People, Process & Technology in Finance – What is the Right Proportion?

Mary Driscoll wrote another valuable piece for CFOs. Her article in CFO.com – Metric of the Month: Finance Function Costs – gets to the chase on a subject that many Chief Financial Officers face. CFOs have told me that it is hard to be a corporate leader in cost reduction while they need to come back to request and get approvals for increasing their costs to be a better business partner across the business, operationally and strategically.

Proportionate costs of Finance © APQC

You should read the article.

I’d like to address the question Mary asked as she ended her article. In discussing the management of Finance costs, which are composed of People, Process and Technology,  Mary asks – What is the right proportion?

Mary believes it is up to each CFO to figure out.

Sounds simple.

But most CFOs are hard pressed to figure it out. If it was easy, the proportion of costs wouldn’t look like this graph.

So where should a CFO start?

  1. Figure out what you’re actually doing. You can hire a consultant to figure it out, but you could, with a little effort and honesty (with yourself), can see what your Finance team is actually doing.
  1. Benchmark and compare. APQC benchmarks are a good place to start, and there are others that exist as well. While they may not be directly correlated to your business.
  1. Prepare a plan. Any plan to improve Finance is a good plan. It is certainly better than just letting things be in Finance. “That’s the way we’ve always done it” is not a plan.
  1. Aim for low hanging fruit. When you benchmark and compare, you’ll see obvious areas for immediate improvement. Identify them and act on them.
  1. Communication & Leadership. CFOs sometimes forget that their leadership role requires that they stand up and stand out. Communicating what you’re doing in a refined and positive way to your team and your company will help get the support you need to make your plan a success.

What about People, Process and Technology? Here is what CFOs need to keep in mind.

  1. Bring on the right People. Bringing on and developing higher level value adding senior finance talent will help you reduce the costs of lower level transactional staffing costs.
  1. Rejig Processes. Does your Finance function have to run like it always has, even though your business has changed significantly in the recent past? If you are running Finance like it’s 1999, and your business looks nothing like it did in 1999, processes need to be significantly updated to fit.
  1. Technology is always a challenge for Finance. Systems, software and other technology solutions can be expensive. Unless your enterprise is going through a wholesale ERP change, focus on Processes and People first. Once that part of your plan is in place, you will have the right Finance ecosystem and culture to properly take advantage of. Dollars on technology needs to be well thought out and prepared for (on the People and Process side) before making significant investments.

Reducing the costs of Finance while improving its impact on the business is possible. Studies show this. While it may sound counterintuitive to someone who has not done this before, learn from the literature.

And if you’re still not sure, ask your CFO Peers about their success stories in making this work.

The Challenges CFOs Face Alone (But They Don’t Have To)

CFO Peer Groups: A mid-year updateCFO Peer Group

Since the release of my book, Guide to CFO Success in 2014, I have been reminding CFOs that they need to build and develop their relationships within their organization.

Last fall, when speaking with some of my key Chief Financial Officers that I keep in regular touch with, I was reminded that while CFOs are lonely, there is a solution to their loneliness. These conversations with my Chief Financial Officers led me to develop my CFO Peer Groups.

Starting this past winter, I created 3 groups of 10 CFOs from across the USA and Canada, with the express goal of getting them to talk, learn, share and network with each other. Each month we had scheduled conference calls, with questions from CFOs sent to the group in advance that prepared the group. These CFOs were able to call on their peers both during and outside of our meetings on the issues and challenges facing them.

This fall, we will have our first in-person meeting in Chicago. At this meeting we will take our phone conversations to the next level and set the stage for where we take this in 2016.

Here is a sample of some of the discussions we have had so far this year in CFO Peer Group.

Topic addressed Question discussed
The ability to grow while stabilizing the core business. How to grow while investing in the core and changing the culture?
Scaling the organization to handle growth efficiently and profitably. What changes have you made both to the finance organization and encouraged throughout the organization to deal with top line growth year-over-year in the 20%+ range.
Having sufficient cash for all initiatives and not wasting time or money to get there. What strategies have you used that have had success or failure? Why?
Integrating 4 recent acquisitions How have you dealt with integration challenges? Staffing, IT, timelines, etc.
Scaling without rapidly increasing costs and maintaining quality What systems, processes or frameworks have they utilized to be successful in the past?
Best practices for managing tight cash flow. How do you redirect the culture of an organization to be conscience of tight cash flow when the CEO wont.
Describe your day to day activities and how this has changed over the course of your tenure What are your thoughts on how the role of the CFO evolves over time and how do you build your team such that you focus on the highest priorities? What functions report to you?
Outsourcing of non-strategic functions To what extent have you outsourced? What did you outsource? What was kept in house? Which outsource partners would you recommend?
Acquisition Process Do any of you have a well defined non confidential process around acquisitions that cover everything from target evaluation, negotiations, financing, due diligence and all legal documentation through purchase? Or is it more ad hoc project planning as circumstances warrant? In either case are roles and responsibilities clear and what role does the CFO and his / her organization play?
The Finance Team How do you ensure a strong, engaged team? How do you ensure they are treated with the respect they deserve by the non-finance departments? What are some good tips and tricks for finding and retaining a strong team? How do you prevent burnout and staff turnover? How to you create a culture that values the finance staff and the role that they play?
Building your Finance and Accounting team Do you have separate Accounting and FP&A functions? Do you lead each of those functions or do you have a #2 Executive in your department that manages these functions (or others?) If so,
Business Unit Structure Have you structured business units in a complex multi-product environment? If so, how did you do it and what worked well and what didn’t? Would also like to know how you structured the management of the business units
I am currently focused on CyberSecurity and efforts to be in front of the issue. What best practices have you put in place recently? Have you reviewed insurance coverage for security breaches? Recommendations for Outsourced CTO services.
Asia expansion. Anyone have experience with hiring/establishing a local presence in Asia?
Budget Planning Has anyone used Zero Based Budgeting as a means to get deep into spending areas? If so, was it worth the time and how did the process
Internal Audit Process Curious on rigor of Internal Audit Process and role of group within your company (financially vs. operationally focused, approach to audit planning, consultative vs. enforcers, etc.)?

These are only A FEW of the discussions we have had in CFO Peer Group so far in 2015.

As the year progresses, my CFOs will be sharing, learning, growing and networking, both in our continued conference calls, as well as at our first in-person meeting this November in Chicago.

My questions to you

As a CFO, wouldn’t you want to be able to share these types of questions with your peers?

As a CEO or Board member, aren’t these the types of things you want your CFO to have the support for?

There is help for the Lonely CFO.

Create your own CFO Peer Group. Or ask to join mine. I might be able to make room.

Numbers Are Only the Beginning: Relationship Management Is Vital to a Controller’s Success

This article is an excerpt from the April 2015 issue of The Controller’s Report published by The Institute of Finance Management

Professional success for any finance leader is based on their brand (how others perceive them), their network (who knows them and is willing to support them), and their visibility (who knows who they are).

IOFM April 2015“Controllers can only impact the business if other leaders trust them and the information they provide” says Samuel Dergel, CPA, member of the CFO and Financial Executives Practice at Stanton Chase. “This trust is built over time when relationships are managed successfully. That is why effective relationship management is a critical tool for financial management.”

“Controllers need to move beyond ledger books and spreadsheets and act as business partners, providing
timely, actionable information upon which other parts of the organization can make profitable decisions,” says Dergel. “However, numbers alone cannot positively impact the business. Relationship management is essential.” Dergel offers the following advice:

1. Recognize the importance of “face time.”

“Relationship management in a corporate environment is based on strong communication,” says Dergel. “However, if a controller is communicating solely by e-mail, there is plenty of room for improvement. The telephone is more effective than using e-mail, but face-to-face communication is more effective than all the above. That’s why controllers must get out of their offices as much as possible.”

2. Develop a “relationship maintenance” plan.

“Be aware of the people you absolutely need to have a good relationship with, and create a plan on how you will maintain and improve those relationships,” says Dergel. Schedule time for relationship management with all these key people (see sidebar). You’ll need to make a special effort with people in other departments.

3. Never underestimate the value of simply sharing coffee.

Relationship building does not always have to be formal—in fact, it is often during informal interactions that the most powerful relationship building can occur. “Simply having coffee on a regular basis with people you want to build relationships with can go a long way toward learning their needs and how you can help,” Dergel notes.

4. Always deliver what was promised, when it was promised.

“Not delivering what is expected erodes trust, and this is a major cause for rifts in business relationships, Dergel explains. “Trust can be built only with people who know you and like you, and this is achieved by understanding what others expect from you and ensuring timely delivery on these expectations.”

Analytics, Shmanalytics? Why the CFO should care

The office and the role of the Chief Financial Officer continues to evolve.

This evolution may cause apprehension in some seasoned CFOs. These experienced financial executives feel this way because, in part, they have worked very hard to get to where they are. They believe that their past experience and success should speak to their future opportunities.

Yet for any executive, especially one in the finance side of the business, resting on your laurels is so 1980s.

The world is changing at a rapid pace, and the business world is either leading this change or trying hard to stay ahead. Organizations that do not continue to stay relevant wither up and disappear into obscurity. Ditto for CFOs.

Cindy Kraft, a CFO career coach, works with CFOs who want to stay ahead of the curve in their career. I like her work, and am always happy to refer senior finance executives to her. As a fellow blogger, she and I agree most of the time. In recent posts (here and here) she discusses technology and its relevance to CFO careers.

The statistics from Cindy’s questions on whether technology should be in the domain of Finance is interesting. I believe the results would be more telling if there was corresponding information on company size. From my experience, companies of a smaller size have CFOs responsible for IT, while larger companies have an executive in charge of Technology.

From my vantage point, CFOs who are able to stay ahead of the changes in the business world, including technology, are able to continue to stay relevant and add value.

So why does Analytics matter to the CFO?

In my book, Guide to CFO Success, I ask and answer “What is a Chief Financial Officer?” in the first chapter (you can preview a copy of Chapter One here). To summarize, I say that a CFO is a Strategist, Leader and Advisor.

Corporate value comes from making great decisions. Decisions based on analysis rather than gut is where Finance and the CFO have the ability to make a difference at the executive table. Technology is just a tool that helps intelligent people make great decisions.

CFOs need to be a Strategists, Leaders and Advisors to their businesses. If a CFO is not helping the company make decisions and adding value to the organization, they are not a Strategist, not a Leader and not an Advisor. In essence, they are not a real CFO.

To continue to be a real Chief Financial Officer today, you need to be able to help your organization make the best decisions possible.

The term Big Data has been bandied about as the cure-all for corporations. Technology vendors are very happy to use the term to get attention and their portion of corporate spending. But data itself is not enough, no matter how big the data is.

The Data Value Chain illustrates that data is only the beginning. It is the usable information that is pulled from this data, viewed through the lens of intelligence, either human or artificial (or both), that wisdom can be obtained.

As CFO, it is your duty to provide wisdom to your organization. This wisdom will lead to the creation of corporate value. Analytics is the point where you turn all that data into valuable decisions.

If you’re not providing the wisdom you would like (or think that you should) to the rest of the business, understand why that is.

Is it because…

  • You do not have the tools?
  • You do not have the people? Or,
  • You do not know where to start?

As CFO, no one expects you to be intimately aware of the available tools and be able to analyse this yourself. However, as CFO, you are only as good as your finance team allows you to be.

As CFO, no one expects you to choose the right analytical tools by yourself. As CFO, no one expects you alone to do the analysis necessary to come to great decisions. However, as CFO, you need to make sure your team can support you in this value added activity. As CFO, understand the power of these tools and information yourself of what they can do. Then you need to guide, lead and develop the team necessary to do so.

I had the pleasure of meeting RK Paleru at the AICPA CFO Conference last May. RK is the Analytics guru (Executive Director, Systems Analytics and Insights Group) to the CFO at George Washington University.

RK blogged about an article I shared with him about the idea of companies hiring a Chief Analytics Officer. While I do not think that most companies are ready to create another seat at the executive table, I do think that Analytics can add tremendous value to the executive table. I am certain that the CFO of GWU thinks that the analytics that RK does bring tremendous value to the CFO, as well as adding significant value to the institution and its mission.

Anders Liu-Lindberg wrote recently about his take on Analytics within the finance function. Anders, from where he sits in his role as Regional Finance Business Partner at Maersk Line, sees corporate value ONLY IF the talent team is built properly within finance is able to partner with the generalist functions. Finance should act as a true business partner to the business, helping make decisions at all levels of the business.

CFOs who do not continue to improve, change and learn will, as mentioned earlier, wither. Resting on laurels is career limiting.

If, as CFO, your response to “Analytics” is “Analytics, Shmanalytics”, you’re not only missing the boat, you’re doing a disservice to your employer and your team.

To remain CFO, both today and tomorrow, both within your company and at your next employer, understand the power of Analytics. Then, ensure you develop and nurture a finance team that can give you the wisdom to help your company make great decisions.

2014: Top 5 of Samuel’s CFO Blogs

As we wind down 2014 and get set for the holidays we all take stock of the year past.

In 2014, my blog turned into a website, led to the publishing of a book for CFOs, and multiple speaking and training sessions during the year. For my CFO blog itself, these were the 5 most popular blog posts visited by my readers.

5) Road Map to Successful CFO Relationships

This original posting was the beginning of the thought process that led to my first book, Guide to CFO Success.

4) Negotiating your CFO Employment Contract

What is interesting about the popularity of this post is that the visits have been mostly from Google searches and other blog postings. Posted in 2011, this is still going strong. Ideas from this blog were further developed in Guide to CFO Success.

3) Introducing: The Strong CFO Program – 1st session FREE

My first blog on financial executive coaching continues to be a point of reference for senior finance executives looking for guidance and support to grow and succeed.

2) The First 90 Days of a New CFO

It seems that CFOs are looking for onboarding advice, because this continues to be a popular topic with search engines. The popularity of this topic ensured that it was addressed further in Guide to CFO Success.

1) Presentation Links: The Road to CFO

My presentation in Vancouver in 2012 continues to be a popular point of entry into my blog and website. Someone somewhere referred to it, and this person must be very influential.

With 2015 about to start, I am pleased to continue the development of content and programs that benefit the CFO and the organizations they are committed to. I am excited about the CFO Peer Groups I will be facilitating this coming year, as well as having the opportunity to help organizations hire and develop the best senior financial talent for their needs.

I am also looking forward to making a difference to you.

Best wishes for continued success in 2015!

Samuel

CFOs: Make 2015 the year you take your game to the next level

With 2015 approaching, many senior financial executives are thinking about what the new year will mean to their workload; deadlines, projects, bonuses (both to pay and to be received), staffing concerns and loads of other stresses. The thoughts are all about what needs to get done and what they are ultimately responsible for.

For the busy and stressed Chief Financial Officer with the weight of the world (or at least their company) on their shoulders, the approach of the holidays and the New Year should give you pause. Think about how to make things better.

There are 24 hours in a day, and, whether you plan for it or not, they will always be filled. As my CFOs told me when writing Guide to CFO Success, more than three-quarters of CFOs are putting in more than 110% of their effort into their role as senior financial executive in their organization.

CFOs are expected to accomplish more than just the day to day accounting and finance tasks. They are expected to be leaders. They need to lead their finance team, lead their colleagues at the executive table and lead the company as a whole. You need to remember that, as CFO, your input is needed to help the company make sound strategic and operational decisions.

As the noted in this 2014 study from American Express:

For eight out of ten respondents, the finance function is a strong, if not dominating, influence on strategic and operational decisions. (See Figure) The finance function is involved with strategic and operational decisions at nearly every company, and 80% of respondents say that the finance viewpoint is either an influential factor or the determining factor.

Amex 2014 study - Figure 7

The expectation is that, as leader of Finance, your opinion counts. What you have to say is influential within the company. Yet too many CFOs feel that they are getting stuck in the details.

How can a CFO get unstuck and take their game to the next level?

Formal training

As an experienced professional, you know you can benefit from continued education that makes a real difference to your career and your employer. Options that can benefit you while meeting your busy schedule can include:

  • An Executive MBA – This could be an excellent tool to move you beyond the technical you have relied upon to date. Many Executive MBA programs are tailored to the busy executive and should not impact your work schedule much.
  • CFO oriented Leadership Programs – An executive training program focused on taking a CFO to the next level might be ideal for the senior finance executive that either already has an MBA, or feels the need to build their career knowledge based with a group of similarly experienced individuals. Programs like the Queen’s CFO Leadership Beyond Finance Program, in partnership with FEI Canada, can be an ideal solution.
  • Online training – When you know what skills you need to improve on and which you need to learn for the first time, online courses can be an ideal solution. If your company has access to leadership and soft-skill courses, make sure that you take advantage of this opportunity. You could also look at service providers like Proformative Academy to give you a choice of options that will suit your training needs, as well as those of your finance team.

Peer Groups

Chief Financial Officers are positioned at the intersection of their finance team, their executive colleagues, and the CEO and the Board. Being at this junction in their organization can make it difficult for them to learn from and share with others. Many CFOs have told me that they feel lonely in their organization, and don’t have people to discuss their challenges with.

The solution to this loneliness can be being part of a group of CFO peers. I recently discussed C-Suite Peer Groups in a blog on BlueSteps. You can become part of an existing group, or create your own.

For 2015, I am creating CFO Peer Groups for a select group of CFOs across the USA and Canada. These selected Chief Financial Officers will commit to work together, learn, share and network with each other. I am excited to facilitate these groups in 2015. I expect that the participating CFOs will take their game up to the next level.

Executive Coaching

Each of the CFOs that I have worked with as their executive coach has been able to step up their game. Executive coaching for the CFO (or future CFO) can be very beneficial to the executive and the company they work for. It is my experience that, like athletes, CFOs perform better with a coach who is well suited for them.

As we approach 2015, it is time to take your game to the next level.

Whether you choose to take the formal approach to learning, get together with your peers to learn, share and network, or engage an executive coach, any step you take to improve yourself and your game is a good step.

What will you do to improve your game in 2015?

 

Do CFOs read e-books?

In a previous blog (Do CFOs Listen to Podcasts?), I mentioned that I polled my CFO Advisors on their content habits. Here is one more tidbit from this survey.e-book Guide to CFO Success

While CFOs may not be the world’s most voracious book readers (see Jack Sweeney’s LinkedIn Pulse post: Imagine Being a CFO Who Doesn’t Read Books: Welcome to the Bean Counters Club), when I asked my CFO Advisors what book format they prefer to read, 1/3 of them said they prefer to read an e-book, while the 2/3 majority prefers a real paper book.

Here are some comments from my CFOs about their book reading preference:

  • I don’t read many books.
  • Gradually making shift to e-book. Reading my first now & getting comfortable!
  • Use my iPad for many magazines, but like to highlight books and prefer feel of holding book.
  • Are you trying to make me feel old? It worked.
  • I like to highlight, etc.

When I began my journey writing Guide to CFO Success two years ago, I had never read an e-book. As I was about to become an author and my book would be made available as an e-book, I felt it was important to understand what an e-book was all about, so I bought an Amazon Kindle. Today, reading an e-book on my tablet or phone is my preferred method of reading, but I enjoy the senses that come from reading and handling a real book.

As the holiday season approaches, consider an e-book as a gift for your favorite CFO. You can tell them that Samuel says they should try it out and join their forward looking peers that are making their way through the digital age.

(I won’t tell them that a main reason you bought them an e-book was because they are very easy to purchase as a last minute gift.)

Happy Thanksgiving,

Samuel

 

The C-Suite Relationship Map

I am fortunate to speak with hundreds of executives each year, in addition to those that I follow and track. Over the years, I have learned a lot about success, what works and what doesn’t, from these talented leaders.

One area that successful executives have in common is their ability to get the best out of their corporate relationships. No matter the discipline of the C-suite executive, their technical ability is just the base upon which they start having an impact on their organization. The CXO is not an island, but is integrated into an ecosystem that is mutually dependent. The success of any executive relies on others. Those who recognize, nurture and sustain successful corporate relationships are those that accomplish more.

My blogging and recent book, Guide to CFO Success, focuses on my primary audience, the CFO and the Office of Finance. Some of the content is CFO specific, but the guidance with respect to relationships applies across the executive suite. Guide to CFO Success spends a few chapters dealing with relationship management for the Chief Financial Officer. A key tool in this discussion is my CFO Relationship Map, a copy of which is visible below.

CFO Relationship Map - October 2014

While I created the Relationship Map for my discussion with my Finance audience, this Relationship Map is useful to all executives who wish to succeed in their own environment.

The Relationship Map is a graphical representation of the areas of corporate relationships. They include who you work for (at the top of the map), who you work with (internally, on the right of the map, and externally on the left), as well as those that support you (your team).

In the CFO Relationship Map, you’ll notice that the CFO reports to the CEO, Board and Investors, and works with the other executives of the company internally. The CFO has a number of important outside relationships, which can include bankers, lawyers, auditors and other advisors. And, as I say in my book, the CFO can only be as good as the team they have allows them to be.

Depending on your own situation, your personal Relationship Map will look different. However, like other executives, you have people you work for, work with internally as well as externally, and have people that support you.

To read the full article on the BlueSteps Executive Career Insider Blog at this link.

You can also map out your own relationships, using this blank Relationship Map or by creating your own.

Do CFOs Listen to Podcasts?

As someone who creates content aimed at the CFO and other senior finance executives, understanding what Senior Financial Officers like to consume as content is important. There is a lot of different types of content out there. Traditional content creators like TV, newspapers and magazines are no longer the only providers of professionally oriented content. Professional services firms, associations and groups, software providers and anyone that wants to get the attention of a Chief Financial Officer is creating content to catch the attention of this Very Important Decision Maker.

When preparing to write my book, Guide to CFO Success, I created a CFO Advisor group to seek the opinions of senior finance executives and learn from their actual experiences. As part of my ongoing quest in providing fresh and relevant Finance oriented content, I reconstituted my CFO Advisor group so that we can all learn and grow.

I recently polled my CFO Advisors on their content habits, and will be sharing some of their insights over the coming weeks.

To begin with, I thought it would be interesting to understand whether CFOs listen to podcasts. Most of the content I have created over the years have been in text, whether on my blogs, in other media articles, as well as my recent book. I have never created my own podcasts, but I have been interviewed for a few podcasts over the past while.Do CFOs Listen to Podcasts

As you can see from the graph, about half of my CFOs do listen to podcasts, while 12% of them tune in to podcasts on a regular basis.

It is interesting to see that CFOs are beginning to take a shine to the podcast as a form of content delivery. To get a better understanding of the value CFOs are getting from podcasts, as well as the future of podcasting focusing on senior finance executives, I spoke with Jack Sweeney, host of CFO Thought Leader, a series of podcasts sharing firsthand lessons from leading Chief Financial Officers. I had the opportunity to be interviewed twice by Jack for his CFO Thought Leader podcasts, and appreciated his insights and questions, which led to the creation of valuable content of interest to the CFO.

“Like many people, my “content consuming” behavior has entered a period of great change. I find I’m adopting the ways of my teenagers (early adopters). We depend almost exclusively on our TV’,s DVR and we take an iPad on family trips so we can access Netflix anytime and anywhere. Meanwhile, I’ve begun to listen to the NPR podcast on weekends simply because I added the app to my iPhone.

I find that there is a noticeable shift in my behavior and meanwhile, from everything I’ve read I’m not alone.  Why would the behavior of CFOs be any different? Clearly, it’s not, and while CFOs may be laggards when it comes to behavioral changes, they are without question changing their behaviors with the rest of us.  Also, I’ll mention once again the car industry’s adoption of in-dash apps over the next few years will also quickly grow the podcast listening audience (CFOs included).” – Jack Sweeney

Sweeney also pointed me to this quote from Tom Webster, VP of Strategy at Edison Research.

“The continued penetration of smartphones in America is changing behavior significantly. We are now seeing activities that were dominated by desktop usage in 2013, flip dramatically to become mobile behaviors. For millions of Americans, the smartphone has become ‘the first screen.’”

Podcasting is just one more distribution channel for content of interest to finance executives. Will CFOs choose podcasting as one of the major ways for them to consume relevant and interesting content as time goes on? Is podcasting a great way to get the attention of the busy CFO?

Stay tuned.