Why relationships matter in finance

Thursday, 7 July 2011 00:00 -     - {{hitsCtrl.values.hits}}

ACCA emphasises a new value-adding agenda for accountants in whatever role they occupy .It examines the role of accountants as promoters of sound business practices, champions of sustainable business development and identifiers of value drivers that all lead to high performing organisations. The model looks at collaborative working and why relationships matter in finance. It considers how leading finance functions look to work collaboratively, building internal and external relationships. It also considers why collaborative working is important for finance professionals and gives some sound advice for how great collaborative relationships can be developed

The finance function and collaborative working: Why internal relationships matter

Over the last decade there has been growing recognition of the qualities that finance professionals and accountants bring to organisations; objectivity, impartially, logic, professionalism and so on.

The bedrock techniques and practices that a finance professional receives as part of their training have powerful application across many different business areas, assuming they are aligned with deeper commercial understanding; cost benefit analysis and investment appraisal, an understanding of the concept of opportunity costs, project management skills, business strategy skills, benchmarking skills, budgeting and forecasting, business performance measurement and so on.

These skills are the armoury of professional accountants, and very powerful techniques for running a business successfully. However, they are only fully enabled if finance has developed strong relationships across the business.

Collaborative working practices help extend finance expertise across the business, but there are other advantages too. Strong internal relationships extend the remit of finance, so that it is not only crunching the ‘numbers’ for colleagues across the organisation, but it is getting involved in, and often seen to be leading on, wider business initiatives such as change management programmes, major business projects, product development initiatives and innovation and research.

The astute CFO recognises that the influence of the finance function across the business is critical. Relationships matter too because sometimes the finance function has to initiate change programmes which may be met with some resistance, such as cost reduction programmes.

Why external relationships matter

External relationships matters too. The range of stakeholders with a vested interest in the remit and activities of the finance function continues to grow and to many the finance function is the face of the business.

To many extents, the CFO and the finance function is the guardian of the brand, and the major interface between key stakeholders and the business. The finance function has primary responsibility to the shareholders of the organisation, yet its influence and remit now extends well beyond this stakeholder group.

It continues to work with its traditional partners, such as tax authorities, auditors, government regulators, investment authorities, pension advisers and the banks, yet its remit is continuously expanding into other stakeholders such as corporate and social responsibility groups, property consultants and assets management groups, management consultancy organisations suppliers, customers, logistics partners and so on. Sound relationship management, and building a culture of trust and responsibility are key.

Building the collaborative culture

Many finance functions have sought to ensure a systemic migration of financial understanding across the business, sometimes referred to as building financial management capacity in the organisation, but its success is critically dependent on having effective working relationships in place. The use of finance champions across the business is a common approach.

More specifically, the advent of ‘business partnering’ has often been a key strategic aim, where finance functions seek to create value by aligning themselves more closely to the needs of the business, by having shared objectives and supporting improved decision making. In practice, the term covers a myriad of different operating models.

Strategically it can make sense to embed finance skills in the operating arms of the business, particular where business operations are geographically dispersed, or highly product diversified. Supported by smaller centralised finance units which drive a common approach across processes such as reporting and investment appraisal, and an off-shored/outsourced transaction processing function, the ‘retained’ finance function is typically more adept and more likely to drive value because of its closeness to the business.

There are some challenges. End-to-end processes need redesigning; there are usually significant implications for organisational design roles, and for the responsibilities of finance staff; a review of the competencies and training needs of finance staff must be undertaken, and current IT capabilities and decision support tools evaluated to assess fitness for purpose.

Typical business partnering model

Embedded finance units: Finance decision support and analytics are embedded into the commercial operating functions of the organisation to leverage decision making and inculcate the units with a greater degree of financial literacy and understanding.

Central finance unit: A smaller centralised unit is established to ensure consistency across companywide financial processes. Typically supported by ‘group’ functions such as tax, treasury, internal audit.

Outsourced transaction process: Back end processes such as accounts payable, accounts receivable, general ledger, and payroll are outsourced to drive down costs, increase efficiency and enhance expertise.

The role of the organisation

The idea that finance should build collaborative relationships across the business makes sense because it helps keep finance staff engaged and motivated – it helps develop people’s careers within the firm, opening up development opportunities where their talents may be used best; it results in greater sharing of experience, which creates innovation and generates new ideas to take the business forward; it also, of course, helps extend the agenda and influence of finance across the organisation.

1.Talent programmers

One way in which organisations can specifically encourage collaborative working is through talent or leadership programmers that are specifically designed to identify and develop the future talent the organisation needs. They provide a formal framework for harnessing the skills and abilities of those individuals considered being of future leadership potential, but they also encourage a collegiate spirit by building up a network among a group of people who may form the future leadership group of the organisation.

2.Multi-functional working

In the future, finance professionals will increasingly be part of multi-disciplinary teams, drawn from different functional or geographic parts of the organisation. The best organisations recognise the value of the skills, knowledge and experiences different functions bring, and proactively seek to develop major project initiatives and business cases calling for the involvement of different parts of the business. Cross- functional working parties and employee forums are great for relationship building.

3.Experiential learning

Job rotation or secondment programmes facilitate relationship development and engender a move collaborative culture between finance and the rest of the business. They help extend the remit and reach of finance, but they also create opportunities to exchange knowledge between finance and the rest of the business. Experiential learning is highly valuable, and consistently features as one of ACCA members’ preferred ways to learn.

The top job: The practices aspiring CFOs need to consider

The ability to build bridges: How a network is ‘structured’ and the position of the person in this network appears important. The most powerful networkers are those individuals who hold strong ‘bridging’ positions between different groups. In simple terms, this means that the individual has access to information and can share information across different parties who need that information.

Quality, not quantity: With relationship building less is sometimes more- it is the quality of the network in which an individual participates and the relationships that they form, and not the quantity of contacts someone between has, which determine the network’s effectiveness

Think long term: The most diligent networks aim to invest time in developing strong relationships that last. They think carefully about how the network will extend their abilities and always work on a reciprocal basis, which builds up trust and strengthens ties. Good networkers make sure that wherever possible they are able to accommodate requests, and provide independent objective advice and feedback. They ensure they fulfil the promises they make. They do not alter their values or beliefs simply to fit in with the current vogue and as a result they earn respect for their integrity. They invest significant time and resources in developing their relationships, and recognise that effective networking is a long- term game.

Therefore, today’s CFO is not only driving and shaping business strategy, but needs to work right across the organisation to engage and bring on board partners such as HR, IT, marketing, sales, and other functions. Astute CFOs understand how the role of finance evolving, and how its interactions with external stakeholders are just as important to its success as relationships. Savvy CFOs recognise that effective engagement with shareholders, banks, regulators, governments, tax authorities, suppliers and customers is key.

The value of networks and strong relationships is equally significant for finance leaders in all sectors. In accountancy practices, the key role of a partner is to earn client fees, so the ability to develop good relationships and to network successfully is vital.

Partners, like CFOs, must continually engage a wide range of internal and external stakeholders as part of their day-to-day responsibilities.

Partners in the audit and tax fields play a key role as trusted intermediaries, developing strong and impartial working relationships not only with clients but also with government authorities and various committees.

The same applies to consultancy operations, where partners will aim to win new clients and to work effectively with organisations to improve business and finance operations. In developing client solutions, they often call on experiences gained elsewhere, so a strong network can again be invaluable in this respect.

This is also why accounting firms and consulting firms worry about partner retention – apart from the investment the firm has made in the career journey, partners who elect to leave a firm take with them not only lots of experience, but lots of client contacts too. Good networks matter for practitioners and firms because business is often won through third parties such as banks and solicitors, or on recommendations from existing clients.