The CFO walks a tightrope within the operator dimension, deftly balancing the costs with the service level requirements while maintaining a constant focus on the finance's operating model along the way.
The focus of the CFO as an operator is to run an efficient finance function. In today's environment, boards and CEOs expect CFOs to bring down costs and lead by example. One way for CFOs to save is to alter the finance operating model. There are three key ways that CFOs can alter their finance operating models to reduce costs and improve efficiency.
• Shifting the service delivery model by centralizing activities that are common across business units, geographies and markets into a center of expertise (COE). COEs focus on aggregating expertise to undertake low-volume-high-expertise tasks more efficiently. This is in contrast to shared service centers that focus primarily on a high volume of routine transactions. Moving select financial planning and analysis (FP&A) activities into a COE allows for greater efficiency by having fewer people serve more customers with more consistent quality.
The first step is to identify FP&A activities that do not truly provide "analytical decision support". For example, data consolidation and data aggregation often take up over 50 percent of an analyst's workload, yet do not really provide true analysis for the business. Once these common activities are identified across geographies or business units there are inherent cost savings through consolidating them over a lesser number of people in one location. Offshoring these activities to lower cost countries where expertise is available may generate further savings.
• Reducing the demand for financial planning and analysis activities
There are many examples of clients with different analysis and reporting requirements across markets and business units because "that's how it's always been done". Challenging the inherent status quo offers finance additional cost savings opportunities. As a result, there is often a significant cost savings opportunity from reducing the demand for services to the initiatives critical to the overall strategy of the company. Establishing clear service agreements with business unit and regional leaders and reducing inessential "what-if" and "just-in-case" analyses can reduce the demand and lower the costs of FP&A.
• Reducing process complexity
An opportunity for cost savings lies in process simplification and standardization. By standardizing select analyses and outputs across units and regions, the finance organization can process more analytical requests and reports faster.
The roles a CFO undertakes as an operator are to:
• Dynamically balance cost and service levels in delivering on the finance organization's responsibilities
• Define and adapt finance's operating model
A CFO demonstrates the following competencies as an operator: Leverage system capabilities - break up "IT"; Focus on the "I" leave the "T" to the CIO or CTO where it belongs.
Program/project management - An ERP implementation project should mark the end of manual accounting processes and excel sheet reporting in the finance function. Extended parallel processing is a resource drain and a duplication of effort and investment.
Problem solving - A CFO's finance talent should be encouraged to solve problems not only identify them for someone else to solve.
Adopting a cross border attitude - A CFO should be willing to embrace resources and solutions outside the home country environment when it is more efficient to do so.
A CFO actively addresses the following critical issues as an operator:
• Developing and evolving the finance operating model
Depending on the requirements of the management and stage of the business cycle, CFOs will wish to maintain a close eye on the scale of the finance function relative to the company's strategy and overall growth.
• Talent management in financial disciplines
Through active talent management a CFO can develop people's skills thereby deploying them on opportunities that fit their strengths and interests. In addition it provides for increased flexibility in rotating talent between various positions providing a safe buffer of resources to keep systems and processes operating smoothly in the event of a person's departure, vacation or absence.
(James Babb is CFO program leader at Deloitte in the Middle East.)
Next week: The CFO as steward
