In what way are corporate finance leaders like ice cream?
No, it's not a bad joke. The answer is an apt metaphor for today's expanding chief financial officer (CFO) role offered by Rahul Mathur during a panel discussion at the Proformative CFO Dimensions conference last week in New York City.
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"I think the truth is we each have to be like Baskin Robbins -- there are 31 flavors," said Mathur, vice president of financial planning and analysis at Spansion, a provider of flash memory products headquartered in Sunnyvale, Calif.
The idea that finance is becoming more strategic is buzzworthy these days, but what does it actually mean? Judging by a day's presentations, it seems silos are breaking down around finance departments and CFOs are being pulled in two directions: At the executive table, they're expected to take a bigger part in driving corporate performance and formulating growth strategies, and at the operational level, they're taking a more hands-on approach to helping business leaders interpret and act on financial information.
It's a hefty amount of responsibility, but attendees got tips throughout the day on how to effectively handle these new terrains from the standpoint of technology, process and people. And speakers were quick to remind CFOs that they shouldn't expect to manage it alone and should rely on their teams and business partners to lighten the load.
Cloud tool gives business leaders ownership over financial reports
Warren May, comptroller at the International Association of Firefighters, explained that his organization ultimately chose cloud-based budgeting and reporting software from Host Analytics over two on-premises options because of the more defined pricing model. But the fact that users could run their own reports was an added perk.
May stressed that a key duty for CFOs today is to get financial information into the hands of business leaders so they can make more informed decisions. However, the burden of delivering this information shouldn't fall entirely on finance. Instead, he said, corporate finance leaders should enable users to take ownership of their data through technology.
"We need to empower users," May said. "We're [all] used to doing the work for everybody, and that's not what we want to do. Our roles have evolved, and there are other things that we could be doing that are better uses of our time." Since implementing Host Analytics, May said non-finance users are now able to enter budget data and run reports whenever they need to, albeit within the limits of account security settings. They are also encouraged to request new reports.
But he didn't turn a blind eye to the Achilles' heel of such an approach: User buy-in.
"In our case, [user buy-in] was one reason why we wanted something with a similar look and feel" to Microsoft Excel spreadsheets, he said. "If you can get that user buy-in, people are going to own the system and it's going to make your job a lot easier."
He added that finance leaders should aim to secure buy-in at all levels, starting at the top and working down to end users.
Involving business leaders in planning dispels confusion about targets
In addition to advocating deployment of technology that boosts non-finance users' visibility into financial data, Dan Miller, vice president of finance and general manager of the software vertical at San Mateo, Calif.-based financial management software vendor NetSuite, advised tweaking the financial planning process to further business leaders' understanding of budget targets.
"My strong belief is you need to build a real long-range plan … and it's not a spreadsheet you did in your office and ran by the board one time at the close session," he said. "My view is it involves the whole team."
Although Miller acknowledged that multi-year plans are "wrong as soon as you finish them," he said they can help corporate finance leaders think through and identify key input and output metrics and keep the long term in mind. "Frankly, almost every company in my experience [is] trying to maximize profitability in the current year, but they're not bringing the sales people in this year to deliver the growth next year," he said. "This helps do that."
Also, involving more people in the process means business leaders won't be mystified about budget targets. "The business unit guy doesn't say, 'Where you did get that number?' [because he] helped me build it," he said.
And multi-year plans can help the finance department analyze potential organizational shifts, as well. "Sometimes when you're in a situation where you have a new strategic direction, there's really no framework to model it, and this gives you that framework to think about how it affects your business," Miller said. He added that NetSuite produces rolling eight-quarter forecasts, which are updated on a monthly basis.
CFOs don't have to be 'yes men' to foster trust with business leaders
In a panel discussion titled Making the Most of the Evolving CFO Role, moderator John Percival, CEO of JRP Associates and adjunct professor of finance at the Wharton School of the University of Pennsylvania, noted that CFOs are increasingly taking on the duties once performed by chief operating officers. So does this mean CFOs now need operations experience to truly gain an understanding of the business?
Cheryl Marks Young, CFO of East Brunswick, N.J.-based nonprofit organization Easter Seals New Jersey, said while it's not necessary, in her opinion, for corporate finance leaders to hold operational roles before rising to the CFO position, they should gain the necessary experience by shadowing business unit leaders.
Mathur said because so much now falls under the purview of the CFO, it's impossible for a single person to be strong in every area. "Part of the challenge for each of us is recognizing which of these things we're going to build in ourselves and which we're going to hire," he said.
Another question posed to the panel concerned communication and how to build trusting relationships with business leaders.
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As someone experienced in turning adversarial relationships into positive ones, Young said she is careful to not be too harsh when rejecting business cases. "My 'no' doesn't mean it can't be done, it just means it can't be done in that way," she said. Young added that she often asks business leaders what they're trying to accomplish so she can understand their broader vision and help them brainstorm alternative ways to achieve their goal.
Similarly, Tom Fitzsimmons, CFO of TMP Worldwide Advertising and Communications in New York City, said he takes the role of a coach when working with business leaders. He also raised the point that although the weaknesses in a business case might be immediately evident to a CFO, they're often not obvious to the person making the proposal. "You have to remember, we operate from a much higher position of knowledge in the company and strategy -- what the CEO's thinking [and] what the board's thinking."
And saying "no" doesn't have to be a source of contention if it's handled the right way, according to Mathur.
"The ability to build trust I think goes along with being able to disagree -- our job is to provide options," he said. "This may not make sense for a business reason [or] a revenue reason, but here are the options for us to accomplish [it]."