When describing the evolving role of the CFO, one of the most consistently cited attributes is that of its becoming a true partner across business.
Achieving this level of partnership, however, requires the development of skills and capabilities that many finance professionals are struggling to achieve. Top amongst these is collaboration.
The traditional view is of finance professionals locked away in their silos, remotely monitoring the performance of the business. As organizations transform, some have broken down these barriers, and their finance professionals have become more tightly aligned to other business units. In some instances, they have even been fully embedded.
But for a function that has tended to operate at arm’s length from the cut and thrust of day-to-day operations, breaking down those barriers and operating in a more collaborative fashion is proving challenging.
In 2017, Oxford Economics surveyed 1,701 finance professionals across multiple industries and four global regions, including 300 leaders from Australia and New Zealand, to uncover their attitudes towards their function’s changing requirements and challenges, and understand what it takes to become a finance leader.
While one of the hallmarks of a transformed finance function is its ability to work in partnership with other business units, the research found that finance is not yet doing that regularly, and is often ineffective when it does.
Becoming more influential
The motivations for collaboration are broad, and are often a product of the nature of the organization itself. Collaborating regularly with other business units was a key attribute amongst finance leaders—often because their companies demanded it. Leaders reported that their organizations were more likely to promote collaboration between finance and other functions by providing technology (84% versus 64% for non-leaders), training (66% versus 55%), and business analytics (64% versus 41%).
Collaboration starts with visibility, and in this attribute ANZ respondents excelled, with 81% of Australians and 74% of New Zealanders reporting that the finance function was increasingly visible and influential at their organization. Finance’s critical role in the organization was also well recognized, with 88% of Australians and 78% of New Zealanders reporting that their CFO was increasingly involved in strategic decisions outside of finance.
But when it came to finance’s involvement in decisions outside of its core function, respondents in New Zealand tended to be less involved than their counterparts in Australia, especially for activities such as changing the business model, entering new markets, and ensuring compliance. This suggests that in New Zealand, finance professionals have more work to do to become more collaborative and influential.
Building collaboration beyond the finance core
There are many areas where finance professionals are seen to be collaborative, but these are often in activities that have traditionally been tightly bound to finance. Australian respondents in particular were confident in their level of collaboration for tasks such as compliance and internal audit, and are on par with global averages, although New Zealanders have some ground to make up. For instance, when it came to collaboration with risk management, 96% of Australian respondents were confident in the effectiveness of collaboration, versus 74% of New Zealanders. Curiously, when asked whether their CFO meets regularly with the risk committee, only 51% of Australians and 58% of New Zealanders agreed. (We will be looking at the role of finance in governance, risk, and compliance in a future article.)
For internal audit, the confidence of Australians regarding their collaboration activity again eclipsed New Zealand respondents: 86% versus 73%. The drop-off was greater still for confidence with collaboration in operations. While the global average was 86%, this fell to 77% for Australia, and languished at an alarming 52% for New Zealand, demonstrating significant room for improvement.
New Zealanders did, however, show effectiveness in their collaboration with sales, as judged by 65% of respondents, well above 54% for Australia, and only slightly behind the global average of 67%. Effectiveness of collaboration with marketing was also lower for ANZ respondents, at 69% for New Zealand and 64% for Australian respondents respectively, and again behind the global average of 71%.
Tearing down silos
For finance to truly evolve, it must break out of its silo. This drawback was nominated by 35% of Australian and 44% of New Zealand respondents respectively as their biggest obstacle to achieving business goals—well ahead of the global leaders, of whom only 24% reported this as an issue.
While finance might be highly regarded in ANZ, it seems that this extends only to traditional finance activities, and not those to which finance leaders strive. So while the silos must come down, it seems that many finance professionals still aren’t willing to make this happen. When asked for their top three priorities, improving finance’s collaboration with business units was nominated by just 28% of Australian respondents, rising to 34% for New Zealand.
Despite this low prioritization, there are signs of willingness to close the collaboration gap. The clearest solution to the problem was technology, which was the number-one option for finance leaders globally, as well as Australian and New Zealand respondents. In Australia, respondents were more likely than respondents in New Zealand to provide training (61% for Australia and 44% for New Zealand, compared to 56% for the global average), and offer changes in compensation (50% for Australia versus 40% for New Zealand, and 43% globally).
Creating a collaborative culture
The road to partnership has many stages, but no function can seek to achieve true partnership if people can’t first learn to collaborate. For finance, this means tearing down the walls that have sealed it away from the rest of the organization and building new relationships.
The strategies for achieving this are varied, and often involve developing new service capabilities that can demonstrate the value finance can offer. When done successfully, this can generate demand from within the business units themselves for greater collaboration. It can also lead to physically reorganizing the finance function to enable closer alignment of finance professionals to the functions they seek to partner with.
For some organizations, this means undoing years or even decades of accepted operating practice. But in on the path to true transformation, building a culture of collaboration is an undeniable requirement.
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