The title says it all: “From Ledgers to Leadership: A Journey Through the Finance Function.” Drawing on input from more than 4,500 finance and senior managers around the world, the report by the U.K.’s CIMA Centre of Excellence at the University of Bath School of Management focuses on the nature of finance in today’s organisations and where it is going in the future.
The key takeaway: Companies still value technical accounting skills, but there is an emerging shift in that more and more of them also want finance professionals to possess business and commercial skills. The CFO and finance staff should not only take care of accounting and financial reporting; they are also expected to act as business partners in the enterprise.
“If you’re a marketing director without financial experience, having that person beside you who can really give your plans that hard-edge rigour that finance brings just gives your projects far more credibility in the business,” explains Andrew Harding, who is executive director of
CIMA (Chartered Institute of Management Accountants). Based in London, he was recently in Hong Kong and spoke to
CFO Innovation’s Cesar Bacani.
This trend towards business partnering that the CIMA study detects, is it a function of the size of the company? Multinationals probably want it, but perhaps SMEs do not?
The largest businesses are doing it, because it’s an effective way to drive the business forward and to increase accountability and improve decision-making. The very small businesses, in many ways, have always done it because they don’t have a large number of staff; the finance people are embedded [in business management], it just happens.
It’s that group in the middle that needs to make the change. They don’t have much access to cutting-edge change. They’re not leaders in the change management and that kind of thing. They will get there, but it’s that middle group which are moving more slowly.
I’ve had my share of dealing with accountants, and it’s struck me that they tend to act as “Doctor No,” focusing on things that should not be done, rather than telling me what I should do to make things work.
That’s what happens when you have very heavy rules-based system. The finance business partner actually has to explain, to be understood and make things happen. Rather than being the person saying no, the finance business partner becomes the enabler, and I think that’s a big part of finance transformation, that move from controlling to enabling . . . Finance transformation is about moving from being Doctor No to being Doctor How.
Does this mean that professional accountancy qualifications like CIMA are no longer needed, that those who want to become finance professionals are better off getting an MBA, for example?
I think that’s going to be a real problem. If you try to be a business partner without technical skills, I don’t think you can do it. What you’re doing as a business partner is you’re actually providing that technical support. The reality is that non-finance people are frightened of finance, they’re frightened of numbers. The idea of business partner is someone to work alongside them, to empower them, to help them with their analytics, their decision-making. If finance professionals don’t have that level of technical competence, not only would it be very difficult for them to do that job, but the manager who’s relying on that support, that person next to them, actually won’t have confidence in them. And if they don’t have confidence in them then you can forget it, something’s very wrong.
Technical competence is very, very important. It’s the foundation; everything else builds up on it. I think the beauty for accountants in business, having qualifications like CIMA available, is that it actually gives them that block, it gives them that foundation. The Continuing Professional Development requirements also mean that the foundation is going to stay there [and will constantly be updated]. Your professional qualification is not like an MBA you get on a certain day. This is with you for life. It’s a lifetime commitment.
FINANCE IN ASIA
Let’s talk about the finance function in Asia. Aren’t there shortages of technical accounting skills here, let alone the business partnership competence that you’re talking about?
The problem around the world is shortage of people with the technical qualifications. With the global recession, it might have eased a little, but we’re not seeing the recession here [in Asia], in China and in India as well. It’s not easy [to meet] demand on this level. But what we’re finding is, businesses are saying they want professionally qualified people, and they’ll have that in preference to MBA, every time.
The challenge to business is to start developing their people, start to really plan and take this seriously. There are businesses that do; we just need to make sure it happens across the world, particularly in developing countries, where they have the greatest shortages.
Are the Asian results of the study different from the global results?
There are parts of it that if you read it, where you just feel intuitively that things in Asia might be different to the overall picture that comes through. For example, when you find corporates supporting people through qualifications, it’s more difficult to get that support in Asia, where perhaps people might be expected to pay for their own education or do it themselves, so it isn’t quite that deep element of training and development embedded [in Asia].
I’ve heard of companies in China that sponsor finance staff to earn their professional accounting qualification as a way to retain them, because these staff then feel loyalty to them.
Anecdotally there are some interesting things that are going on. For example, I’ve come across groups of potential trainees in India who have actually been reluctant to take on a professional qualification because what’s happening in India at the moment is, they have such mobility because of their skills, and their wages are rising at a high rate, that actually they think, ‘Why should I bother taking this professional qualification? By doing that, I’m putting myself at risk of a failure, I’m also having to study very hard, and actually I don’t have to study very hard, because I’m getting huge increments and I am able to move jobs whenever I like.
I think there’s a real challenge in developing economies to make sure they do develop that skill set, particularly the professional skill set which gives that little bit more. And I think the idea of having a professionally qualified finance function, is something that can give businesses a lot of confidence. It’s a good control feature. A professionally qualified accountant is bound by a code of ethics. They are expected to present their information impartially and in the best interests of the company. That kind of training you don’t get in any other environment, apart from the professional environment.
Do all companies actually want accountants to be business partners or do they just want somebody to do all the figures?
If they’re looking for somebody to prepare their annual report and do heavily based compliance accounting, then the chartered accountant, the CPA, is that route. Similarly if they want someone to do the tax, manage the tax affairs, again the CPA/chartered accountants is probably the best fit for that.
What we’re seeing with business partnering is a trend towards it. Not all businesses are very far developed along the way, some are very developed and really seeing the benefit of it. Others, still operate with finance in very, very traditional function, where it’s a separate unit rather than embedded into the business.
BECOMING A PARTNER
How do you acquire these business partnering skills?
We do an awful lot around case studies, report writing style, questions in the assessment in what we call the top CIMA [qualification], so it directly looks at that. But interestingly, most businesses are looking at building [business partnering skills] through experience. And that becomes another challenge because what we have is, we got a trend towards outsourcing. What that means is some regular experiences which accountants would have gained in the past, aren’t there anymore. If you’re an accountant in London or an accountant in Hong Kong, suddenly a huge chunk of the work you might have had experience of is being done in Dalian.
So how do we make sure that our people get that experience? What they’re going to have to do in the future is they’re going to plan that much more carefully. They may have to start saying, right, that’s part of our outsourcing agreement, you’re going to take some of our people for a period of time every year, and let them get that experience so that we don’t lose it in our core competence in the business.
What kind of experience are we talking about here? Isn’t what is usually outsourced the drudge work of accounting, ledger work and such.
A lot of the actual reporting and analysis is being outsourced or put into shared services centres. The outsourcing company is actually moving themselves higher up the finance value chain, which can mean that companies will find it very, very difficult to develop their own finance people with that full, broad skill set that they want to have in place.
So maybe companies will need to go to outsourcing companies to recruit finance staff . . .
Which you don’t particularly want to do because the outsourcing company will recruit different type of person, and you don’t get the same business culture that an outsourcing organisation as you get from other types of corporates.
Why won’t the finance person stop at being a business partner? Why not become the principal yourself?
They often do. They end up with such a deep understanding of [business operations], and provided that they have the ambition and the skill set to manage, then that’s often what will happen. So we have a lot of CIMA people who begin in finance and then suddenly they find they’re marketing director. Or they’re IT director and that’s being a result of having worked closely with those areas. Business partnering in those areas actually, after a while of doing that, have the understanding, the skills and the ability to manage and run that area.
Are the technical skills you learn in accounting and numbers, are they useful in learning business partnering skills?
It’s a discipline of analysis, evaluation and objectivity. Those will serve you well in any kind of business. Being able to do that, having those three things together is how you make good business decisions.
But in terms of leadership, in terms of communicating with people, being warm and knowing how to motivate and all these other things, is that something that you get to learn from the technical skills?
You get to learn that through your work, through your development as you do for any other type of job. Marketers aren’t born with that, they have to learn it. Everyone has to learn it. But it doesn’t form part of that, the finance people doesn’t form part of that foundation. But it’s that bit on top that everybody looks for. It’s that special bit which differentiates between the ordinary and the extraordinary.
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