Finance Evolution: Ledgers to Leadership

CIMA’s report, Finance Transformation: The evolution to value creation, concludes that finance functions in today’s organisations are transforming into business partners with other parts of the organisation via a process of evolution.

 
Such a role requires much less of an emphasis on cost-efficiency and back-office duties, and much more on finding ways to be outward-facing and a creator of value. It makes new demands on finance professionals while still requiring them to be both technically competent and in a position of independence.
 
The report highlights that finance functions require a portfolio of roles and finance professionals with a diverse range of competencies and skills. Both business-oriented competency and technical competency are indeed seen as being crucial to the business-partnering role for the finance professional, but their importance is not restricted to this role. Instead, business competency is vitally important across all finance roles, independent of the adoption of business partnering.
 
Paradigm shift
The findings show that there should not be an expectation of a ‘typical’ finance professional, as finance professionals will continue to be extremely diverse in their capacity to undertake new types of roles.
 
CIMA also reported that the changes taking the finance function towards the business partnering role do not necessarily encompass the elimination of more traditional roles, such as transactional processing work, since developments in IT have meant that this is far less onerous a task even than ten years ago.
 
And due to virtual collaboration, neither do they require physical relocation of finance professionals to the business units they partner. Instead the key changes are those that really create value via improving internal processes and focusing on products and services.
 
CIMA’s consultations indicate it is possible that, having become involved in these changes, the finance function may continue down the evolutionary path and proceed to the next step: being a true business partner with a stake in, and responsibility for, those strategic and operational decisions into which it has an input.
 
It is therefore possible to see that identifying the type, and developing and then maintaining these business competencies as a priority for finance professionals, involve a shift in paradigm similar to the move towards business partnering itself.
 
Indeed, it is even wider reaching, since all finance professionals, both business partners and finance specialists, will require better business and commercial skills going forward to provide the value that organisations expect from the finance function of the future.
 
Business versus technical skills
This paradigm shift raises many questions, such as:
 
  • What exactly is meant by ‘business competency’?
  • Does its importance outweigh that of technical competency?
  • What is the optimum balance between technical and business competency?
  • How can this balance be established in an organisation’s finance function?
  • How can an individual finance professional achieve the right levels of competency and maintain them throughout his or her career?
  • How can organisations plan for the development of their finance staff to really add value to the organisation?
  • What are the optimum ways in which organisations recruit and develop talent?
  • What are the actions to consider for organisations and individual finance professionals?
 
Finance professionals at all levels rate their business competency as being more important to their organisations than their technical competency, though the balance between the two competencies depends on the individual’s role, duties and seniority, and on the size of their organisations.
 
Interestingly, non-finance senior management continue to rate finance professionals’ technical skills more highly than their business skills in terms of the value they add to the organisation, the technical and financial skill-set and expertise being the finance professional’s ‘raison d’etre’. While this suggests there may be misconceptions among non-finance personnel about the wider functions and roles of finance professionals, it highlights that anyone looking to work in finance may need to develop financial technical skills first and foremost.
 
It also reinforces the fact that many employers have finance competency development as part of their recruitment, learning and development strategies. There is perhaps a need for finance professionals themselves to continue to recognise and value their technical skills.
 
Finance professionals require a mix of skills and competencies and while technical skills are a critical requirement at the recruitment stage for organisations, there is definite evidence of a shift in requirements for business and commercial acumen across all finance roles.
 
This interplay of competencies is not restricted to organisation-facing roles such as advisory or strategic roles, but is also in evidence across all role types, including in general accounting and the specialist technical ones, such as treasury, tax and audit.
 
Business partnering
In CIMA’s experience, different companies are at varying stages of business partnership, with some having made considerable progress in the level that they have achieved. Reaching a stage of ‘true business partnership’ is largely considered impossible; as any successful business will know, a growing business can never afford to become complacent or static.
 
The types of skills sought after in finance can be impacted by external pressures, and since the 2008 recession, CIMA has seen even more of a focus on the need for finance professionals who possess a marriage of both strong technical and management skills.
 
Strong leaders can motivate staff and therefore have a positive impact on retaining talent within the business. There has been emphasis on the need for professionals with a combination of these skills for almost a decade now, but it is only in the last few years that CIMA has started to see job specifications and roles created with this in mind.
 
Some finance professionals may be uncomfortable with the way in which the role is evolving, but increased training or mentoring, supported by employers, should enable professionals to develop in their weaker areas. Priorities will naturally change with a heavy workload and many professionals end up neglecting training opportunities open to them.
 
The only way an employer can prevent this from happening is to ensure the professional has dedicated time for it. A comprehensive training programme that all parties invest in can be a strong tool for developing and retaining employees.
 
The correct balance of skills within the finance function will vary from business to business, depending on the individual needs of the company. Benchmarking and performance appraisals can determine the types of skill-sets within a business and the current competencies of the existing finance team.
 
This establishes a starting point, against which existing and new talent can be compared. Skills gaps, both technical and managerial can be identified and appropriate action can be taken going forward.
 
CIMA has noted that not having the right people in the right place can cost a business, and many employers are reacting to this by continuing to create specialist finance departments, such as treasury and taxation. Business support and advisory partner routes are going to become all the more popular in the years following the recession.
 
In reality, business partnering brings the finance function closer to the business and the professionals within it become trusted advisors, with stronger relationships across the company.’
 
About the Author
CIMA, the Chartered Institute of Management Accountants, founded in 1919, is the world’s leading and largest professional body for management accountants, with 183,000 members and students operating in 168 countries, working at the heart of business. In this ongoing series, it investigates how technically competent finance professionals around the world have evolved to add value and become business competent.
 

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