One question I hear a lot from other finance people when I discuss the value of finance business partnering and how the finance function can become more value-adding in general is: “How can I measure the value of my contributions, specifically?”
Put in more general terms, how can finance measure its direct impact on the value creation when it collaborates with other functions to add value to the company?
My answer is simple. You don’t. And you shouldn’t.
The direct value of business partnering could be measured through traditional means, typically extra revenue or lower costs, but it’s not important to quantify finance’s part of that value
Two things that matter
When finance works together with people from other functions in cross-functional teams, there are only two things that matter when it comes to value creation.
- Did the cross-function team add any value to the bottom line as a team?
- Did the people from the other functions perceive finance’s contributions positively, i.e., did they think the result became better because finance was part of the team?
If the answer is yes to both those questions, then it’s quite simple really. Finance added value to the company.
Finance and value creation
You can always ask more basic questions, such as what is value creation and where does finance add value directly.
But knowing the difference between a discounted cash flow model and the term shareholder value (if there are any), or how finance can improve working capital or bring down banking fees just aren’t all that relevant anymore.
Yes, finance should do those things, but more importantly, finance needs to be able to collaborate cross-functionally and help the frontline teams add value. The value that’s created from finance’s point of view is then indirect value, as it’s created through or together with others.
The direct value could be measured through traditional means, typically extra revenue or lower costs, but it’s not important to quantify finance’s part of that value. The only things that are important are 1) was value created, and 2) the recognition that finance made a positive difference.
Asking the wrong question
So when you’re not supposed to measure your direct value creation (even if it was possible), how can you then make the business case for your finance transformation, which will free more time for business partnering?
You’ve invested heavily in talented FP&A and finance business partner resources and expect to see some dollars on the table. The confusion comes when your people seem to be doing a good job working with the other functions, but struggle to come up with cases where they deliver a direct impact.
It’s because you’re asking the wrong the question. What you should be asking is whether the frontline teams are creating value, and how your finance team is helping them do that.
If value is not created at all, both your team and the business have a problem. But if value is created and your team is just not mentioned in the credits, then you need to take a closer look at exactly how finance is partnering with the frontline teams.
I've written extensively about this previously, so I recommend you to read:
- What Finance Business Partnering Really Is
- You’re A Finance Business Partner, Now What
- How Finance Business Partners Improve Company Performance
But here I will just leave you with the observation that, if both the above conditions are met, then your transformation is a success and finance is helping add value to the company.
Don’t wait for direct value creation from your team. But demand value creation from the business – and that your team takes the lead in making sure it happens.
About the Author
Anders Liu-Lindberg is the Senior Finance Business Partner for Maersk Line North Europe and works with the transformation of finance and business on a daily basis.