When the CIMA Forum considers how management accountants can better support decision making, the discussion is never about how to provide numbers. For example, they might share views on providing a managing-for-value or risk-management framework, or the metrics and analytics to support evidence-based decision making, but the challenge is never to produce a measure. The challenge is always to achieve impact.
A recurring theme is that effective business partnering is not just about providing management information and having technical skills. It is about understanding relevance, sharing insights, influencing decisions and managing performance to achieve impact and adding more value.
In a case study, a guest speaker from a leading-edge technology company made a thought-provoking presentation on analytics, a seemingly technical topic. Interestingly, although he shared with the CIMA Forum how his company had used analytics to achieve a step change in their business model, he emphasised the need to develop finance/business partners’ soft skills over the need to develop technical analytical skills. Without these soft skills, impact would not be achieved.
Key learning points include:
• In talent development, it is important to acquire expertise in business-process improvement and experience by rotation through the range of finance roles (back, head and front office).
• To move from analytics and insights to achieving impact, the communication and influencing skills required are areas of higher priority for focus and development than sophisticated analysis and modelling skills.
• Intuitive logic can be more valuable for finance/business partners than scientific analysis in achieving impact.
In creating effective skills in the finance/business partnership, from back to front office, organisations can consider five scopes of work processes; namely, Data Capture, Reports Analysis, Insight, Influence and Impact.
PA Consulting Group has developed an interesting business-partner-material model, which incorporates the Herrmann Brain Dominance model developed by Herrmann International, to illustrate the thinking processes of a sample group of FTSE 100 finance directors.
Their findings may illustrate a fundamental challenge to developing accountants as a partner for the business. Having cerebral and left-mode-thinking processes, these financial directors are logical, analytical, quantitative and fact-based thinkers. These are valuable qualities for them to contribute to decision making. However, their nature may make it difficult for them to develop empathy with more emotional or intuitive colleagues.
The challenge in developing finance/business partners has been described by the CIMA Forum as being the need to help accountants to become ‘T shaped’, meaning that they should acquire a broad range of business skills to top off core finance skills acquired through training in business as a management accountant.
This requires a development programme that includes experience in financial and accounting roles and in working closely with, or even within, business lines.
Finance professionals need to be trained to accomplish more than furnishing and assembling financial information, but also to draw insights and to communicate these effectively to support decision making. They will be expected to use their understanding of the numbers and metrics to evaluate opportunities and support decision making about investment opportunities and resource allocation.
Unilever’s progress towards finance/business partnering has been driven by the Unilever Finance Academy. This unit is leading the change in Unilever’s global finance community, developing tools and techniques and promoting and dispersing them to business units.
Regional finance information centres support business units’ adoption of the range of tools and techniques and their consistent application. Cross-functional teams in the business units consider and agree on roles, expectations and accountabilities in brand-management processes. Contributions are from IT, finance and customer development. Finance’s contribution to marketing and customer development varies, depending on the service target area and process. In some cases, finance assumes an advisory and supporting role, and in others, a performance-monitoring role. Finance integration into the business also depends on the maturity of the market, and factors such as market share and availability of local finance skills.
A web portal of resources, e-learning modules and a range of other communication tools support the diffusion of best practice and the development of skills in the finance decision support/business analyst community.
The experience of a major British bank that has invested in developing finance/business partners supports this view. The organisation recognises a need for finance/business partners, but the accountants who are given this title are instead more comfortable preparing spreadsheet models to supplement the management information provided by the shared service centre. This bank has now provided business performance managers to assist the finance/business partners and remove this excuse. But it is clear that many finance/business partners are more comfortable dealing with numbers than business issues.
• The nature of the finance/business partner role varies, but an emerging ideal is that of a ‘challenging sparring partner’.
• The skills required are the core financial-and-accounting skill set, with a broader business understanding and a range of soft communication/influencing skills.
• Leading companies have invested in training programmes and career planning to develop
• The challenge for accountants is to overcome their stereotype.
As a total enterprise, Kimberly-Clark uses an Objectives, Goals, Strategy and Measures (OGSM) tool extensively. Long-term objectives (words) and goals (numbers), together with strategies (words) and short-term measures (numbers), cascade in a disciplined and transparent way from the total enterprise through functions and into individuals’ personal objectives. The resulting integrated approach to activity planning means that they are now less precious about what is owned by finance. For example, manufacturing-facility staff with a finance background are focused on analysis only, and belong to the facility management. Their careers may take them in and out of finance, but they are embedded in the business. Finance business partnering (business analysis) continues to be a career-development bridging point, from function to the business.
Along with all areas of the organisation, the prime concern in people development is to develop future leaders for the enterprise, rather than individual functions. The disciplined activity-planning process for individuals and groups is combined with an objective measurement process. All staff follow a standard development process, focusing on developing leadership skills at three levels:
• Leading self
• Leading teams
• Leading leaders
For each level, six leadership qualities are assessed and developed — building talent, collaboration, decisiveness, inspirational, innovative and visionary. Results are plotted on a nine-box grid with forced distribution, which enables absolute transparency of the best talent in the enterprise.
In the business-partnering role, the leadership development expectation is the same as with business roles, and organisational result expectations are closely interwoven with the business area being supported. As a result, the partner is highly integrated.
Functional expectations and development are secondary but continue to be provided. Indeed there is still recognition that the specific skills of process and risk management that traditional, experiential finance training provides is an excellent background to supporting the business and inserting level-headedness into business planning.
The role of the management accountant can be mapped on to the decision-making process to show how finance/business partners can support decision making.
A more compelling case for the engagement of management accountants as finance/business partners is made by showing how they can help apply financial disciplines to the decision-making process.
The application of finance disciplines, such as managing for value, performance management, risk management or analytics can improve decision making.
Managing for value
The rise of private equity seems to have increased the focus on managing for value. Private equity organisations have the advantage of not having to be as transparent as publicly quoted companies, but they are usually funded by much more debt than equity. This high leverage carries financial risk and can mean they need to manage for cash to service or reduce debt.
Management might learn from the private equity houses’ strategic focus, implementation, remuneration and possibly corporate structure or gearing. Management may not have an exit strategy, but they may have the advantage that they can manage for value to maximise shareholder value in the longer run.
In 1999, as the potential of the internet became clear, Jack Welch famously exhorted GE managers to ‘destroy your business’. This framed decision making. Benchmarking against potential e-enabled competitors identified cost savings and suggested new business models. Likewise, ‘what would a private equity house do to our business?’ can frame decision making today.
In March 2007, Cadbury Schweppes, which has long been a champion of managing for value, issued a press release confirming that private equity investors held 3% of its shares. Just two days later, it issued a press release announcing its intention to separate its confectionary and US beverages divisions, and that the board was evaluating the options for separation to maximise shareholder value. It also announced that it was addressing its operating costs to improve margins that had lagged behind peers.
Cadbury Schweppes claims it was planning to make these changes in any case, but it is interesting that the private-equity stake seemed to have prompted it to make these announcements, as though to assure investors that the management was already doing what private equity owners might do.
The press releases issued by Cadbury Schweppes can be viewed here and here.
About the Author
Andrew Harding is a chartered accountant with over twenty five years' international business across finance, business development and talent management roles.
He trained with Binder Hamlyn (now Deloitte) in London. He specialised in training and development before joining ACCA where, after leading the global business development and professional standards activities, he became managing director before joining CIMA in 2009.