VideoYears ago, I visited my brother in Manhattan. At the time, he lived in an apartment above an Italian restaurant. "How's that Italian place downstairs?" I asked.
His reply: "It's not that good, but they deliver." By at least offering delivery service — an absolute essential in New York — the restaurant escaped the deepest of scorn. But food unworthy of a walk down a few steps wasn't winning it any James Beard awards, either.
So it goes with your finance organization. The fact is, a finance team may not embody the worst practices — glacial closes, manual rekeying of data, triple-digit DSO — but avoiding those obvious signs is by no means a mark of greatness.
So how do you know if you're running a truly world-class finance department? It's easy to offer up obvious markers like low cost of capital, accurate forecasts, and financial transparency. Granted, these are important concepts — but they're also mouthed so often by CFOs and finance consultants that they've tended to lose their meaning.
And some experts say that old saws about finance departments can actually be counterproductive. Take the never-ending quest for higher productivity, which most CFOs see as a most noble and worthwhile pursuit. According to John Roberts, a director at the Washington, D.C.-based Working Council for Chief Financial Officers, it ain't necessarily so. "A lot of CFOs see [the pursuit of productivity] as a trap," he maintains.
Indeed, the slavish pursuit for ever-greater productivity can actually exhaust — and eventually demoralize — a workforce.
Of course, settling on exactly what constitutes a top-notch finance operation can stir up a heated debate. Nevertheless, we put the matter a group of experts — CFOs, consultants, and executive recruiters — and frankly, we were surprised by their selections.
Not one of our experts mentioned rolling budgets. Or finely turned AP/AR systems. Or thinny-thin GS&A. Instead, our panelists cited more mercurial items — like strategic thinking, knowledge of operations, and companywide visibility. None of which fits neatly into an Excel spreadsheet.
In fact, it would seem that judging by the answers of our panelists, building a first-rate finance department starts with sensitive and self-aware leadership. The catch? Sensitivity and self-awareness are not always strengths for number-loving, empirical finance chiefs.
Even more surprisingly, some of our experts said that a skilled finance chief does not necessarily make for a great finance department. "The most dysfunctional finance department I've seen had probably the best CFO I ever saw," recalls Tom Casey, a partner in human-resources consultancy Buck Consultants. The CFO was a numbers whiz, says Casey, but he didn't have a clue about running a team of happy, harmonious, high-achieving workers.
And looking at the list below, it would seem that happy, high-achieving workers — workers who are given ownership of their jobs — are crucial to running a first-rate finance department. The bottom line for the bottom-line set? CFOs, no matter how dazzling, are only as good as their cast of supporting characters.
1. Finance Department Employees Know What the Finance Department Does
"Why are we here?"
It's a question for the ages, pondered by everyone from Martin Heidegger to Woody Allen. Existential crises aside, employees in world-class finance departments understand their roles. And they know that their roles aren't limited to printing out Excel files.
The reality is, CFOs are no longer numbers cops. Likewise, their team members should have a "line mentality," says Marge Johnsson, founder of finance consultancy The Johnsson Group. She believes finance staffers should know how the rows of data on their computer screens fit in with a company's objectives.
Top-notch finance chiefs foster a service-oriented culture in their departments. In an earlier interview with CFO.com, Coach Inc. CFO Mike Devine said, "I've always built my finance teams on the theory that finance is a customer service organization, and our customers [include] senior management, the board of directors, and line management." Added Devine: "I tried to breed that feeling of, 'We are here to serve.' "
Ralph Packard, CFO of mutual-fund giant Vanguard Group, takes a similar approach. Packard says he plants the service seed as soon as a new employee starts work. To get a sense of where finance fits in at the company, each new finance staffer goes through a comprehensive orientation process for the finance group, in addition to the general corporate orientation.
In addition, Packard notes that advances in technology over the past five years have allowed finance employees to gain perspective. "Technology has removed a lot of the grunt work," he says. "Before, they were recording transactions and keeping books, and they didn't have time to think about what the numbers meant."
Admittedly, the connection to larger company goals is not as obvious for some finance employees as others. It's easy for a risk manager, for example, to see how her work is crucial to her employer's business. But what about the payroll clerk?
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