Structuring a finance department has some new wrinkles these days, thanks to the trend of CFOs taking on more strategic roles over the past few years. The way the finance organization is set up may indicate whether the CFO is a strategist and views the company in a holistic way, or one that mostly makes sure the numbers are in order.
CFOs often have an empire of units beneath them: treasury, financial reporting, tax, financial planning and analysis (FP&A), risk management, investor relations. And increasingly, real estate and procurement are falling into the reporting line, too. The result can be an excessively stretched CFO.
“There’s a real opportunity cost with an overly broad scope,” notes Michael Griffin, executive director of finance and strategy group at The Corporate Executive Board, a member-based research and advisory firm. Specifically, it makes it harder for CFOs to spend time on activities that will drive revenue and hold down operating costs.
That dilemma may be partly cured by employing a valuecentric model for the departmental structure; for instance, having a core finance unit and a separate value-creation unit that includes FP&A and strategy staff. Many CFOs are moving in that direction.
For a CFO, “success is not just about getting the numbers right, but also uncovering the story behind the numbers: taking raw accounting information and creating cogent and compelling management discussion and analysis,” says Eileen Kamerick, managing director and CFO at investment bank Houlihan Lokey.
Those who take the big picture into account are more likely to develop an organizational structure that isn’t merely reactive. That will allow staff to come up with more ideas and, ultimately, help drive revenue and run the business. “You have to create an organization so you aren’t in the engine all the time,” Kamerick notes.
Before any restructuring of the team, CFOs should have a clear vision and strategy for the finance organization and then work back from there, Griffin says. It’s not good to look at the structure in a vacuum.
Macrofocused CFOs tend to seek more integration of their reporting units, notes Ankur Agrawal, associate principal at McKinsey & Co. In particular, they often bind accounting and FP&A tightly to corporate strategy and the forecasting and budgeting processes, he says.
Much of the battle to becoming more strategic, however, involves learning how to pass off mundane tasks. CFOs need to spend less time on daily core finance functions and be more confident in their ability to delegate, says Griffin.