By Andy Burrows
One thing I’ve realised recently is that, in the minds of Finance professionals, the questions over the place and value of the Finance function are closely linked with questions about their careers.
I don’t know why it suddenly dawned on me. It’s kind of obvious when I think about it!
Perhaps it’s just that when I asked a little while ago what questions people had about Finance careers, I didn’t expect to get questions like this one:
“How can you convince top management that the Finance department is not just a cost centre, but way more?”
There were other questions similar to that, but I’ll write about those perhaps in other articles.
Clearly, if we are just seen as costs in the business, then that’s a bit of a dead-end in terms of careers.
The thing any business wants to do with costs is to reduce them. So, if Finance is just a cost, then the only thing you’d want to do with Finance is to cut us back as soon as you can.
So, we’re not going to get far in our Finance careers if we’re just seen as an overhead, a necessary evil, a back-office burden.
And the first thing that occurs to me is that we can’t really complain if management looks at the Finance function that way.
Because we trained them to think that way!
If we’re always going on about the cost of things, sucking our teeth and pointing our fingers, saying no to spending requests, slashing budgets so that managers hate us, why are we going to be exempt from the same attitude?
If we obsess about costs in our communication with managers, they think that’s the language we communicate in. So, they talk to us about costs. And when it comes to talking about Finance, the only thing they think we’re interested in is costs.
We can’t have it both ways. If we want to talk about the value of an overhead function like Finance, if we want to say that we’re not a mere cost centre, then we have to change the way we talk about the business.
The fact is that no person, department or function, within a business is just a cost.
The business would not employ someone, or would not spend money on something, if there wasn’t at least the perception that the business benefit (i.e. value) exceeded the cost.
The debate with managers, therefore, is not about spending, but return on investment.
Is that perception of value correct? Does the value really outweigh the cost?
Sometimes the long term value does outweigh the cost, but it still has to be cut, because the return isn’t quick enough. In other words, it doesn’t convert into real cash quickly enough.
And we could talk all day about how to look at cost cutting and expenditure analysis.
The real point is that before we can expect management to look at Finance as anything but a cost-centre, we have got to change our language from the language of cost to the language of value and return.
Further than that, we have to start getting our heads around intangible and indirect value.
As I said earlier, the business would not employ a person to do an activity if the value it derived from that activity wouldn’t exceed the cost.
But, with certain activities the value is intangible or indirect. That doesn’t mean it’s not real value.
Intangible means it’s near impossible to tell how much value comes that particular activity. Take certain types of advertising as an example. Some advertising is for direct sales, aimed at bringing in immediate revenue. So, you’d expect tangible results. Other advertising strengthens the brand and promotes awareness. Sales are more difficult without that awareness, familiarity and brand trust, but you can’t tell how many new sales come from that advertising. So, the results are intangible, but no less real.
Indirect means that the activities and assets on their own don’t produce value, but they are essential to a process that does create value. So, for instance, it’s pointless buying a load of laptops but not employing the people to work with them. Or we shouldn’t see all the value arising because of the salesman, when there would be no cash inflow without an invoice or a bank account (both provided by Finance)!
Again, if we can start to show that we recognise the connectedness of the activities of the business, all needing each other interdependently to create value, then we will have set the scene to talk about Finance as more than merely a cost.
All the above lays the groundwork. One of the fundamental reasons that “top management” often perceive the Finance function as a mere cost centre is that we in Finance are not comfortable talking about ourselves in terms of value. We somehow expect that everyone will get it.
And so, with the foundations laid with the language of value and return, the next thing to do is to start making a list of all the things you do in Finance and how it contributes to value and return in the business.
You could even try to put $ values on the processes, projects and activities. I personally wouldn’t publish them, because I have a thing about ‘spurious accuracy’! But as an exercise to make you really think, it would force you to recognise which business processes don’t work without what we do in Finance. It would make you think which decisions could not have been made, which risks would have been missed, which relationships would have been messed up, and so on.
But even that only focuses on what the top management allows us to do now. The sense of the original question is that we’re being prevented from fully contributing because we’re not seen as value creators. So, to recognise the value of what we already do is just the start. Because if we’re being asked to do those things, then the management must believe there’s some value in them. Otherwise, they’d be wasting money.
So, the next step is to be clear on how Finance can add value to the business, beyond what it already does.
You need to be clear and specific about what additional work you want to do in Finance and how that adds value. What more could you do? And how much more profit would the business make because of it?
You may think that last question is unfair. But, hey, you want the right to ask that question of every other business proposition that crosses your desk! So, why not be honest and try and answer it yourself?
And it’s difficult. I know!
One good starting point to help you in the specifics may be my short paper, How Finance Can Drive Business Performance.
The thing is that if you get this really clear in your own thinking you will naturally talk about it. And one of the ways to convince managers that Finance is more than a cost centre is to talk naturally about the other things we can do that they may not have thought about.
Finally, on two levels it helps to start with thinking beyond ourselves.
At a functional level, I never tire of saying that Finance exists for the business. So, we should think more in terms of how we can help the business, rather than always how we can get into a more influential position. The focus should be on the business. Not on ourselves.
But also, at a personal level, showing an interest in the management, the people who own and run the business, helps you to understand things from their point of view. What do they want from the business? What does it mean to them? What worries them?
The irony is that you get more influence when you stop trying to be influential and simply show that you’re interested in other people! Be curious and fascinated in how the business works, how people got into their jobs, etc. And you’ll find that people will start to be interested in you too, and you’ll get chance to naturally share what you’re learning and the knowledge and experience you have.
I hope that those thoughts were helpful to you if you’re struggling with convincing your non-Finance colleagues that Finance is much more than a cost centre. We’re not just a department that does mysterious stuff with numbers that is just a back office necessity. We’re a bunch of fellow-humans who want to be a valued part of the team that makes the business a great success.
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