This article was first published in the April 2012 International edition of Accounting and Business magazine
In today’s unpredictable economic climate, diversity has become more than a recruitment requirement. Once represented by a tick-box survey completed with every job application, diversity today is increasingly seen as critical to success in global business.
More than just a consideration of gender, ethnic background and sexual orientation, diversity now encompasses not only visible differences, but the things that make people unique: life and work experiences, views and beliefs. Diversity in this wider sense is about harnessing different perspectives and inputs, encouraging productive collaboration, innovation and creativity. Companies grappling with the challenges of a changing global economy are increasingly seeing it as something they need to embrace.
In a new ACCA report, Building a Better Business through Finance Diversity, 12 international diversity, HR and finance experts give their views on the importance of diversity in finance. And, they say, the bottom line is that the global business environment not only demands that diversity be taken into account, but also that success depends on it.
In a scary time for business, the finance function has a pivotal role in steering companies away from turbulent waters. More than ever before, the onus is on CFOs to make sure the ship stays afloat. Companies are re-evaluating their investment strategies and many of the assumptions on which they once based their business – it’s an exercise where dexterity and diversity of thinking will pay dividends.
Companies need creative finance professionals who can devise new solutions to new problems. This changes the way finance professionals are recruited, but also the job of the CFO. ‘The role of CFO is becoming more of a trusted adviser, providing insight into the business, driving a lot of the strategy and with a very important seat at the table,’ says Carlos Passi, assistant controller of business transformation at IBM. ‘And with that change, the skills required are also different.’
The logistics of extending business into a global market are forcing CFOs to adapt. Professor Mansour Javidan of Thunderbird School of Global Management explains: ‘Move the company into one extra market and the CFO has the same role to perform but now has to ensure there is capital market access beyond the domestic market. The CFO’s job now is not just to follow domestic rules and regulations but also rules and regulations in the second country.’
An impressive finance background is no longer enough for tomorrow’s CFO. ‘When we look for finance leaders, we try to play down their functional strengths once they reach a certain level and get them more rounded in term of business experience,’ says Datin Badrunnisa Mohd Yasin Khan, group chief talent officer at Axiata. ‘Of course, we’re looking for people who have grown up with the finance discipline but that alone is not enough.’
Professor Javidan agrees – CFOs require a more varied CV than ever before. ‘As a company globalises and the CFO gets more globally exposed, hard technical skills are still necessary but no longer sufficient,’ he says. ‘You have to become an expert in balancing the contradictory forces coming at you – and particularly in positions like finance and accounting.’
Finance leaders must develop broad experience in developed and emerging markets and while CFOs are expected to adapt to disruptive innovations and new business models, their teams also need to keep pace. This is where diversity of thought and experience can be a vital tool for staying ahead of the competition. Recruiters should be looking to bring individuals with fresh ideas into the finance function.
Roberto Mello, CFO of GE Healthcare China, welcomes the challenge. ‘The opportunity to tap into talent from different cultures and backgrounds is a powerful tool because it gives us the chance to have different points of view,’ he says. ‘There is incredible opportunity and strength for the business to be found in the differences between people.’
Of course, harnessing these differences can be challenging. ‘If you don’t understand the depth of the differences you may violate people’s strongly held views without realising it,’ warns Peter Reilly, director of HR research and consultancy at the UK’s Institute for Empowerment Studies.
Each new market has its own customs, culture, regulatory, environment and governance strategies to consider. These must be understood and incorporated into the existing corporate model. ‘Once you have respect for and an appreciation of differences, not necessarily thinking of one as better than the other, then you can really start working on getting the best out of people,’ Mello adds.
A potential pitfall of diversity, warns Kathryn Komsa, chief diversity officer at Marsh & McLennan, is the patience and time required to consider numerous opinions during decision-making. ‘When people with diverse backgrounds, experiences, ways of interpreting things come together, it may take longer to get a solution,’ she says. ‘But you will inevitably get to a better solution.’
Komsa’s colleague, CFO Vanessa Wittman, says debate in decision-making may shake the traditional hierarchy of the finance team, but can deliver immeasurable benefits. ‘The understanding that debate leads to better answers aligns with the ultimate finance goal of challenging the business,’ she says. ‘Any CFO who is searching for views that only echo their own shouldn’t be a CFO.’
As many companies consolidate their finance teams into regional hubs or outsource processes to cut costs, diversity may seem a pipe dream. Globalisation swells the financial information companies need to manage, forcing them to shrink in-country finance teams and migrate commoditised activities to shared service centres. This boosts productivity and saves costs by standardising processes for routine transactions.
At the same time, companies must comply with local financial and governance regulations in the jurisdictions where they operate. This encourages a shift to a process-driven approach that assures compliance and improves accountability. ‘More than any other function, finance demands sticking to the rules and doing the same thing in a very standardised business model,’ says Reilly. ‘There’s an argument that the greater the standardisation applied, the harder it is to benefit from diversity.’
But not everyone agrees. Stevan Rolls, head of HR at Deloitte, believes that standardisation and diversity can work together. ‘Some activities in the finance function need to be robust and repeatable and so are good candidates for standardisation regardless of where you are,’ he says.
‘Others require local treatment or are more complex and so require on-the-ground expertise. Finance is a function in which there are places where you want innovation and places you don’t want innovation. The key is deciding which is which.’
Even if it overcomes these potential pitfalls, a company can end up with diversity without the benefits. Businesses can benefit only if the workforce is empowered to express its diversity – otherwise, companies end up with teams who look different, but think the same. ‘It’s diversity of thought that brings the real business advantage,’ Rolls explains.
So simply hiring a team of people from different backgrounds with varied experience is not enough. Employees need to feel free to express their creativity and difference in thought and opinion – and their seniors must allow themselves to be challenged. The shift from the consensus-driven management style to one that embraces differences is critical.
Harnessing the power
Finance leaders and HR professionals need to tap the potential of diversity, strive to foster diverse thinking across the organisation and encourage the open discussion of views and ideas. Companies need to be open to recruiting staff from different sectors, regions or professional backgrounds.
Finance executives must be encouraged to develop greater experience through secondment or job rotation and leaders should resist the urge to retain good staff members in one position for too long.
‘It’s never easy, because if you have a great person in the team you don’t necessarily want them going off to do something else,’ says Rolls. ‘But in the long term, they’ll come back with different skills and a wider view on their role. Ultimately, you get a lot more out of them by letting them go.’
Finance diversity: Why and how
- External changes are demanding greater diversity in the finance function.
- Changing the roles and responsibilities of the finance function requires CFOs to think more broadly about the skills and background of their team.
- The demands on the finance function are growing as companies expand further overseas.
- In a global economy, the ability to understand differences in cultures and perspectives is a prerequisite for the finance function.
- Diversity of thinking encourages innovation.
- In order to derive benefits from diversity, business leaders must be comfortable with being challenged.
- There can be a tension between diversity and the need to develop standard processes across geographies.
- A broader perspective on recruitment can play a valuable role in creating a more diverse finance function.
- Finance executives should be encouraged to develop experience outside the finance function.
- Finance leaders must develop broad geographical experience in both developed and emerging markets.
Expert view highlights
‘Equal opportunity is important to ensure that talent gets the opportunity to fulfil its potential regardless of background. But you can still have a workforce with representatives from a wide range of backgrounds and not have diversity. It’s diversity of thought that brings the real business advantage.’
Stevan Rolls, head of human resources at Deloitte
‘When people with diverse backgrounds, experiences, ways of interpreting things and tools come together, it may take longer to get a solution, but you will inevitably get to a better solution.’
Kathryn Komsa, chief diversity officer at Marsh & McLennan
‘As a company globalises and the CFO gets more globally exposed, hard technical skills are still necessary but no longer sufficient. You have to become an expert in balancing the contradictory forces coming at you.’
Mansour Javidan, professor at Thunderbird School of Global Management
‘Once you have respect for and an appreciation of differences, not necessarily thinking of one as better than the other, then you can really start working on getting the best out of people and situations wherever you are based.’
Roberto Mello, CFO at GE Healthcare China
‘When we look for finance leaders, we try to play down their functional strengths once they reach a certain level and get them more rounded in term of business experience. Of course, we’re looking for people who have grown up with the finance discipline but that alone is not enough. We really want someone with a more developed business sense.’
Datin Badrunnisa Mohd Yasin Khan, group chief talent officer at Axiata
‘The understanding that debate leads to better answers aligns with the ultimate finance goal of challenging the business. Any CFO who is searching for views that only echo their own shouldn’t be a CFO.’
Vanessa Wittman, CFO at Marsh & McLennan
Kate Jenkinson, ACCA journalist