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This article was first published in the February 2016 international edition of Accounting and Business magazine.

Finance, as we keep hearing, is increasingly a strategic business partner rather than a grudge, support function. But what exactly is a strategic partner? One definition is: an advisory unit that can proactively or reactively assist in the financial and commercial evaluation of opportunities to improve business performance, or develop the business in new areas and directions.

This means finance doesn’t act only as a passive reporter or analyst of performance, nor does it just turn plans into numbers; it actively contributes to the thought process of business and commercial design. That means working with other areas of the business, including sales and marketing, operations, R&D, IT, HR and – most importantly – with the CEO. It means putting together plans and business cases, and helping translate these into strategic projects.

In practical terms, having one foot in strategy and another in finance could require your input with the following:

  • sales and marketing decisions on new products, markets and channels, and international development
  • operations and R&D decisions on new facilities, technology and processes, cost management projects, outsourcing and lean management
  • IT decisions on new technologies, outsourcing and business process re-engineering
  • HR decisions on organisational changes and HR interventions
  • CEO decisions on acquisitions, alliances and divestments.

Core activities

The core activities for a partnering role with the business are:

  • ensuring transparency of financial performance across the business
  • working to achieve breakthroughs and continuous improvements in business performance with line managers
  • jointly identifying and evaluating growth opportunities
  • efficiently and effectively allocating resources, particularly in terms of investment and costs
  • assessing and evaluating key business and financial risks, and testing decisions for the mix of reward and risk
  • focusing further on economic value added throughout the business and in all decision-making
  • managing the finance function on a lean basis.

So how much of all this are you actually doing now as a finance unit? And how much transaction-specific work and routine reporting are you doing by comparison? Studies suggest that well-developed strategic partner roles are a rarity. And it’s not just something that afflicts finance. HR, for example, often strives to be a value-added partner but finds it hard to shift from operational issues to more value-added interventions for similar reasons to finance.

Partnering might mean embedding finance staff in their ‘client’ organisations – in terms of physical location and dual reporting, or both. Where a business is geographically spread, that approach may have logistical advantages.

Other choices in deploying finance as a business partner include whether or not staff should be assigned to a particular business department indefinitely. Doing so could enhance relationship-building and trust but may be too rigid. Many think it is better to reallocate staff through constant rotation as a way of keeping their ideas fresher.

But what does it all mean in practice?

New behaviours

As a senior finance professional, you can’t just sit there in meetings and listen, or do no more than chip in a bit to the conversations; you should also sometimes initiate or lead the discussion, or act as a facilitator, perhaps putting up ideas on a flipchart or steering the debate. There might even be an opportunity to make some sparing use of financial concepts and tools such as strategic gap analysis.

The finance professional may be co-opted onto strategic project teams as a member or even team leader. This allows a finance professional to bring to bear the skills that are their strengths – structuring, problem-solving, etc – and could involve, for example, things like acquisition evaluation, integration, or the turnaround of a particular business area.

It may entail working in parallel with a group of managers to produce a business case for investment or change, such as outsourcing. Finance staff seem to struggle with this, particularly because the core paradigm of their work is so often, even today, management reporting. A good business case should have an executive summary, key issues and key objectives, strategic options and evaluation, assumptions and uncertainties, financial projections and sensitivities, and appendices.

It will also mean adopting a different style to the traditional controller role (the ‘financial police’). The strategic partner is more likely to be a catalyst (for new ideas and change), a collaborator (in jointly solving problems or addressing opportunities) or a consultant; above all, they will be the organisation’s conscience, reminding the CEO/directors not to overlook issues. In the latter context, an easy but highly value-added question to ask is: ‘So what’s the one really big thing that we have forgotten?’ You can follow that up with: ‘So what’s the second really big thing we have forgotten?’

Turning the sceptics

If finance is a strategic business partner, the CEO can’t just use the function as a stick to beat other departments. Where there has been a history, and memories still exist of this (maybe under a previous CFO), other directors may well view such a change of emphasis with cynicism. Becoming a strategic partner is not just about internal rebranding but real change; it’s about having a full communication and influencing strategy to win over sceptics.

It also demands a shift in skills, as we are no longer looking at just number-crunching. These skills might include:

  • commercial awareness – a good knowledge of the business model and how it does or doesn’t add value, its value and cost drivers, its market and the macro environment
  • strategic thinking and analysis – challenging skills, which might not come naturally
  • influencing, facilitating, relationship development – these demand patience, sensitivity and even flexibility, and may sit uneasily with senior finance staff below the CFO
  • educational – and not just on finance matters but also on commercial and legal issues, and external trends such as economic and market growth.

Finally, some thought needs to be given to getting the right staff for these roles.

This is perhaps the biggest challenge of all, as the staff already in place in the finance department may not be capable of playing a strategic partner role particularly well. Training and coaching may help here, as will assigning those staff who lack the temperament to 100% reporting and control roles. But other choices may also have to be made that natural wastage won’t deal with.

A precondition of finance becoming a true strategic partner is that the core reporting and budgetary systems are working well and that users are happy with them. Otherwise there may be a feeling among line managers that finance should be fixing itself before it comes around trying to fix the rest of the business.

Although becoming a strategic partner might represent a huge challenge for finance, it nevertheless offers a more interesting and perhaps more sustainable career than that of being a number cruncher and nothing more.

Dr Tony Grundy is an independent consultant and trainer, and lectures at Henley Business School