Wanted: the all-round Finance Manager

At the management consultancy firm McKinsey, people used to refer to the concept of the ‘T-shaped consultant’: the vertical bar of the T representing specialist skills and the horizontal bar representing a broad understanding of organisations and management. What we need today are T-shaped managers – people who have both deep skills and capabilities, but can also make those broad connections and understand the organisation as an organic whole, not just a collection of moving parts. Survival in the modern world depends on everyone pulling together and working towards a common goal, and we cannot do that while sitting in silos.

The role of the financial manager has never been as important as it is today. As we struggled to cope with the pandemic and the devastation it has created across wide swathes of the economy, we need financial managers like we have never needed them before. The finance department has access to knowledge and forecasts that are either unintelligible or unavailable to the rest of the organisation. As the old certainties vanish and previous plans and budgets are torn up and scattered to the winds, the finance department can become an engine for change. Financial managers can become agents for regeneration, renewal and revival.

Or can they? The sad truth is that many finance departments operate in closely bounded silos, with little or no real understanding of what goes on in the rest of the organisation and what its needs are. Only at the top is there much contact with other departments; and sometimes, not even there.

In his book Reinventing the CFO, the late Jeremy Hope, a well-known American writer on financial management and leadership, painted a dismal picture of the profession. Morale was at rock bottom. Financial professionals felt undervalued and unloved by their colleagues; many believed that ‘everybody else in the firm hates the finance department’ (and, Hope concluded, very often they did). They felt that their work had no meaning or value, very often because they could not see or experience the value they were creating for the rest of the firm. Others felt that the rest of the firm didn’t understand their work or why it was important; again, this was likely to be true in many cases. More than 40% of the people Hope surveyed were considering exiting the profession altogether; worryingly, these were often the most senior and experienced professionals.

This was in America, and 15 years ago, but the finance professionals I talk to today often present a similar picture of themselves and their colleagues. Turnover rates are high, often higher than in operational roles. It can be hypothesised that this is because people working on the front line can see and feel more directly the impact their work has and the value it creates, although I know of no data that proves this. But Hope’s argument, that financial managers need to break out of their silos and integrate into the rest of the firm, is as true today as it was then – arguably more so, given the scale of the crisis we face.

An organic view of management

A successful organisation is so much more than just the sum of its parts. It is an entity, with separate functions performing separate tasks, but all reliant on each other and working in harmony to achieve a desired end. Organisations that struggle are the ones that put up walls and seal off parts of the organisation from each other, cutting lines of communication. Because of their highly specialised nature and the unique skills that are required of managers, finance departments are particularly at risk of ending up in silos.

The blame for this does not lie with financial managers. Responsibility rests with a mechanistic approach to management that goes back to scientific management in the early twentieth century. Instead of focusing on the whole firm, management broke down into constituent parts – financial management, operations management, human resource management, marketing and so on. Each worked independently of the other, focusing on its own core tasks rather than on the organisational purpose.

But there are other ways of looking at organisation, as Gareth Morgan reminds us in his book Images of Organisation. The machine organisation is one of them, but Morgan urges us to also consider comparing organisations to living organisms. This is not a new idea: Plato discussed it in The Republic: and the medieval scholar John of Salisbury proposed a notion of organisations with ‘heads’ – the leaders who did the thinking and planning – ‘hands’ – the workforce who carried out those plans and were the productive arm of the organisation – and ‘hearts’ – the soul or spirit of the organisation that was its motivating force. Other writers have picked up on this idea, and it is embedded in the notion of ‘systems thinking’ developed by people like Arie de Geus and Peter Senge, the latter most notably in The Fifth Discipline.

If we see an organisation as a whole system, all its parts interdependent on each other, the whole notion of silos makes no sense. Separating out departments and cutting off contact between them is like amputating someone’s leg in order to make them run faster. All the parts of the organisation have to work together in harmony, and because of the skills and knowledge they have at their disposal, this is true of finance departments most of all.

The ties that bind

What links finance departments to other parts of the organisation? Let’s look briefly at the three examples mentioned above: human resources, operations and marketing.

All too often, financial managers view staff as two-legged cost centres. But until artificial intelligence makes us all redundant, which is hopefully still a little way in the future, organisations depend on people. Creativity and innovation are human attributes, as are the empathy and relationships skills required to deliver services and create value. How effective the organisation is depends almost entirely on whether it has the right people in the right places at the right time.

Here is an area where, as Jeremy Hope suggested, financial managers can help their colleagues. Ensuring we do have the right people in place requires planning and forecasting – the very areas where finance teams often have highly complex skills and tools at their disposal. At the same time, understanding the human needs and the culture of the organisation will help the finance team create better, more realistic plans that are tailored to the organisation’s capabilities, and not to some theoretical understanding of what might be possible (and often is not). Finance and HR need to talk to each other and work together as closely as possible.

The same is true of operations management. Lack of understanding within finance of what actually happens on the shop floor is endemic. ‘If you want to improve productivity,’ a finance director once told me, ‘don’t try to increase output. That’s tricky and uncertain, and most of the time the reward doesn’t cover the outlay. Make cuts instead. Cuts are easy.’ Of course the opposite is equally true, if not more so; to the shop floor, financial managers appear to be talking a foreign language.

But operations are the engine room of value creation. Here again, the planning, forecasting and budgeting skills of the finance department can help operations teams to use resources more efficiently and effectively. This is particularly true when planning special projects. Instead of handing operations a budget and telling them to get on with it, financial managers can be embedded in project teams, and help them analyse the cost and other financial implications from the beginning. In turn, being close to the engine room means the finance department can get a feel for what is happening and where problems might emerge in the future, rather than only learning about them when the month-end results come through.

Marketing was for many years the Cinderella department, and to some extent still is. ‘The first thing we do in a downturn is make the marketing department redundant,’ a CEO once told me. Nowhere is the gap in understanding and failure to speak a common language more apparent in most organisations than in the relationships with the marketing department. And yet, the marketing department is the company’s window on the world. It is through functions like marketing, sales and after-service that the company speaks to its customers. For the finance team, having access to market intelligence is vital if they are to plan accurately and budget for investment in the right areas.

Breaking down walls

A retail organisation I worked with in the early 1990s was struggling to contain costs and become profitable. Rather than making cuts, as advised by my colleague above, the company instead undertook a radical restructuring. It broke down its internal silos and created project teams, each with a representative from the key functions: finance, HR, marketing, store operations and, additionally, purchasing. These teams were given a high degree of creative independence and told to get on with it. Within two years, costs had dropped significantly and both turnover and profits were rising.

What happened was simply a matter of personal relationships. The finance professionals in particular felt that they were now fully integrated into the firm. They could see the direct impact of their work in terms of customer satisfaction and value creation. That in turn increased their self-esteem and commitment, and gave them more job satisfaction. Instead of performing their own job in isolation, they were now part of a cross-functional team that spanned the entire organisation.

This example shows what can be done. Of course there are no cookbook recipes for what to do, and each organisation has to find the best solution to its own needs; not everyone can break down silos as radically as this company did. But even if the silos don’t go away, we still make doors and windows in them to allow people in and out. There are other tactics that can be used too – shadowing, for example, where financial professionals spend a day on the shop floor or out in the field learning what other people do; or ‘skunk works’-type teams that come together for a limited life to work on a particular project. Anything that gets finance teams talking to other parts of the organisation, and that promotes greater understanding and communication, should be tried.

In The Republic, Plato uses a powerful metaphor of people living in a cave who have never seen the outside world. All they know of life beyond the cave is the shadows they see on the walls, of other people passing to and fro beyond the cave entrance. They are happy with this life, because the cave gives them the illusion of security. But in the aftermath of the pandemic, that illusion is no longer possible. It is time for finance departments to come out into the light.

Related resources

• Finance transformation hub
• Other articles from this Special Report - Commercial insight