The Changing Role of Finance: Business Partnering

By Elizabeth Harrin (London)

A new study by PricewaterhouseCoopers shows that finance functions are moving away from being transactional centres and becoming key strategic business partners, assisting with decision making. Nearly two thirds of participants in PwC’s benchmarking work said that their finance function primarily acts as a support group for the CEO and the strategic planning process.

PwC’s finance effectiveness benchmark study looked at the finance functions of 1700 businesses in over one hundred FTSE 200 and international companies. It shows that CFO’s have a tough job to do: balancing running an efficient division and providing proactive and insightful information to support business decisions. And of course motivating their teams as we come out of recession, when many of them will have seen colleagues pack up their personal effects in a cardboard box and leave.

Times have been tough for finance teams recently, and they now carry the demands of the wider organisation to steer them along the path to recovery. This is what has prompted adoption of a new model of working with the rest of the business: partnering.

Business partnering defined

Gone are the days when the actuaries sat by themselves in the staff canteen, if they stopped for lunch at all. Today, finance employees need to integrate with their colleagues across the business to help design and execute business strategy. This is where the partnering model comes in: seeing finance as a value-add function, that doesn’t just do transactional processing and print out reports at the end of the month. Finance business partners understand the accounting principles, compliance and regulation requirements, but also the realities of running a business. They see the company from both sides, as a holistic organisation, and can advise their non-finance colleagues accordingly. Think of it as an internal consultancy role.

Doing that type of role takes a special kind of skill: people with the experience and ability to explain complex financial principles in straightforward terms, and then assimilate the business knowledge and map that back to the numbers. The role involves proactivity and the confidence to challenge poor decision making. Unfortunately, PwC say only 11% of finance staff are involved in this type of critical activity.

Can finance teams deliver?

The challenge is that traditionally finance divisions have been seen as reactive, reporting centres, with a focus on operational processing. Not the kind of forward-thinking visionaries that help drive a business into the next decade. And the PwC analysis shows that while we might want our Finance Director to lead a team that integrates seamlessly with the rest of the business, the skills aren’t there.

For example, finance analysts in average-performing companies spend 55% of their time gathering data – and only 45% doing the actual analysis. In top performing companies the picture is different: nearly 60% of an analyst’s time is invested in analysing data, providing more quality and more relevant insight.

Getting the right people

You might want the finance team to perform analysis tasks and provide business insight that will set your company apart from the others, but it’s not that easy. You can’t dish out new job titles to a bunch of transactional processing people and expect them to become top-flight analysts overnight.

The best performing companies have invested in training for the people who add the most business value in the finance function. And they get paid more – up to 25% more, with top earners taking home up to £91,000 (US$138,000). It hasn’t been easy to recruit and retain talent in the recent economic climate, so firms are getting better at succession planning and growing their own talent in-house.

PwC has also noticed a shift towards changing the compensation model to reward the right type of work. Bonuses are linked to risk-adjusted measures, and companies are developing balanced scorecards to track progress against strategic measures.

How to copy the top performers

More than 80% of the companies PwC worked with were dissatisfied with the quality of their management information, and there is huge scope for improvement here. Bringing all the data management under the control of one function is one option to improve the flow of information in the company. While non-financial data is still the responsibility of other business areas, having one clearing house for data enables consolidation and standardised processes, which in turn lead to better access to MI across the whole company. Better access to data should lead to decisions being taken with all the relevant information forming part of the picture – with better outcomes.

Clear metrics are another important distinguisher – the best performing companies have simple ways of measuring performance and transparency around what those numbers actually mean. Metrics should map to the business objectives and strategic goals, so you can clearly tie up what you are delivering with shareholder value.

Simple is also the way to go with organisational structures and processes. The more that can be standardised, the easier they are, and this frees up valuable time to do tasks that add more value to the business. Consolidation of repetitive tasks into a single department or function can also create more time elsewhere. Automating processes as far as possible removes the level of operational risk that creeps in when harried finance employees have to deal with bloated manual processes.

The demands of business have changed, and finance functions need to keep up. That means taking a more proactive role with delivering quality management information, standardising and simplifying as much as possible, and ensuring that key staff have the skills they need to provide the right support for business decision making by acting as partners in the process. What is your company doing to meet these three challenges?