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Calling all CFOs: it is time to restructure the finance function

As lockdown restrictions lift and financial care packages are being offered by the UK government, Jeremy Fletcher, MD at Transform Finance, argues that operational finance functions should be taking significant action now to ensure survival


With Covid-19 set to dominate global headlines for some time to come, most organisations will rightly be focused on protecting their cash and re-budgeting to allow for a totally new outlook.

However, they must also take the opportunity, or be forced by circumstance, to review their organisational plans. The CFO will typically be at the forefront of these initiatives, and will be leading by example through reviewing the structure of the finance function.

Aside from its fiduciary and legal responsibilities, the primary role of the finance function is to support the organisation of which it forms a part. Therefore, any plan to transform or restructure must begin with a fundamental review of the requirements and needs of the business. And this starts from the top.

Before any replanning exercise starts, the CEO and the individual members of the executive team must be allowed the opportunity to explain their own needs and expectations. While these demands need to be given full consideration, it is for the CFO to assess them for cost, feasibility and practicality of delivery, and accept or reject them accordingly.

From these C-Level discussions, the CFO and their appointed project team will gain greater knowledge and understanding of the key components of the business, how it works, and its fundamental drivers. All the executive inputs will require full consideration in the next stage of the restructuring process.

Armed with their own detailed knowledge of the finance function and the new demands from the senior team, the CFO must now map a new hypothetical organisation.

Why hypothetical? Because, although the new structure should be drawn from scratch to create the perfect model, the reality of having a fully staffed department inevitably means that the hypothetical organisation will be compromised to allow for the existing employee base. The hypothetical organisation can be created in draft form, but in reality, it can only be brought into existence in stages over an appropriate period of time.

Once the bones of a new structure have been formed, the CFO should review the plan with individual finance managers and the relevant subject matter experts. This will ensure that the new structure is workable and that various elements of detail have been fully considered and worked through. Of course, at this point, although the CFO needs the skills to manage the disappointments and disagreements that this stage of the process may entail, they must also ensure that the momentum towards the new organisation is maintained as required.

With the new structure agreed, but with the old structure still in place, the CFO will now create a route map to move the organisation from the old state to the new.  There are three major components in doing this: people, process and systems.

Taking the most important element first – people – the CFO reviews the current organisation with an eye to planning the steps towards the new organisation.  This would normally include at least the following elements:

  • Redefining the split of management responsibilities: Ensuring each area fits with the process flow of the business;
  • Reducing layers of management: Ensuring a suitable manager-worker ratio;
  • Checking stress points: Amending functions that have historically been overwhelmed with work;
  • Reviewing your direct reports: Ensuring you have suitable individuals for each new role, and
  • New pieces: Building in any new responsibilities highlighted from your executive reviews.

 

The steps above are the keys to simplify and streamline the finance structure. However, in order to take this further, both finance processes and systems need to be fully reviewed and appropriate changes made.

Detailed processes can be amended by combining the skills of finance managers and the individuals working the detail of each process. Robust and open communication and debate should be encouraged in order to flush out any unnecessary process steps, unneeded data production and inefficient process loops. Alternatively, a general process owner can be employed, usually on a short-term basis, to lend experience and expertise to ensure that the new processes conform to the most efficient and commonly practised standards.

A systems upgrade can help to create a more streamlined finance function allowing for faster processing requiring less steps and less human intervention. Again, creating a team of subject matter experts and individuals with the relevant technical knowledge will ensure the most efficient system choice and design.

Finally, all elements coordinated in a well-structured comprehensive plan will lead to the creation of an efficient cost-effective organisation, and the CFO can show leadership across the whole company by showcasing the functional effectiveness of an efficient finance function.

The steps are straightforward; the skill is in the CFO’s coordination.

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