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What should finance pros do when confronted by recession? Invest in people

More than half of global CEOs expect an economic slowdown in 2020. As profits fall, pressure will pile onto CFOs and other finance leaders to chart a path for improvement, or cut costs. Raef Lawson, vice president – research and policy at the IMA, writes

Technology – particularly automation and artificial intelligence – is sometimes seen as the salvation for finance professionals looking to cut operating costs and improve productivity.

However, a 2019 study by consultancy Bain & Company looked at where companies would be able to cut costs during a future recession, and concluded that despite “massive investment in digital technologies”, cost efficiency is relatively stagnant, and room for meaningful staff cuts is limited.

Furthermore, cuts to staff have resulted in “reduced service levels and lost institutional knowledge”, while asking “staff to do more with less cannot be sustained for long, as people will have no leeway to innovate or execute new initiatives”.

Given this bleak picture for finding cost savings while improving efficiency and productivity, finance leaders need to define a different path. Rather than relying on technology to reduce staff, recent research conducted by the Institute of Management Accountants (IMA) indicates that leaders of finance departments should invest in their people, particularly when it comes to helping them acquire technological skills that will be necessary in the future.

Published in a September 2019 report, Achieving a Competitive Advantage in the Digital Age – The Value of Training and Certification, studies show that the best way for an organisation to adapt to technological change is to ensure that its employees have the skills they need to thrive and add value, and that they are able to constantly upskill as circumstances change. This holds true even during a recession, when resources are systematically squeezed. 

Automation of traditional finance tasks does not mean that finance jobs will disappear. On the contrary, finance professionals, freed from the constraints of routine tasks that AI can do better, should be reskilled and redeployed to other key areas serving the business, which includes being a contributor to long-term strategy and decision making based on the intimate knowledge of the numbers that only a finance professional could possess.

This is a crucial implication of technological change that many business leaders – including those within the finance function – often miss. Unfortunately, during economic downturns, many CEOs turn to downsizing rather than reskilling and re-deploying, which can cost more in the long term as automation fails to adequately pick up the slack of having fewer employees. As CEOs, boards and shareholders demand cost cuts, finance leaders will be hard pressed to expend resources on initiatives that seem to bring less short-term value. 

So how can finance leaders protect their companies from skills shortages when strapped for money and resources? 

Embrace Certification

Many certification programmes in finance and accounting cover the current and emerging skills needed by professionals to perform their jobs better, resulting in greater productivity and cost savings.

Encouraging finance staff to pursue certification is a relatively cost-effective way of upskilling employees, compared to creating internal training programs. Furthermore, IMA’s research found that staff retention rates may be helped when companies provide incentives for certification. More than three-quarters of its survey respondents indicated that their employer’s support of certification would strongly (23.4 %) or somewhat (53.7 %) affect their decision to remain with their company. This prevents the loss of institutional knowledge that comes with high employee turnover, whether voluntary or otherwise. 

Reorient priorities: from reporting to strategy

IMA research indicates that organisations that outperform their peers spend a lower percentage of their time on statutory and external financial reporting, and a higher percentage on strategy development and improving finance operations.

Finance leaders need to set this tone at the top, encouraging finance professionals to think of themselves as valued business partners rather than bookkeepers. The goal is to harness automation to eliminate tasks, not jobs, and retain employees as highly productive contributors to the organisation. Coupled with a new emphasis on certification and training, this new focus will ultimately add value. 

Get ahead of the curve

Finally, finance leaders must begin investing in their people and building value now, before a sudden or substantial economic slump makes acting more difficult.

Communicating clearly to all stakeholders that technology should be a means by which to upskill rather than to shed staff – and that a company is ill served by gutting its workforce in the name of efficiency – is paramount to a new, people-focused initiative aimed at boosting future corporate prospects. 

As economic storm clouds gather in 2020, time is limited. Make the case for a renewed, reinvigorated finance function now, before it’s too late. 

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