From Finance to Value
Updated: Nov 6, 2020
A finance professional with ambition to break out of an incremental finance career progression and make a transformative impact, can start by broadening his or her mindset from operating as a "Functional Finance Leader" to operating as a "Value Leader". This article describes the mindset shift, frames the broader scope of impact, and gives three examples of this transformation in practice.
Defining moments occur when a perspective changes, a mindset shifts. In a finance career a mindset shift can occur at any moment over a person's professional horizon - a conversation with a mentor, a challenging project, an external unexpected event. The shift from mindset of a "Functional Finance Leader" to a "Value Leader" is transformative.
Finance careers typically start with academic training in economics, accounting or business administration, then moving to positions within an public audit firm, financial service consultancy or finance function in industry. Over the course of several sequential and lateral promotions to a controllership or financial analysis position, a finance professional progresses to a position of respect for dependable functional knowledge and consistent delivery. At this stage of mastery, the external perception tends to reinforce one's professional mindset as a "Functional Finance Leader".
Functional Finance Leaders provide a critical foundation for production, routine and continuity. They ensure daily problems are solved. They ensure functional technologies operate. They ensure finance teams are trained. They keep operators informed. Functional Finance Leaders are essential to every organization.
Functional Finance Leaders provide a critical foundation for production, routine and continuity.
A defining moment (a conversation with a mentor, a challenging project, an external unexpected event) may lead to a re-thinking of aspirations and career objectives. A Functional Finance Leader's defining moment may transform her aspirations to have a broader impact as a Value Leader.
A Value Leader is a change maker, respected for using her technical expertise to take points of view that unlock 10x potential. To achieve 10x potential, these points of view must span across non-finance enterprise functions and create meaningful value for the firm and external stakeholders (i.e., customers, investors, community).
A Value Leader makes independent appraisals. She frames problems as opportunities. She is comfortable with ambiguity. She encourages debate, and distills discussion into decisions for action. A Value Leader grounds game changing ideas with a latticework of evidence. With this mindset, she pivots from a formal position of functional authority to guide decisions in areas outside her formal position of authority. Functional Finance Leaders who make the mindset shift to value leader can be extraordinarily transformative leaders.
Value Leaders ground game changing ideas with a latticework of evidence.
The scope of influence of a Value Leader is broader than a Functional Finance Leader. It expands from the specifics of finance and accounting to any decision that influences value creation of the organization. In practical terms, the scope of influence expands from Controllership to growth, returns and risk in five ways:
Analysis & Insight: Harnessing all sources of information (finance and operational) to analyse performance and improvement opportunities. Continuously pushing finance and operational teams to climb the analysis maturity ladder from descriptive to prescriptive, proactive analytics.
Strategy & Innovation: Structuring objective analysis of Revenue and Profit growth opportunities over short-, medium-, and long-term horizons. Facilitating exploration of sustaining, transformative and disruptive innovations that mitigate risks of obsolescence.
Culture & Talent: Communicating and acting upon the values, norms and behaviors that advance business's strategy and purpose. Recruiting the right talent, then encouraging, challenging and developing individuals to make meaningful contributions.
Technology: Leveraging hardware, cloud infrastructure and software to automate routine processes, mitigate risks and costs, and enable faster and better delivery of finance and operational objectives.
Capital Allocation: Investing human and financial resources in highest and best use for sustainable growth over short-, medium-, and long-term horizons. Using all available mechanisms to support organic and inorganic growth including M&A, partnerships, investments and public policy.
The broader scope means a Value Leader takes a general management context to their role, speaks with an independent voice based on deep understanding of financial and operational performance and risks, and serves as a business partner in the orbit of every aspect of the organization. Consistently bringing this mindset to the role, a Value Leader finds ways to use daily conversations into transformative contributions.
Transformation in Practice
As described above, Value Leaders approach situations with a different lens than Functional Finance Leaders. They separate signals from noise and speak in actionable language about growth, returns and risk. They define problems so they are understandable and tractable. They highlight first-order and second-order consequences of decisions. They communicate without jargon.
The following example situations contrast how a Value Leader and a Functional Finance Leader approach situations differently.
Performance insights (Analysis & Insight and Technology): Especially in volatile market environments (e.g., H1 2020), rapid and accurate reporting of revenues, expenses and cash flow are essential for executive decision making. In this situation, a Finance Functional Leader will work long and hard hours to prepare accurate ad hoc off-cycle reports (often manually) to quantify changes in performance compared to prior expectations. In contrast, a Value Leader has a different mindset. She changes the task from only asking "what did happen?" to "what do we do?" and designs an algorithm for executive decision-making about how to respond to future scenarios. To accomplish this, the Value Leader works smarter using automation, uses analytical technologies in partnership with Technology colleagues, and solicits different opinions while processing insights.
Sales productivity (Strategy & Innovation and Culture & Talent): Rarely do sales hit the expected target, missing either to the upside or downside. A Finance Functional Leader is astute to productivity variances by segments (e.g., geography, product line, customer segment, sales team members) and reporting periodically. A Value Leader goes layers deeper to analyse trends in sales productivity by segment and ask if strategic assumptions are still valid and if talent is capable of meeting expectations. Further, a Value Leader raises questions and proposes steps teams may take to answer questions and resolve gaps between performance and expectations.
Funding a innovation (Capital Allocation and Accounting & Controls): The heart beat of sustained growth is repeated investment in internal research, development and regular opportunities to partner, invest in or acquire external capabilities. A Finance Functional Leader plays a critical role to ensure internal investments are accounted for and audited for compliance with policies and return expectations. A Value Leader considers second- and third-order accounting, strategic and productivity implications of allocating capital internally versus external options. For example, a Value Leader poses questions and alternatives to externalize innovation if the innovation is non-core or lower value added when compared to other innovation opportunities. The Value Leader's mindset is concerned with how to maximize the value of investments in innovation.
Discussion and refinement of concepts presented in this article are welcome.