How can finance contribute to agility? Standard Bank Investment Banking CFO Sean Doherty explains
Sean Doherty worked for Standard Bank, became a consultant and then rejoined the bank as CFO Investment Banking. We asked him what he learnt ‘on the outside’, how finance can contribute to agility and his doubts about finance transformation.
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You worked for Standard Bank, then started a consultancy, but then came back to Standard Bank. What valuable experience have you been able to bring to the bank from your time 'on the outside'?
"There are a few things which I brought back with me. Two major themes that spring to mind are resource availability and alignment, which are very different in a big corporate versus a startup. Coming back to Standard Bank, I am more conscious of the resources at my disposal and aware of how we can look at using these more efficiently or effectively. In a startup construct I learnt very quickly how to stretch and leverage everything to initially survive and then compete, and within this, prioritisation is key. I am also acutely aware of how much more challenging it can be to align people around a single objective in a big organisation and how this can be perceived as a lack of agility. What I have learnt, however, is that there are ways of bringing some of this thinking into a big organisation, which has proved valuable experience to me and my teams."
"I now also have experience in starting and running a business - albeit very small - so have a greater appreciation of what our sales people do and how they feel when we, as finance, don't act with the required urgency. I am not involved on the client side but again now have real experience of being a business customer of the bank and of what does and does not work. These experiences have made me more client sensitive as a finance professional."
The theme for our February event is Get Smart in 2016 - Move like a butterfly - sting like a bee. What could this mean for the finance function?
"I would bucket resources and the agility with which those could be used in three broad groups: firstly the organisation's capital (financial and human) and how and where this is utilised; secondly the finance function's role in this capital deployment and thirdly, the finance function's human capital and how, at what cost and for what benefit this is deployed."
"Another consideration is the need for a balance between medium to long-term strategy and or objectives and being able to take advantage of short-term opportunities. Even in an extremely uncertain and changing business landscape, it is critical for leadership to have long-term strategic convictions and remain consistent to those - obviously if all evidence is screaming otherwise the courage to change is necessary! This medium to long-term strategy sets the tone and the framework for which company resources are deployed and the benefit of that deployment measured, again over a period of time."
"It is extremely difficult in certain industries to shift this capital quickly. However, the manner in which this capital is deployed is where I see the finance function playing an increasingly important role. The ability to be agile and "pivot" are critical traits for companies to learn in this capital deployment process. In Jim Collins' book 'Great by Choice', he speaks about companies firing bullets before they fire the cannon. His reasoning is that by firing many bullets and learning from those that miss, that when a company does fire the cannon, they are empirically sure that it will hit, whereas by just firing the cannon and hoping, chances are that you will miss. Finance plays a critical part in firing the bullets and independently and empirically learning from each bullet and pushing those learnings back into a company. In recent times the 'lean startup' methodology has become popular to test ideas and client needs before 'betting the house'. Finance is the function that is best placed to assist this process. Agility can be created through all businesses and functions in an organisation by applying these kinds of frameworks."
"In the shorter term, opportunities will arrive and teams and people on the ground will need to take advantage of those. I guess this is where the culture of an organisation comes to bear and the trust you instil in those nearest the opportunity. At its most simplistic, centralised versus decentralised organisations could provide part of the answer. I am grappling with this right now and feel it has something more to do with the culture instilled and how this culture is sustained. I understand that that is a 'fuzzy' comment but something tells me that an ordered organisation rather than a controlled one is where the answer lies."
"Lastly, the finance team itself. I've commented on the role of finance in the broader organisation. The function has a dilemma in that business expectation is increasing at a pace similar to that of compliance and regulation, while the resource needed to deal with these increasing demands is flat at best. There are numerous solutions ranging from the practical to the more esoteric. While being a believer in efficiency, automation and outsourcing where possible, I think the big change needs to be in the minds of finance people themselves and how they see their role, which is materially different from even five years ago. No longer is getting the 'glossies' correct and out and obtaining a clean audit the definition of success. The finance function is being asked to be the 'coach' of the team and this requires a different outlook. That is not to say that the basics can be ignored but doing the basics is now just expected. Agility will be obtained in our functions when we get the function to believe that this is their role and prioritise and organise accordingly."
A bank such as Standard Bank is like a big ship that will only change course slowly. How can finance contribute to flexibility and agility in this context?
"A lot of how I answered the previous question speaks to this question as well. In addition I'm a big believer in not throwing stones when in a glass house. So, in my team we are running a number of small experiments to enable us to make better, quicker decisions. These range from running small crowd sourcing campaigns to answer focused questions to using market prediction models in the place of the annual budget in specific markets. Not all are successful but we learn from each and my goal is that that is observed in the organisation and adopted. The flip side of being part of a big ship that may turn slowly is that once you have turned and are aligned the momentum created is massive. This type of momentum can only be created in a large organisation by being consistent in strategy and the messaging of this strategy which speaks to my earlier point around a balance between consistency and agility."
What does the CFO of 2020 look like?
"The role of the CFO has fundamentally shifted post the financial crises, developing into an increasingly strategic member of the leadership team. In fact I think that strategy is not possible anymore without the CFO at the table and I think that this trend will continue and become even more entrenched. Looking to 2020 I think the CFO looks like the coach of a sports team. A good coach allows a team to 'play' by setting out the framework or parameters within which they operate, giving them the resources to enable competitiveness, reminding the team of their strengths and ensuring that the team play to these, being aware of vulnerabilities and having plans in place to protect them, understanding what competitors are doing and how this may impact on the team, 'protect' the team from outside distractions or internal politics."
What role can a flexible workforce play in the evolution of finance?
"In part employees will drive this. Already I am seeing people that want a series of experiences as opposed to a 'traditional career'. This choice by employees will offer flexibility in how a function is staffed. There needs to be better balance between full and part-time employment and real focus on what skills an organisation needs to differentiate its offering to clients. Skills that offer competitive advantage need to be kept in-house and leveraged. Part-time staff or consultants could be used at bust times to provide capacity or for very specific engagements. If a balance is achieved between full and part-time staff, the ability to scale and descale could be hugely advantageous."
With finance transformation focussed on long-term gain, what can CFOs do in the short term to improve the way scarce resources are used?
"I am a bit of a contrarian here. I recognise the potential in finance transformation programmes, but have never really seen the benefit realised. I am increasingly asking the question as to how what we in finance do assists our clients and the businesses we run and therefore how does this impact the way in which we work and invest into better, more efficient processes and technologies as well as, most importantly, skills. I'm concluding that the way in which we previously did things is not as relevant anymore. So what is it that we as a function add? At its most basic we add trust to customers and investors. In my environment this is even more important as we look after people's deposits. So investment in ensuring that trust is maintained is crucial and speaks to controls, compliance, regulation etc. This is not only about getting a clean audit but ensuring that an environment of control and integrity is maintained in the organisation."
"Finance has a huge responsibility in setting this tone. Over and above this, the buzz phrase at the moment is business partnership tending to mean aiding business in decision making through various means. The irony of this is that huge amounts of investment is spent on technologies and operating models to assist this, when in fact if the control basics around data and the process of generating this data are in place you have the building blocks to generate the information needed to inform and make decisions. I actually think the long-term solution is very focussed investment on increasing or maintaining solid control through consistent process and then on analytics using this 'clean' data. But there is no silver bullet as 'finance transformation' programmes promise."