Insider Business Club: deconstructing the FD

Peter Simons, technical specialist at CIMA

The role has always been three elements – producing the accounts, the
stewardship and the strategy. However, over the last ten years, shareholder
value maximisation, and the freeing up of the capital markets has really put the
focus on the maximising value, which has meant that the poor old FD has to focus
on keeping his costs low and now focus on the shareholder value a bit.

The Enron and WorldCom scandals have put a big emphasis on government
enterprise and Sarbanes-Oxley. Well, I think we over-reacted, and that it’s not
as important as it seemed to be a little while ago. But the technology and the
globalisation has allowed FDs in the big companies to really cut their costs. If
you ask me about the business processing costs, we estimate that for the bigger
companies, they fall on something of about 2.4% of turnover to about 0.75%, and
that is a big saving. If they’re in retail – that’s the profit margin.

It is very important, but if you outsource that stuff, then the FD can get on
with the other parts of his role, which is exciting actually. Instead of
producing the figures, he gets to produce the money.

Nick Jarman, partner in performance improvement,

‘The relative costs of the transaction process have fallen over the last few
years, that is definitely true. Larger companies seemed to have achieved that,
and it is the mid-tier that are now picking up on that theme.

There is a question here and that is the argument that was put forward years
ago about shared services and consolidating, reducing activity around finance,
and re-skilling those people that would become available, to focus them on
helping drive the business. I

am not sure that has come through. I think the experience has been that those
people were doing mainly transactions before and were unable to make the jump
between the transaction piece and the insight piece.

‘What we have to be careful about is keeping to the agenda of the finance
function. Shared services and outsourcing are a mechanism to address cost and
efficiency around the back office, so it is very important that they don’t
become the agenda themselves and we treat them as part of the overall objectives
for finance.’

Peter Moller, partner in finance transformation at Deloitte

It is very different to simply turning a handle and producing monthly and
annual accounts. It is looking and helping the organisation map out its strategy
and then implement its strategy. It might be looking at new business models or
new ways of producing things, whether you make or buy; it could be looking at
new sourcing models globally.

But whether it is fair to ask a CFO to play both the role of strategist and
steward is an interesting question. I wonder whether it is likely that any
individual has both the capability of becoming a great steward and a great
strategist. If you think about the Myers/Briggs personality type indicator that
people use, it may well be that a steward and strategist have a very different

So, on the one hand, if you want someone to do strategy type work, they need
to have a certain amount of creativity, be risk-takers, great communicators, be
able to talk to the leaders within the organisation. On the other hand, someone
who is a great steward needs to have great powers of analysis, be potentially
risk adverse, and be able to cross the Ts and dot the Is.

Ian Macmillan, partner in business consulting with IBM

It doesn’t by rights reduce risk. The outsourcing market is growing hugely.
Go to India or China or eastern Europe and look at what is happening there, they
have incredible facilities and seeing is believing.

The point about quality is that there are some organisations who are actually
able to do it at the right quality and there are some organisations who will
struggle. One of the key points is making sure that the infrastructure is in
place and actually making it work.

You need to be very clear about what is sensible to offshore or outsource and
what is not. If you spend time thinking about that model, then the endgame is
fine. Quality, in a number of cases that I can point to, actually increases
because you moved, you standardised, introduced a highly efficient focus.

In reality, you’ve got highly qualified graduates working in India who are
actually passionate about doing a purchase ledger job. I would challenge anyone
to get the same quality and passion around that subject in the UK. Quality can
be enhanced, but it is not a panacea.

The debate was chaired by Gavin Hinks, editor of
Accountancy Age

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