Create Value with Relationship Management

Finance Business Partnering is only possible if you are great in communication and able to create an environment of trust and comfort with your closest relations. This is not easy as finance is often viewed as a specialty and a support function doing bookkeeping and standardized reporting based on requirements from the operations and executives. Your relations shall therefore be managed carefully to build a relationship that sets a perception on Finance as a Business Partner that can actively create value without instructions but through open dialogue and for your relations having an open mind on suggestions and ideas. On long-term having the opportunity to dispose better on how to utilize the finance resources.

The aim for relationship management should be to reach the state where all parties will see you as “one team” that drive the business in a positive direction. The major question is: “How do you get to this state of mind?”

Relationship mapping
First, you should know the people you should partner up with. My suggestion is to write down a summary for each of your relations containing:

1. Name and title
2. What is this person’s primary interests?
3. What can this person benefit from your input?
4. How does this person tackle your input and how do you tackle their input?
5. How can you improve the way you work together and create a two-way relationship?
6. What dialogue do you need with this partner to make you a preferred advisor?
7. What will be a success from your partnership?
8. What can you do to get there?

You will most probably discover in the process that all the people you work with should be tackled differently as everyone is different and have various interpretations of the business.

Dialogue with your partner
With basis in your relationship mapping, you should be able to figure out going forward how you should focus in your daily dialogue with your “partner to be” and build an environment of trust. Trust comes from people understanding each other and the feeling of being understood so it works two ways. It also is created from believing that your word counts. Further, trust comes from seeing that other people enable you to perform better.

You need to communicate input in a way that create a positive perception from that specific person and you need as well to act on input you receive and advise/analyze how this can be transformed into value. Remember that the purpose of the dialogue is to create the environment of trust. When you have achieved this state, I would suggest that you start building the partnership by discussing with your partner how you can actually benefit from each other by approaching the partnership in the same way and building the goals you want to achieve together as “one team”.

Maintain your partnership
A good partnership doesn’t stop as you have created it. You must maintain the partnership as the time passes and not fall back into separated routines. It is therefore important that you evaluate “on-the-go” to ensure you stay on the same page of the partnership and work as “one team”. If you start to neglect or not use each other on a continuous basis you will start to pull in different directions, so you need to be able to adjust your common goals and align on your partnership. Most important, you should never stop creating more value together.

If you update your relationship mapping after doing this, you will know you are successful as your answers to the questions should have changed especially on how both of you take input from each other. You will now be working as “one team”.

Value creation
To create value together you need to understand that you should not grow to be the same person but “one team” that see and use each other’s competences, experience and point of view.

It is important that you get out into the business and make your own impressions of what is good and bad and not only listen to your partner but as well be able to open a discussion of approach on your own. You need to ensure that the dialogue is not only started from one side of the partnership but from both sides.

See also my posts around Competencies of the Business Partner and How to be a Chief Value Officer.

How to be a Chief Value Officer?

During the past weeks, I have been introduced to a new title of Chief Value Officer (CVO).

The discussions have been that this is the major subject on transformation of finance to replace the CFO role with the modern expression of CVO but I am not sure if this brings the right perception in a business with this title as I believe “Value” can be many things. It is obviously though to be the monetary value that is expressed but what about the value that are created from human resources, IT development, operational quality etc.? Where are the boundaries for the value creation that should be included in the finance value creation? I believe there are many opinions on this subject but personally, I think the boundaries should follow one simple principle:

If any subject impact financial performance (both long-term and short-term), the Finance Business Partner should actively evaluate his/her perspective on the subject.

Following are a couple of examples focusing on HR works which will not naturally fall under finance responsibility but will create a management discussion to provide value to the company:

  1. If the operations department discuss opening a new staff position, finance should proactively evaluate benefits and risks of such action to the company and provide their opinion on the setup to create a more precise environment around the decision.
  2. Finance make specific suggestions on new positions anywhere in the company that would actually create value to the company.

What happens to the CFO?

I understand that automation is the future and will remove many jobs in the future but still someone should be responsible for ensuring that this automation works and is adapted to any change in markets, IT developments, accounting regulations etc. If the CFO role is to be taken off the table, who will then be responsible for this as it is not a value add?

In fact, I find this title to be quite provoking and not covering the scope of responsibilities that are required from finance. Anyway, I do agree with the basic idea that the CFO role should have a more modern approach to Business Partnering and should have a lot more focus on creating value to the business instead of focusing mainly on ensuring requirements of support and that the business is profitable as it is expressed within the word “controlling”. I therefore see the newly expressed title as a clear statement of the primary focus area but it will in fact be a CFO with a modern view on value creation. Though, we are not to forget to be responsible for the governance and quality of the “basic” finance work and this may still be part of the role.

Would CVO be a new added role to the organization splitting Finance in 2 different sectors. I truly doubt that this will function but should we be open to the idea? I think that creating a divided sector will increase the complexity of the organization and decision making in a way that will devaluate the value creation that is the purpose for adding the new role as decision making (especially in large companies) will be conflicting and time consuming as the roles will not share the same interests.

What is “Value”?

With reference to my previous article: Does CEO’s enjoy feeling alone?, I am also touching on this point with the value creation that I believe should come from the finance function as an area of further focus to the CFO’s. Though, I would also like to discuss what is real “Value” to a company. When you think about the word, it is most commonly used to describe the overall company values such as “integrity” or “green environment leader”. Some companies go to market to make investor earning but also a few non-profit organizations host a CFO role but where the value driven are quite different. Additionally, you see companies with the main purpose of creating profits but have a clear focus on social responsibility. This leads me to say that the value to be brought on the table by the CFO is very dependent on which company you work for and what are the value that you should focus on. Not only profits.

I believe, business partnering is all about really understanding the business you work in and how you can add/create value that is beneficial for that specific company. You should ensure that the finance organization as well gets under the skin of their respective areas, adding value on all levels to optimize either cost spend in full scale or the bottom line but also to focus on the core values of the company’s wishes for clients, society or employees.

This brings me back to some of the core competencies, I believe is important for a Business Partner who is ready to adapt to the situation he/she is in. I say: “Capture the moment and add value where it makes sense.” See my article: Competencies of the Business Partner

Does CEO’s enjoy feeling alone?

I recently read a post from Human Capital Group telling about new statistics saying that 60% of CEO’ s in Denmark is feeling alone when defining company long-term strategies reviewing the environment in top positions. Another interesting conclusion is that most of these are very happy about their job because of the relation to the board chairman. I am wondering a few questions:

Source: Human Capital Group – Er der koldt på toppen?

Does CEO’s not want Finance to be part of the long-term strategizing?

It can easily be read as a fact that the CEO’s are very independent people that mostly likes to work alone and get their own agenda on running their company but I believe myself that the many CEO’s who enjoy their role and defining long-term strategies on their own are only doing this because they do not really see the proactiveness from their Finance Business Partners that is actually required. If the finance function were to succeed in actually being a true Business Partner they would be able to add more complimentary information to the discussions on long-term strategy as finance would be able to understand the combination of all areas of the business a lot better. In the more traditional company structure this has been the task of the CEO’s but much information is hidden as the intelligence is simply not good enough. I do believe that most CEO’s would really appreciate any input as they see the additional value this will bring to the table.

Should Finance Business Partners take stronger part in defining long-term strategies?

Personally, I strongly feel that is the duty of a CFO to be able to come up with own suggestions on how the long-term strategy should be. By doing this, you enable a really beneficial dialogue with the CEO on strategic values and highlight the differences on opinion (or agreements, of course) which will better support the business finding a strategy that will create common grounds further down in the organization and thereby create better results.

What can we do as Finance Business Partners to influence the long-term strategy?

To enable the finance function to be more proactive, you should ensure the that the information that reaches the top of the hierarchy is also value adding in terms of understanding the true business. I would suggest to look at strategizing to get to know the business better by investing in training programmes on “True Reporting”. How many organizations intelligence data do you think gets corrupted by middle leaders that are trying to save face because they are afraid of the consequences if things are not as expected? My guess is “many”, and one manager doing this leads to the next also doing it. I believe that a great amount of value will come from creating an openminded organization mindset. Another great place to start would be defining the framework of collaboration between the company functions. Many people say: “Finance should be closer to the Business”. I say: “Finance needs to be part of the Business” as it works both ways in collaboration. Not only collecting data and information and understand the business but also create the environment where the remaining parts of the business understands the finance perspectives and is supported in the way they can also perform at their best.

Does Standardization and Business Partnering go Hand in Hand?

In many years the finance function has been focusing on standardization and centralization as a method for cost efficiency and creation of organizational competence centers. With the recent start of the Business Partnering Institute, the question that comes to mind is whether standardization and centralization is aligned with the value creation from business partnering.

Standardization is in many areas focusing on the principles of LEAN management but can also be viewed for adding some basic principles that standardize the quality of specific reporting. Often, we see businesses only working with one or the other of these setups and not combining these to the optimal mix of processes.

In example, many large companies have had a focus on creating Shared Service Centers that covers a large region based on LEAN management. Some of these projects has been cancelled and is returning to a decentralized solution as it did not match the expected value proposition but is this really the right call? This is where a true business partner could start creating great value: Instead of wasting big investments, the true business partner would be able to function as a project manager, analyzing the non-value adds in the process and figure how these can be optimized by applying more quality instead of LEAN approach or decentralize part of the scope to start adding value.

An opposite example is a decentralized solution where focus is on highly standardized quality. A set of principles are applied that everyone in all geographies/areas need to adhere to ensuring a standardized approach with high quality. Experience is that these tasks are often including some steps that could be centralized as basic standards and which adds demotivation to the people locally as they are required to span over too many different competences: Accounting, preparation, analysis and reporting. In many cases, the local organizations are often too small to split the competencies into people with the right motivation areas. Again, a true business partner will be able to find a solution that would add the right mix of decentralization/centralization and LEAN/quality.

So answering the question, I believe that what we often see in that business partnering are not going hand in hand with standardization and centralization but it can do if the business partnering approach will be the basis of implementing the principles of standardization and centralization.

Competencies of the Business Partner

As many companies use the title Business Partner they also have an idea of what kind of person they want in their organization but what are the competences that a business partner should have to create true value.

In order to realize the value of a business partner it is also important that the employer add the freedom to the business partner to shine and to have the “privilege of focus”.

Competence #1: Understand the parts of the business that are not on paper

In most businesses, there are many processes that are described but there are also many that are not and you also often see that there are workarounds as the described processes are not formfitting for all parts of the organization. A business partner needs the skill to review, analyze and understand what is actually happening in the business and not anticipate that everything is working as the official processes describe. This competence will enable the business partner to better support business change and understand the consequence of decisions and change.

To excel this competence, you need the ability to listen to people without judgement.

Competence #2: Communicate in all organizational layers

Communication goes two ways and in many different variations depending on who you communicate with. In general, you need the ability to actually listen but also to create the perception that you are listening. You also need the ability to clearly speak what is the plan and make the recipient understand what you mean. This is universal but the ways are very different in the various layers of the organization as you need detail communication for people on the ground and short version bullet points at management level.

Competence #3: Create common understanding in the organization

As competence #2 is important you also need the ability to use this competence to create an environment where you as a business partner tie the organization together as “One Team” by creating common grounds and let the different people in the organization understand and accept the conditions of the works and interests there are in the organization. With references the the TV Show: “Undercover Boss”, we see great examples that the leadership are working in different directions but understanding each other better create more common grounds.

Competence #4: Project management skills

One of the most important tasks that a business partner will take on, is to implement new standards, processes or reporting. For doing this you need the abilities of a project manager to plan, execute, test and evaluate. Also, it is important to match this to your listening skills during the project to identify potential issues with the outcome and be able to adjust during the project to ensure optimal end result.

Competence #5: Understand standardization and centralization implications

It is important to understand the general basics of different tasks whether they can be standardized or centralized and what are the implications from doing this on overall efficiency. One task can easily be optimized and performed cheaper but in some cases, this may implicate that other tasks are created instead to mitigate issues from centralizing a task. For example, if you centralize a task and the local people still need to understand what is happening, then you add a new task for communicating this. Remember in this case that communication is both about informing and understanding.

My first post

Welcome to my blog published by ProcOpt Management – Consulting for Improved Business.

I have created this blog with the purpose to share my thoughts about finance and business management and how this can affect businesses – if done right.

Everyone is talking about decision making and the processes behind and I will not keep back on this but will just as much focus on the basis of management information and effectiveness of back office functions to share the lights on some areas that are often overseen.

I hope you will feel the posts will be useful for you.

Have a good summer!

Best Regards

Thomas Laden Nørgaard