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From ledgers to leadership

A JOURNEY THROUGH THE FINANCE FUNCTION

LEADERSHIP

Skills Techniques Competencies Communication Education Qualifications


Supported by:

From ledgers to leadership


A journey through the finance function
Based on research by the CIMA Centre of Excellence at the University of Bath School of Management April 2010

LEDGERS

LEADERSHIP

ability to lead, an act or instance of leading; guidance; direction

LEADERSHIP

Introduction
In CIMAs recent report, Finance Transformation: the evolution to value creation, we illustrated that finance functions in todays organisations are transforming into business partners with other parts of the organisation via a process of evolution. Such a role requires much less of an emphasis on cost efficiency and back office duties, and much more on finding ways of being outward-facing and creating value. It makes new demands on finance professionals while still requiring them to be both technically competent and in a position of independence. The report highlighted that finance functions require a portfolio of roles and finance professionals with a diverse range of competencies and skills. Both business-oriented competency and technical competency are indeed seen as being crucial to the business partnering role for the finance professional but their importance is not restricted to this role. Instead, business competency is vitally important across all finance roles independent of the adoption of business partnering.

LEADERSHIP

From ledgers to leadership a journey through the finance function

We saw that there should not be an expectation that there is a typical finance professional and that finance professionals will continue to be extremely diverse in their capacity to undertake new types of roles. We also reported that the changes taking the finance function towards the business partnering role do not necessarily encompass the elimination of more traditional roles, such as transactional processing work developments in IT have meant that this is far less onerous a task even than ten years ago nor, due to virtual collaboration, do they require physical relocation of finance professionals to the business units they partner. Instead the key changes are those that really create value via improving internal processes and focusing on products and services. Our consultations indicate it is possible that, having become involved in these changes, the finance function may continue down the evolutionary path and proceed to the next step: being a true business partner with a stake in, and responsibility for, those strategic and operational decisions into which it has an input. We can therefore see that identifying the type, developing and then maintaining these business competencies as a priority for finance professionals involves a shift in paradigm similar to the move towards business partnering itself. Indeed it is even wider reaching since all finance professionals both business partners and finance specialists will require better business and commercial skills going forward to provide the value that organisations expect from the finance function of the future. It is a shift that raises many questions, for example: What exactly is meant by business competency? Does its importance outweigh that of technical competency? What is the optimum balance between technical and business competency? How can this balance be established in an organisations finance function? How can an individual finance professional achieve the right levels of competency and maintain them throughout his or her career? How can organisations plan for the development of their finance staff to really add value to the organisation? What are the optimum ways in which organisations recruit and develop talent? What are the actions to consider for organisations and individual finance professionals? The CIMA Centre of Excellence at the University of Bath School of Management has been established to research, over a five year period and on a global basis, the answers to such questions, among others, and to determine best practice in the further development of the finance function. This is the second report arising from its first year of comprehensive work based on substantive global data and with input from more than 4,500 finance and senior managers to give an invaluable, objective view of the nature of the finance function in todays organisation, the path it has taken over a decade of rapid change and its likely future trajectory.

Finance transformation insight


Dominic P. Moorhead, Pharma CFO, F. Hoffmann-La Roche Ltd. Roche a global leader operating two business segments, pharmaceuticals and diagnostics. The organisation is active in more than 150 countries and markets many of its bestsellers through subsidiary Genentech and affiliate Chugai Pharmaceutical.
Business partnering is a key success factor of any finance function operating in an environment of value creation. In the modern business world, all finance functions are striving to achieve this to the extent that it fits their business needs. Many finance functions have made significant progress in re-positioning themselves as business partners, and this change takes time as it is based on the credibility of individuals in the role. Moreover to maintain this position finance needs to align with business needs and continue to develop a pipeline of people with the right skills. As Roche Pharma CFO, during the past nine years we have focused strongly on business partnering, during this period I feel that we have achieved a high level of partnering across the business. The proof of this is that we are integrated within the business and always have a seat at the table as trusted advisors; moreover we are respected for our view even if we disagree with the business. Have we seen a shift in requirements for skills in the finance function? Absolutely, business partners do not want a finance technician but a finance leader, with strong communication skills and business understanding. All finance roles require more business competencies particularly for controllers who are working closely with the business, but also for the more technical areas of tax, treasury and accounting who need to support the business. Of course for the global company, transaction processing has become concentrated in regional shared service centres, and specialist matters have become centralised at HQ. Thus the role of finance managers and controllers has been freed up to focus more on business partnering and this trend will continue. Moreover I think that finance will be challenged to play a stronger role in the leadership of the business, as this is a natural product of successful business partnership. It goes without saying that all finance people need to be strong technically, this is a given, however this needs to be combined with business and leadership competencies depending on the role. For the future, my view is that as the financial competencies are core, it makes more sense to master these first, before developing the business and leadership competencies which become more critical at senior levels. It is good to have a mix of people with different backgrounds in the finance function, as this brings different perspectives and clearly helps with credibility, and these could be MBAs, or engineers or other people from the business. The shift from cost efficiencies to value creation does demand a broadening of skills for finance people. However we have experienced that people welcome this as it brings their role closer to the business, though it is a challenge and some people are better suited to technical matters. Integrity, independence and objectivity are not negotiable for the finance professional and are the cornerstone of all finance roles. However the business partnering role puts these values under stress, which is why such roles require maturity, strength of character and skill in dealing with business partners. We liken this to walking the tight-rope, with the business pulling on one side and finance pulling on the other! While professional accounting qualifications are founded on a high level of professional integrity, it is up to the individual to translate this into personal integrity in the business environment. In terms of training for finance staff, in recent years we have focused heavily on the development of finance leaders. However we have concentrated on personal action based on the use of development centres, sustained coaching/ mentoring, and on-the-job opportunities. This is not a quick fix, but requires continued work over a meaningful period of time. Todays work pressures are an obvious hurdle, and CFOs should assess what the development needs are of their people and how best to facilitate these using varied forms of training with a heavier weight on the more practical methods.

Executive summary
Finance professionals at all levels rate their business competency as being more important to their organisations than their technical competency, though the balance between the two competencies depends on the individuals role, duties and seniority, and on the size of their organisations. Interestingly, non-finance senior management continue to rate finance professionals technical skills more highly than their business skills in terms of the value they add to the organisation, the technical and financial skill-set and expertise being the finance professionals raison detre. While this suggests there may be misconceptions among non-finance personnel about the wider functions and roles of finance professionals, it highlights that anyone looking to work in finance may need to develop financial technical skills first and foremost. It also reinforces the fact that many employers have finance competency development as part of their recruitment, learning and development strategies. There is perhaps a need for finance professionals themselves to continue to recognise and value their technical skills. Finance professionals require a mix of skills and competencies and while technical skills are a critical requirement at the recruitment stage for organisations, there is definite evidence of a shift in requirements for business and commercial acumen across all finance roles. This interplay of competencies is not restricted to organisation-facing roles such as advisory or strategic roles, but is also in evidence across all role types including in general accounting and the specialist technical ones such as treasury, tax and audit. It is important to note that while this interplay of competencies is evident across all finance roles, the importance of different skill types varies markedly and is dependent on the respondents characteristics. Thus, business skills become increasingly important as one moves from the types of duty with the lowest business orientation (general finance/accounting) to those with the greatest (where individuals see their work as directly relating to other functions/units). Similarly, business skills (as well as technical skills) are more important for the more senior finance roles, and are more comparable to the skill-set required for senior non-finance personnel. Organisations are showing that, where the ideal finance candidate cannot be sourced, there is a preference for recruitment of people with the necessary technical skills first, the organisation then being prepared to train and develop the requisite business and management skills in post. It is important to note that the shift in importance of the more business-centric skills has not led organisations to look to recruit business people and train them into finance. It seems that the worldwide preference is for professionally qualified financial professionals first and foremost though the interplay of skill-sets cannot be ignored. This is reinforced in relation to the types of training option the research looked at by the fact that business post-graduate qualifications (such as MBAs) are the least in demand, deemed the least useful, by both finance management and non-finance senior management when they recruit for their finance functions. These skills are of course not just recruited into an organisation and both business and technical competency can be developed via training in post. Here we find that the attitudes of organisations have a number of inconsistencies. It is notable for instance that while organisations view learning through doing as being the most useful development and training activity, in practice this is delivered to non-senior finance personnel much less often than its usefulness would indicate and this is true also of other training methods that are rated as useful. Cost and the need for time off away from the day job clearly put many organisations off investing in training and development, in particular external training. Often the less valuable but cheaper and quicker training tools or activities may be used where return on investment is pushed towards the bottom of the criteria. We also see less enthusiasm among senior finance personnel for external education, including training for professional qualifications, than one might expect given the ongoing importance of technical competency. However, we see a large proportion of organisations buying these professional qualifications and skills at recruitment, rather than developing them in-house. Furthermore, respondents do still rate external education (including for a professional qualification) as important, and building on qualification through continuing professional development (CPD) is also seen as very valuable. This may indicate that there is a need to enhance the practical value of training and qualifications, particularly in the earlier years of training. Furthermore, it is possible to conclude that technologically-based methods of delivering training are not being used widely and are also not being found as useful as may have been expected given the vaunting of e-learning etc in recent years. This, however, is an area identified as having great potential in the future with scope for further development of the methods used.

LEADERSHIP

Executive summary

Finally we see a marked disparity between what support organisations plan to provide in terms of time off and financial support, such as course fees, and what non-senior finance personnel actually experience. Our consultations illustrated that often this is an area for organisations to focus and improve on in order to develop the value creation skill-sets through training. However, there are also other areas to focus on, namely that the organisation needs to ensure that such programmes and training opportunities are communicated and cascaded throughout the organisation. Often it seems finance staff are simply unaware of their employers training offerings. It is very notable, however, that organisations with a higher degree of business partnering deliver more training and development support. Companies that want to follow this transformation and shift into business partnering roles in their value creation journey need to evaluate the training and development policies and offerings carefully. Learning and development are not issues that are limited to the organisation however; individuals also need to take responsibility. The consultations illustrated a minority of finance professionals who have good intentions where training and development is concerned but cite lack of time, adding pressure on existing workload, encroachment into personal time or simply lack of will as restraining factors. Finance professionals need to take the lead in this time of transformation to ensure that they have the required interplay of business and technical skills to progress in their careers and to be the value creators of the future that organisations are demanding. While technical competency is still the starting point for recruitment of finance professionals they are nothing without technical accounting skills when it comes to the recruitment of future leaders and the choice between two similar candidates the research makes clear that personal characteristics are actually the key distinguishing criterion. We see that technical skills are still critical, as next in importance are professional finance qualifications above work experience. Interestingly degree-level education is not so much a distinguishing selection criterion, and post-graduate qualifications such as MBAs are rated the least important recruitment factor of those that were identified for rating. The most common compromise at the recruitment stage is that, if given a choice between a technically competent person who lacks business skills and a business-oriented person who lacks technical skills, organisations tend to select the technically competent one. While organisations rate business competency very highly, this compromise is perhaps made because technically competent people may hit the ground running and add value from day one, and can then be trained to gain more business and commercial skills. Consultations have illustrated that being technically competent is essential as these skills are fundamental to the core activities, so organisations will more often compromise on business skills in order to get the core foundation of technical skills that remain essential in the finance function. However, when looking at the areas in which existing finance professionals most need to improve in it is the business competencies communication, interpersonal skills and strategic skills that shortfalls are most keenly felt. The recruitment process is taking slightly longer and is involving slightly more compromises than before, but this is expected to ease as the global recession means fewer organisations are recruiting and more candidates are available. However, consultations illustrate a clear lack of people with the right mix of technical and business skills and the recruitment of such talent remains a challenge. On retention, we see that qualified staff do not leave their organisation because they feel there is a lack of development opportunities; the key reasons for non-retention are finance employees being lured away by higher salaries and promotions. The research would point to clear actions for organisations but also for individuals who are looking to get into finance roles and have leadership ambitions. Those who develop and possess a technical skill-set, in particular with a professional finance qualification, but who can also demonstrate business and management competencies will more often win out in the recruitment race. Training and development in these skills throughout a professionals career, as well as exposure to business experience, are critical to gaining this mix of competencies. We see that finance professionals in strategic and advisory role types, alongside management accounting ones, demonstrate the mix of competencies that is associated with those identified for leadership development. Moreover, it is these individuals who will be more attractive to organisations leadership programmes and who will, on the whole, be the finance leaders of tomorrow.

From ledgers to leadership a journey through the finance function

Finance transformation insight


Chris McCarthy, Director, Hays Senior Finance Hays Senior Finance helps companies source finance talent on a permanent and interim basis. With an average tenure of five years, the team is accomplished at finding professionals to meet organisations requirements. Their experience of the market combined with sound recruitment methodology saves time as they work efficiently to find the best possible finance talent for business.
Business partnering enables finance professionals to become more proactive with their ideas, plans and strategies; thereby giving the function increased visibility within the business and allowing it to add greater value. In our experience, different companies are at varying stages of business partnership, with some having made considerable progress in the level that they have achieved. Reaching a stage of true business partnership is largely considered impossible; as any successful business will know, a growing business can never afford to become complacent or static. The types of skills sought after in finance can be impacted by external pressures and since the recession we have seen even more of a focus on the need for finance professionals who possess a marriage of both strong technical and management skills. Strong leaders can motivate staff and therefore have a positive impact on retaining talent within the business. There has been emphasis on the need for professionals with a combination of these skills for almost a decade now, but it is only in the last few years that we have started to see job specifications and roles created with this in mind. Some finance professionals may be uncomfortable with the way in which the role is evolving but increased training or mentoring, supported by employers, should enable professionals to develop in their weaker areas. Priorities will naturally change with a heavy workload and many professionals end up neglecting training opportunities open to them. The only way an employer can prevent this from happening is to ensure the professional has dedicated time for it. A comprehensive training programme that all parties invest in can be a strong tool for developing and retaining employees. The correct balance of skills within the finance function will vary from business to business depending on the individual needs of the company. Benchmarking and performance appraisals can determine the types of skill-sets within a business and the current competencies of the existing finance team. This establishes a starting point, against which, existing and new talent can be compared. Skills gaps, both technical and managerial can be identified and appropriate action can be taken going forward. We have learnt that not having the right people in the right place can cost a business, and many employers are reacting to this by continuing to create specialist finance departments, such as treasury and taxation. Business support and advisory partner routes are going to become all the more popular in the years following the recession. In reality, business partnering brings the finance function closer to the business and the professionals within it become trusted advisors with stronger relationships across the company.

LEADERSHIP

Contents

The competencies required of finance professionals


1.1 1.1 1.2 1.3 1.4 1.5 1.6 1.7 Introduction Business and technical competencies Competencies needed for different roles, duties and degrees of seniority Competencies needed in different sizes of organisation Competencies needed for increasing levels of business partnering How non-finance management view the competencies of finance professionals Actions

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13 16 18 20 20 21 23

Training and development of finance professionals


2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 Introduction Training and development methods: use and usefulness The effect of training and development on the career development of non-senior finance professionals Organisational support for training and development Organisational support by geographical region Organisational support by size of organisation Organisational support by sector Actions

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27 27 29 30 32 33 33 34

Recruitment and retention of finance professionals


3.1 3.2 3.3 3.4 3.5 3.6 Introduction Recruitment criteria: issues and preferences Preferred professional qualifications Recruitment challenges Retention issues Actions

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37 37 40 41 42 45

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From ledgers to leadership a journey through the finance function

Conclusions and next steps


4.1 4.2 4.3 4.4 Conclusions Next steps Get involved About the Centre of Excellence at the University of Bath School of Management

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49 50 50 50

Research methodology

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Figures, charts and tables

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The competencies required of finance professionals

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12 From ledgers to leadership a journey through the finance function

1.1 Introduction
The research from the CIMA Centre of Excellence at the University of Bath School of Management has analysed what organisations need in terms of competencies and knowledge base for their finance professionals, as indicated both by the time spent and more importantly the importance placed on the various activities carried out within the finance function. Finances increasing focus on value creation and a higher level of business collaboration and partnering are achieved through activities of finance professionals carried out as part of their duties. How then does the split between more traditional technical activities and more business-facing ones alter as the finance function develops the collaborator and business partnering role? What is the impact on other finance and leadership roles? In this report we shall concentrate first on identifying the activities that feed the need for specific business and technical skills and competencies as perceived by finance professionals themselves, and then contrast this with the perceptions of the senior non-finance managers who drive organisational strategy. How the finance professionals time is spent Although the time spent on particular activities provides some measure of their importance to the individual who undertakes them, this does not necessarily accord with their importance to the organisations achievement of its objectives. This relationship is therefore critical in understanding finance effectiveness and also in both identifying and rating the skills and competencies required.

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The competencies required of finance professionals

Time spent on activities and their importance to meeting organisational goals The rankings for how professionals rate finance activities in terms of importance is shown in Figure 1.1. Figure 1.1 Importance of finance activities ordered by time spent on them (most time at the top)
Activities
Managing staff Communication and presentation Strategic financial planning Preparation and interpretation Project management Maintaining financial systems Treasury and financial risk External reporting Business advice MAS Strategic MA IT systems Leadership Accounting advice Tax Accounting standards Corporate governance Corporate finance Investment appraisal Internal audit Ethics VBM Business partnering Networks and alliances E-business Multinational accounting Green issues MAD Social accounting SOX 0 1 little/no importance 2 some importance 3 very important 4 critical importance

Average importance rating

The research reveals that while time spent on activities broadly accords with the importance of the activities, for some the time spent is out of step with their importance to the organisation. For example: In general less time is spent on strategic financial planning than its importance indicates. Collaboration with the business via business partnering is seen as less important than the time it absorbs, albeit a relatively minor difference. It should be noted that the individuals perception of importance to the organisation of any given activity might be influenced by the amount of time that that individual spends on that activity, but where this is the case an even closer alignment between the two would have been expected.

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From ledgers to leadership a journey through the finance function

Each activity in which finance professionals are engaged as listed in Figure 1.1 can be classified into one of five general role types: Table 1.1 Role types and principal associated activities Role type Strategic and advisory Financial Principal associated activities Business leadership, advice and partnering Strategic techniques (financial planning, strategic management accounting etc) Strategic relationships (networks and alliances, mergers, acquisitions and disposals) Finance (corporate finance, treasury) External reporting (including accounting standards) Tax Preparation and communication of management accounting information Accounting advice Ethics and governance Internal audit Sarbanes Oxley and multinational accounting Green issues

Management accounting Regulation

Systems

Information technology Financial and management accounting systems E-business

Grouping these activities by role type and looking at how much time is spent on the role types reveals that: the regulation role is highly specialised (no time is spent on it by the majority of finance professionals) the financial role is moderately specialised the management accounting and systems roles are quite evenly spread being both specialised and frequently engaged in. For the strategic and advisory role certain activities are relatively commonly engaged in while the others are not: the provision of business advice and strategic management accounting and financial planning are relatively widespread activities the practice of business/thought leadership is relatively restricted the remaining activities in this category, including business partnering itself, are specialised, being undertaken by a minority of finance professionals. Furthermore, we see that there are two key factors determining whether a finance professional undertakes business partnering activities. The first is their seniority. Finance professionals who were identified as being in the senior finance group are much more likely to be spending time in the strategic and advisory role type than more junior personnel. This is backed up by many of our consultations where senior finance professionals see the need for experience and maturity in business partnering roles. The second factor is whether they have front office or back office duties. This is shown in Table 1.2.

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LEADERSHIP

The competencies required of finance professionals

Table 1.2 Engagement in role type by finance professional duties Role type Finance professional duties General finance/ accounting Back office Professional finance/ accounting (internal audit, tax, or treasury/risk management) Finance/accounting support of operating units Front office Other functions/units (including line or general management and non-financial support activities) Strategic and advisory Management accounting

Financial

Regulation Systems

Those with front office duties are likely to spend more time, and those with back office duties less time, on business partnering activities.

1.2 Business and technical competencies


The term business competency embraces a range of broad business or commercial oriented skills (Table 1.3). Table 1.3 Business competency Interpersonal skills Business skills Leadership and project management skills Strategic agility Communication skills Problem solving skills Change management skills Risk management skills Team working, conflict management and influencing/negotiating Good understanding of the organisations objectives, operations, market environment and ethical issues Leading others, managing resources and delegating effectively Flexibility and thinking on your feet Written, oral and presentational skills, and communicating effectively with non-finance people Taking a critical and methodical approach when problem solving Assessing and facilitating change Understanding the sources of risk, and evaluating risks and methods for their control and mitigation

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From ledgers to leadership a journey through the finance function

Technical competency encompasses two distinct skills (Table 1.4). Table 1.4 Technical competency Accounting skills Broad understanding of the technical issues and ability to keep up-to-date with new accounting rules and regulations Ability to keep up-to-date with new concepts, techniques, tools and technologies

IT skills

There is not a total divide between business competency on the one hand and technical competency on the other. While we can identify the two underlying competencies as business and technical and classify skills quite clearly for the most part, in fact change management and risk management skills both represent an intermediate competency. They fit into both because change and risk management require the application of technical (often IT) expertise in the context of business/organisational management as well as the exercise of more obviously business expertise such as negotiation, flexibility and communication. Despite the complexity and specialism of technical competency, what is interesting is that finance professionals attach greater importance to general business competencies above traditional technical skills in accounting and IT, whether or not the individual finance professional is acting in a business partnering role (Figure 1.2). Figure 1.2 Importance of skills to the finance professional
Skills
Communication Problem-solving Business Interpersonal Strategic Leadership Change management Risk management Technical accounting IT Unimportant Moderately important Important Very important Critical 3.746 3.656 3.617 3.524

4.2

4.20

4.19

4.19 4.026 3.986

Importance rating

Thus overall it is communication, problem solving, business and interpersonal skills that are all regarded as being very important (though not critical) by a finance professional, while technical accounting and IT skills are viewed as being no more than important. It appears then that the finance professional takes these technical skills as a given, while seeing business skills as significantly more important in their role. This is aligned to the rise in closer collaboration and partnering with the business that we see is a key trend for the finance function and where these skills are ever more important for finance professionals to undertake these key activities.

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The competencies required of finance professionals

1.3 Competencies needed for different roles, duties and degrees of seniority
The importance of business and commercial skills within finance is noted across the spectrum of finance roles, however there is clearly a difference in the level of this importance attributed for certain roles. While business competency is rated as more important overall by finance professionals, where the issue is the exact skills needed for a particular role or set of duties the balance between business and technical competency shifts subtly. When the roles that finance professionals fill in organisations are categorised into the five role types in accordance with the principal activities in which they engage (as detailed earlier in Table 1.1) we see that each role type has a different emphasis on the two main competencies, with a clear spectrum running from the strategic and advisory role (comparatively strong on business skills, less on technical) to the financial role (vice versa). This is shown by the relative positive and negative weightings attributed by finance professionals in Table 1.5. Table 1.5 Relative importance of competencies to role types Role types Competency Business Technical Strategic and advisory +5 -1 Management accounting +2 +3 Systems +1 +3 Regulation -2 +2 Financial -6 +5

The need for technical competency is relatively weaker in the strategic and advisory role type than that for business competency, but for all the other four role types there is a relatively stronger need for technical competency. As for business skills, while the need for these is relatively much stronger in the strategic and advisory role type, it is relatively weaker for all the others, notably in the regulation and financial role types. Thus the balance of competencies is very much role dependant: each role type encompasses a portfolio of activities and a mix of competencies and skills is needed for each. Interestingly while technical competency is more important for the management accounting role than business skills, this is the role where there is the closest balance in the need for both types of competency (Figure 1.3). As we will see in later sections, it is this best balance of skills that are evident in the management accounting role that are identified as those required for leadership. Figure 1.3 Correlation between role types and skills
Skills importance
Key 0.3 Business skills Technical skills 0.2

0.1

-0.1

-0.2

-0.3

Strategic and advisory

Management Accounting

Systems

Regulation

Financial

Role type

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From ledgers to leadership a journey through the finance function

Rather than concentrating on role types, we can distinguish between finance professionals on the basis of whether they have back office duties (general and specialist finance/accounting) or front office duties (providing finance/accounting support to operating units, and also actually being part of these units). This analysis shows that business skills are seen as increasingly important by finance professionals as they move from back office duties with the lowest business orientation (general finance/accounting) to those with the greatest, where individuals see their work as directly relating to other functions/units. Again this is indicated by the relative positive, neutral and negative importance attributed to the two type of competency by finance professionals, set out in Table 1.6. Table 1.6 Relative importance of competencies to front and back office duties Duties Back office finance/accounting Competency Business Technical General -5.5 +2 Specialist -4 +1 Front office finance/accounting Support operating units 0 +1 Part of operating units +6 -4

Technical competency is seen as less important for the most integrated front office duties, where the finance professional is actually part of the relevant operating unit, but for all the other three duties technical skills are relatively more important. As for business competency, while this is relatively much more important in the most integrated front office duties, it is relatively less so for all the other duties very notably in general finance/accounting ones. Thus the balance of competencies is duty dependant as well as role dependant. As one would expect, the technical/business competency balance is also affected by the finance professionals degree of seniority. Both types of competency are relatively much more important for senior than for non-senior finance role groups. Also as one would expect, business competency is very important for non-finance personnel while skills in accounting and IT are relatively less important (see Table 1.7). Table 1.7 Relative importance of competencies to non-senior finance, senior finance and non-finance role groups Role group Finance Competency Business Technical Non-senior -2 0 Senior +2 +3 Non-finance +8 -7

It is interesting to note here that the other area where we saw an almost balanced positive need for both types of competency was in the management accounting role type. One could interpret this as suggesting that since senior roles and management accounting roles both require the closest balance of skills, it is the management accounting role that offers a good or best preparation for senior finance roles.

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The competencies required of finance professionals

1.4 Competencies needed in different sizes of organisation


Business competency is also seen by finance professionals as relatively much more important depending on the size of the organisation in which they work (Figure 1.4). Figure 1.4 Relative importance of competency by organisation size
Competency importance
Key 4 2 0 -2 -4 -6 1100 101250 251500 5012,500 2,50110,000 over 10,000 Business competency Technical competency

Employees in respondents country

Figure 1.4 highlights that in a small/medium-sized organisation finance professionals are generally in short supply and so their primary value to the organisation is in exercising their technical skills. In large organisations, they may specialise greatly in terms of the technical skills they employ but there is also greater demand for them to make use of more business oriented skills in performing their duties and these are more likely to involve front office duties and collaboration / business partnering roles. The declining importance of technical skills in large organisations as perceived by finance professionals reflects a decline in the relative importance of financial and regulation role types in such organisations, reinforcing the need and demand from the organisation for more business skills.

1.5 Competencies needed for increasing levels of business partnering


With the increased level of collaboration and business partnering that has been driven by finance transformation, it is not unexpected to find that finance professionals perceive the need to rely more on the exercise of business competency. In addition, however, the need for technical competency also increases in importance as business partnering increases as shown in Figure 1.5. Figure 1.5 The relationship between business partnering and competencies
Competency importance
Key 10 5 0 -5 -10 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Business competency Technical competency

Business partnering score

As such, business competency does not supplant technical skills with increasing levels of business partnering and collaboration, instead we see they increase in importance at about the same rate. The idea therefore that finance roles involved in closer collaboration with the business, such as business partners, need to have a greater focus on the business and softer skills with less requirement for technical accounting skills is not supported. Finance technical skills are still as important, reinforcing the need for interplay and even a balance of both competencies.

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From ledgers to leadership a journey through the finance function

1.6 How non-finance management view the competencies of finance professionals


So far we have considered the perceptions of finance professionals themselves in relation to the two types of competency that they exercise. The view of non-finance management (shown in Figure 1.6) is somewhat different however. Figure 1.6 Importance of finance professionals skills to non-finance management
Skills
Technical accounting Communication Problem-solving Interpersonal Risk management Business Leadership IT Change management Strategic 0 1 2 3 4

Importance rating
UNIMPORTANT MODERATELY IMPORTANT VERY IMPORTANT CRITICAL

Overall management outside finance attach a much greater relative importance to technical accounting IMPORTANT (not IT) skills they dominate all others and appear to consider these as the core value skills that finance professionals bring to an organisation. It is interesting that while considered important, these were rated almost least important by finance professionals themselves (Figure 1.2). There is, however, consensus between finance professionals and non-finance personnel regarding the relatively high importance of communication, problem solving and interpersonal skills. The implication of this apparent disparity is that to a degree finance professionals take their technical competency for granted it is a given and concentrate on the development of business competency which is perhaps more of a challenge but which is also a skill-set they realise is becoming more of a requirement. At the same time they also see a need for a complex interplay of skills. Non-finance management perceive clearly that it is technical skills that set finance professionals apart and that add greatest value to the organisation. However, while technical competency is deemed as critical, management recognise too that business competency and commercial and management skill-sets are important. Furthermore, this need for both technical and business skills extends across all finance role types. The importance placed on business competency by finance personnel together with the requirement from non-finance management for an interplay of both technical and business competency illustrate clearly the shift in collaboration within the organisation, with finance bridging the technical and business areas and becoming value creators. This is supported by some of our consultations that point to the need for all finance professionals to have this mix; business partners require sound technical knowledge while the specialist roles (such as tax, treasury and reporting) equally need good business skills to interact better within the business and with other stakeholders. A minority view is that there is still some way to go for finance functions to be open with non-finance people in the organisation about what they do and how they do it. This lack of openness perhaps contributes to the notion prevalent among non-finance management that business competency is less critical, simply because they are unaware of how important it is becoming within the finance function. The suggestion is that perhaps finance could be more transparent in this area.

21

LEADERSHIP

The competencies required of finance professionals

Risk management is seen as their least important business skill by finance professionals (Figure 1.2) while non-finance management see it as the most important one after communication, problem solving and interpersonal skills. This is an interesting disparity that perhaps needs addressing; it highlights the key role that finance professionals are perceived as taking in managing risk, a role that many finance professionals themselves seem to regard as being a specialism that is relatively unrelated to their core work. Finance professionals strategic agility is felt to be very important by finance professionals but is seen as the least important of all their skills by non-finance management. Consultations clearly mark seniority as being a key factor here; in senior finance roles such strategic agility is acknowledged as critical. But there is a possibility that the requirements for finance professionals to be flexible and to think on their feet are simply not perceived by at least some non-finance management; the old stereotype of accountants being dogmatic bean counters has perhaps still not altogether gone away. The implications of these varying perceptions for finance professionals are two-fold: while there needs to be greater openness amongst them about what they do, how they do it and what value they bring, they may also need to place greater value themselves on their technical skills as it is these that are so highly rated by their non-finance colleagues and management. Where senior management were asked to rate the skills that most needed to be improved by finance professionals, there was not a clear consensus about any particular skill though there was some emphasis on the need to improve interpersonal, communication and strategic agility skills. This highlights a real development challenge for existing finance professionals, and reinforces the need for these skills alongside technical competency for those wishing to enter the finance field. Figure 1.7 Skills most in need of improvement by finance personnel
Skills to improve
Interpersonal Communication Strategic Technical Leadership Risk management Problem-solving Change management Business IT 0% 2% 4% 6% 8%

Citation frequency

The research so far points to the critical nature of technical skills in finance as seen by senior management. It is a mistake to be blinded by the need to be competent at business skills and so not to see the critical nature of technical competence it continues by and large to be the raison detre of finance professionals. There is however also an emphasis from non-finance management on having and improving business skills, in particular interpersonal, communication and strategic agility skills. What is important to note is that these requirements are seen across all role types; they are not just limited to business facing roles, such as business partners.

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From ledgers to leadership a journey through the finance function

1.7 Actions
The research, together with the consultations undertaken, highlights some interesting areas that would suggest calls to action for different stakeholder groups: For the person looking to start a career in finance, with ambitions to reach the senior tier, our analysis points to the need for a qualification that provides the technical core competence in finance but that also develops the business and commercial skill-set. For the finance professional who is looking to fast-track and progress into senior roles, the types of skill that need to be built and developed are clear: technical expertise is there already and so the focus should be on communication, interpersonal and strategic skills. In addition they should pursue the roles and activities that aid their development towards senior positions, namely those categorised as management accounting or strategic and advisory role types. Organisations planning the development of their finance functions and finance professionals need to integrate a healthy pipeline of suitable candidates to take on the roles of future finance leaders and drive value creation. The research would seem to suggest a variety of actions: Recruit people with professional finance qualifications that develop both technical finance competence and business and commercial skills. Train existing staff in a professional finance qualification to provide the technical competence. Develop career plans that are designed to expose staff to both the technical and the commercial and business skill-sets; placements in one of the strategic and advisory and management accounting role types could be one way to achieve this. Ensure that there are learning and development opportunities in place to support finance professionals in developing the business and management skill-set in particular communication, interpersonal and strategic skills. Identify retention strategies and actively target these at those staff who have attained technical and business competencies and experience, since they are likely to form the finance senior team of the future. Some of this group will move outside finance into the organisations senior management roles.

23

Finance transformation insight


Naveen Agarwal, CFO Asia Pacific and India, Global Wealth Management at Merrill Lynch. Merrill Lynchs Global Wealth Management (GWM) group is one of the leading providers of a broad range of both proprietary and third-party wealth management products and services globally to individuals, small and mid-size businesses and employee benefit plans.
The idea of the CFO as an active business partner has been gaining mileage. While the CEO is the visionary with the big picture, the CFO as a business partner is the one who sees the complete picture. Most organisations now see this partnership as inevitable and organisations with finance as business partners experience significant value add in quality of their decision making after being fully aware of the financial implications of their decisions and risks involved. Finance still needs to focus on traditional responsibilities of cost reduction and efficiencies but in the current age these traditional responsibilities are only a small set of a larger paradigm that todays CFO need to cater. However, this shift in focus is largely still restricted to large organisations. A true partnership can have four stages; financial advice about results; performance advice with expected business scenarios; trusted advice by applying industry knowledge to proposed investments and strategic advice in defining business vision and long-term strategy. While finance true partnering is rare it does exist. In my opinion, we are currently half way and theres definite value in continuing to progress to become true business partners and value creators for the business. However, finance professionals are and will still be accountable for transaction accounting, financial statements, reporting and so on even though some may have been outsourced. Business and commercial acumen is an added advantage but technical expertise is a must. A finance professional should be finance trained but qualifications alone do not transform a professional into world class CFO. Analytical, people management, interpersonal, influencing, partnering, leadership and strong communication skills are needed. An MBA with strong financial understanding may turn out to be a good CFO but such people by far are in the few. In my opinion, a Masters in business or MBA is useful to somebody who has completed their primary finance qualification and has some experience. Old school finance executives may be slow to move away from the traditional role. They continue to focus on getting the numbers right rather than analysing to support decision making. This weakens the benefits that the organisation may have gained from transformation and reduces its ability to identify and exploit new opportunities. But often it is also organisations that fail to estimate the benefits and put adequate structure to this transformation. As a result, finance professionals are left with a role wide open to interpretation. Without a clear frame work, people tend to fall back to their skills comfort zone. Theres no value in presuming that the finance professionals will compromise their independence and objectivity in being business partners, it does not mean supporting business in any wrong doings but rather supporting the business in informed decision making and enhancing profitability with adequate risk controls in place. Often, it is people outside of finance that think working closely with the business may compromise with their core principles but its more perception than the reality in my experience. Learning is an on-going process and training is the key to professional development of any individual. However, very often the finance professionals fail to give adequate importance to their development. Being engrossed in regular responsibilities, some professionals do not see any immediate value add of the training and fail to set it as key priority. For many organisations, training is an employee motivation tool rather than for their development. Budget per employee is fixed as per their hierarchy in the organisation rather than professional requirements and organisation needs. To be more effective, professional training should be aligned to problem solving and commercial thinking. Workshops should be organised with senior and experienced finance professionals for practical and reality based experiences. Sponsoring development programs alone do not help. Training and professional development clearly should be a priority of the management and I think CFO/ CEO performance should also be measured on this parameter.

Finance transformation insight


Sriram Kameshwar, Head of Knowledge Services, Prudential UKs shared services, India Established 1848, today Prudential is an international retail financial services company with significant operations in Asia, the US and the UK. Worldwide Prudential employs over 27,000 people and has attracted more than 21 million customers.
Traditionally, the finance function used to operate in an insular manner but in the last decade there has been a step change in its role. Finance is now creating value in its own right by shaping strategy and tactics. This is made possible by finance business partners who work alongside the business managers gaining tremendous insights into the business and using their finance skills to bring a sharp commercial focus to operations. More and more organisations are realising the benefits of this approach. In some it is limited to rudimentary co-ordination at budgeting and financial interpretation of performance against budget whereas at the other end of the spectrum, there are organisations where the approach is so evolved that the business partner is fully embedded into the business. I believe that the traditional lines of demarcation between different functions in an organisation will become increasingly blurred. If we imagine departments as circles in a Venn diagram, the overlapping areas are getting increasingly larger. While every department will retain its core function and skill-sets, the strength and effectiveness of the overlapping areas (which represent the partnering aspect) will drive value creation for the organisation. It is no longer adequate for a finance professional to be an expert in technical aspects of finance alone. There is a definite shift to a more holistic skill-sets requirement that encompasses business and commercial savvy. As a general rule, if one were to traverse upwards in seniority, one would expect to find the competency balance tilting towards business and as one goes towards the base level, the balance shifts towards technical prowess. I may be sounding clichd here, but as they say the proof of the pudding is in the eating. Success is measured in terms of numbers, be it the top-line, bottom-line, asset creation or cash generation. Just as finance roles are developing deeper shades of business skills, so also non-finance roles are acquiring finance knowledge. Many finance professionals may shun the partnering roles that require them to step out of their comfort zones. Unless the finance person takes up this challenge to step out, there could be serious limitations to career advancement as finance roles morph into business roles at senior levels. Training and development will be key in this and support given to development is an investment for future success of the organisation. My organisation has a well laid out study support policy that not only provides financial and study leave but also encourages managers to provide guidance to staff. The CFO/CEO should help HR draw up an education support policy. To me independence is a state of mind. It does not matter whether you are part of a business unit or a separate function to retain objectivity. We need to overcome the traditional thinking that business areas would resort to deviant behaviour unless policed. Yes, there could at times be a tendency to show profits where there are none or brush aside credit-worthiness considerations to meet short-term goals. However these can be addressed by having strong systems and processes with proper checks and balances and the financial controls function would still be independent. The transformation in the finance function mix is complex. General accounting functions are getting mechanised and more firms are willing to outsource this. Most of the tax administrative work is easily outsourced while only strategic aspects are retained in-house. Specialist cash management firms can take care of treasury operations. Audit functions with their independence requirement have always been amenable to outsourcing. While strategic aspects of risk management are critical and need specialist skills, the operational aspects of monitoring and reporting could see increased automation with sophistication of information technology. I see that business partnering roles would increasingly grow in importance as speed of business increases in todays fast paced changing business world, decisions are required to be taken with lightning speed and finance is at the heart.

LEADERSHIP

Training and development of finance professionals

2
26 From ledgers to leadership a journey through the finance function

2.1 Introduction
Clearly the research points to technical specialism as critical but with an ever increasing importance attached to business competency across all role types within finance. How is this being translated into action when the recruitment, training and development of finance professionals come into play? Having examined the types of competency that finance professionals require to fulfil their roles and duties within an organisation, we turn now to the question of how, and how far, the training and development of finance professionals enable organisations to achieve the required balance and to have value creation agents at the heart of the finance function. Here again, the views of senior finance professionals were sought separately from those of non-senior finance professionals and non-finance managers. The perspective of senior people who may be responsible for recruitment strategy and training and development, or who may be very far removed from it is different from those who are closer to the coalface.

2.2 Training and development methods: use and usefulness


The types of training and development method evaluated in the research are set out in Table 2.1, and are ranked according to how useful each one was rated by senior finance professionals. In fact only four methods were rated useful (coloured green) at all; the remainder were rated not useful (coloured blue). Table 2.1 Usefulness of training and development methods (senior personnel) Usefulness rank 1 2 3 4 Types of training and development method Learning through doing External training courses supported by the organisation External continuing professional development (CPD) supported by the organisation In-house education and training face-to-face Knowledge sharing External education courses supported by the organisation In-house education and training using technology External activities not supported by the organisation Knowledge sharing using technology Activities involved Job rotation/co-location, coaching/ mentoring, secondments, exposure to top management Short one-off courses Activities to maintain a professional qualification Lectures, seminars, formal programmes Discussion groups, study groups and Action Learning (small groups or learning sets meeting to discuss each others experiences) Working towards a professional qualification or an MBA Blended learning (distance learning through TV/online, supported by traditional methods such as seminars), computer-based learning Training/education courses or CPD activities (as above) undertaken by the employee entirely at their own expense Best practice intranet, internet chat rooms, blogs

8 9

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LEADERSHIP

Training and development of finance professionals

Senior finance professionals rated on-the-job experience (learning through doing) as the most valuable developmental tool overall. This is supported by our interviews and consultations with real life practitioners: exposure to on-the-job experience is highly valued. It is very notable though that no single method is evaluated overall as very useful, although amongst the more formal methods there is a slight preference for all external modes of delivery. That external education, including working towards a professional qualification or an MBA, is seen as less useful than other forms of training, development, education and knowledge sharing which must give pause for thought to all educators. Many in finance already have a financial qualification, and we will see later that many organisations prefer to recruit fully qualified people, so this rating may not seem particularly important or relevant. However, consultations point to a need to do more to enhance the practical value of qualifications, particularly in the earlier years of training though there is an acknowledged difficulty here in that qualifications have to provide a common curriculum which is not necessarily oriented towards any particular type of organisation. Current trends towards employing technologically based modes of delivery for education, training and knowledge sharing are not necessarily leading to improved usefulness: both types involving technology in delivery are among the three types ranked least useful. However usage of technologically based methods of delivery is relatively rare (see Figure 2.1), which means there is relatively much less experience of their use, and this goes some way to explaining their weak ranking in terms of usefulness. Consultations point to these types of learning and development services being on the increase as better solutions are developed and made available, and organisations begin to explore and use them. The degree to which training/development methods are used in practice is generally in line with their usefulness except that learning through doing figures lower in the usage ranking than its relative usefulness as seen in Table 2.1 would suggest (Figure 2.1). Figure 2.1 Usage of training and development methods
Training/development method used
External training In-house f-to-f External CPD Learning through doing External education In-house technologies Knowledge sharing External unsupported KS with technology 0% 10% 20% 30% 40% 50%

Proportion using

In relation to the low usage of learning through doing it may be that while such practical, hands-on and relevant training is extremely useful it proves difficult in practice to deliver. Many organisations do it successfully with rotations and secondments, but for this a wider training and development strategy and plan are required. Earlier research from the Centre of Excellence at the University of Bath School of Management suggested that another way is to encourage virtual collaboration and working in teams across the organisation via projects and information technology. These are often used to give hands-on experience, and they facilitate business partnering without requiring physical relocation in the business. The suggestion therefore is that learning through doing may in future become more prominent and use more virtual technology solutions. It seems there is a clear case for making the availability of learning through doing more widespread as a training and development method; the issue is how to do so.

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From ledgers to leadership a journey through the finance function

Over 40% of organisations use external short or one-off courses; this is the most frequently used method and is ranked second in terms of usefulness. But overall take-up of training and development methods does not seem to be high: the proportions using each method are surprisingly low, since in each case usage is confined to a minority of the sample. For instance, knowledge sharing, including situations where it is technology enabled, is rarely used although it is highly ranked in terms of usefulness and effectiveness suggesting this is an area for substantial development and action by organisations. It seems that in larger organisations in particular the idea of disseminating best practice is considered vital and effective.

Our aim is standardisation across the world if a region has an innovative idea, we need to spread it across the organisation. Director of finance function transformation team at a major MNC (hospitality industry) we identify ways of implementing excellence in what the finance function does and make sure this is shared throughout the business. Director in finance function transformation team at a major MNC (FMCG)

One line of thought from our consultations points to the possibility that some organisations may just go for the easiest approach to training and development by making simpler, more traditional methods available, for instance by adopting a list of short courses. Some claim that employers have training and development policies as motivation and retention tools which are not necessarily geared to the needs of the organisation or the employee. In addition the higher rated learning activities and tools require more planning, more time and more complex implementation, so employers may be put off from using them. These are short-termist approaches as the real value of training and development policies and offerings is to ensure that employees have the opportunity to gain the right mix of those business and commercial competencies that we have discussed. It is this interplay of skills that is key to the finance professional, and to the roles within the finance function as it goes forward in its transformation journey to real value creation. The potential return on investment for organisations which focus on the higher value training and development activities is therefore clear to see. The low usage rate of e-learning and technology based methods is notable because these are areas in which many organisations have made substantial investments for the development of solutions, yet they are used in practice by only between 13% and 23% of organisations. Given their low ranking in terms of usefulness that we saw earlier it is possible that the full potential of these methods has not yet been fully realised. Our consultations support the idea that many technologies are still relatively new and require different learning styles that are not favoured by all, in part due to lack of experience in their use. The appetite for virtual collaboration and working for business partnering that we also see in our consultations points to e-learning being an area for much integration and growth in the future.

2.3 The effect of training and development on the career development of non-senior finance professionals
Finance professionals who have recently experienced external education, such as professional qualifications or degrees, perceive it as having played a significant part in promoting their career development. While we have seen that external education is not rated particularly highly by senior finance professionals there is a much higher level of regard for it from non-senior finance professionals (Figure 2.2). This probably reflects the fact that they are likely to have more recently experienced external education, such as studying for their professional qualification. Certainly it appears that those who have undertaken such programmes perceive it as having played a significant part in promoting their career development, since not qualifying might have halted their career in finance early on.

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LEADERSHIP

Training and development of finance professionals

Figure 2.2 Usefulness of training/development methods (non-senior finance professionals)


Training methods
External education External training External CPD Knowledge sharing External unsupported In-house f-to-f In-house technology KS with technology
0 0.5 1 1.5 2 2.5

Usefulness

How the various training and development methods are rated for usefulness and for usage by non-senior finance professionals is interesting: they rate external education as being the most useful in Figure 2.2 but report it as being the least widely experienced method in practice. This highlights two important issues: first that non-senior finance professionals place enormous value on receiving proper support for the professional qualifications that they perceive as being held in high esteem by the market, and secondly that their demand for this support is not being met. There is a lesson here for the employers of finance professionals even if staff do not receive this form of training and development, this does not stop them from wanting it and valuing it. The implication is that an employer which offers such training support will always be in a better position to recruit and retain the best finance professionals than the employer which is not prepared to make such an investment.

2.4 Organisational support for training and development


Organisations can support the training and development of finance professionals in a number of ways and to meet a number of training objectives (Table 2.2), but there appears to be a chasm between what support organisations claim to provide in theory and what they actually do, or are perceived as doing, in practice (as first seen above in Figure 2.1). Table 2.2 Percentage of organisations providing support in policy and practice (as reported by senior finance management) Organisations providing support in policy (%) 76 29 76 58 60 78 78 29 40 32 Organisations providing support in practice (%)

Training objective Professional qualifications

Nature of support Paying for exam and course fees Allowing time off for study leave

Post-qualification CPD

Paying fees for activities Allowing time off for activities

Other training courses

Paying fees Allowing time off for attendance

Other support

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From ledgers to leadership a journey through the finance function

There is a large and significant difference here between what senior finance management claim is available by way of support, and what actual use is made of the various methods. For example: Allowance is made for CPD leave and/or fees by approximately 60% of organisations but only 32% actually report using CPD training. While 76% of senior finance management claim they support staff by paying for exams and course fees and providing study leave, only 29% of respondents have actually received such support. It seems that the facilities are available in theory and the policy of many organisations allows for support, but it is not necessarily applied in practice. Bridging this gap between policy and implementation is critical for organisations to ensure that key staff are retained and that their finance personnel add value to the business in the way that is planned. Where organisations do not provide support for training/development, the most common reason given by 42% of organisations is that it is too expensive. Three other reasons were also cited by more than 30% of these organisations: that all training is done in-house that only qualified people are recruited that training requires too much time away from actual work. The first two points are probably linked, in that external training is expensive and time-consuming so it may be a good idea to bring it in-house, but the last two criteria given raise a concern. A significant proportion of organisations seem to believe that by recruiting qualified finance people they may not have to invest in continuing training or development. As we have seen above, the changing requirements for skills and competencies within finance are a reality and these organisations may quickly find that their finance functions are not fit for purpose if they do not support their staff in acquiring these essential skills. The transition of their finance functions to becoming value creators will be compromised. Where support is offered by the organisation there is considerable variation in the time allowed for training/development as reported by senior finance management, depending on whether the employee is training for a professional qualification, is already professionally qualified, or is some other type of finance function employee (Figure 2.3). Figure 2.3 Time allowed for training by type of training and category of employee
Type of employee and training
Key Training: PQ Other: In-house Qualified: CPD Qualified: In-house Training: In-house Other: External training Training: Other external Qualified: Other external
0 2 4 6 8 10

Employee who is training for professional qualification Employee who is professionally qualified Other finance function employee

Average number of days allowed

Employees training for a professional qualification have the most time allowed for that preparation (nearly ten days), but receive comparatively little other training. Qualified employees are allowed broadly similar amounts of time for continuing professional development and in-house training (about seven days for each), while other finance personnel receive a high level of in-house training (seven days) but comparatively little other training.

31

LEADERSHIP

Training and development of finance professionals

It is notable finally that despite the reported usefulness of external training that we saw in Table 2.1, this form of training is allowed the least amount of time for all three categories of employee, cost again being the key factor. It would appear therefore that finance and human resources management need to monitor the return on investment in training and development closely. Limiting the most effective training or education activities may not be the most efficient strategy in terms of costs and benefits in the medium to long-term, since this entails limiting the skill-set of the finance function and possibly negatively affecting the retention of key people. In addition there is a small disparity between the time allowed for training and development as reported by senior finance management and the actual time received as reported by non-senior finance professionals. This again appears to highlight some inconsistency between training and development in principle and in practice and again represents an action call to employers. But while both employers and employees are generally in agreement on the need for training and development, it cannot be left to the employer alone to drive this forward. Our consultations illustrate that individuals must also take responsibility for their own development. Some are accused of not making time for development or simply of not having the will of not being bothered. As the shift in skills requirements continues, finance professionals need to take a much more proactive approach to identifying skills gaps and areas for their development. They then need to work with their employers to find out what support is provided by their organisations, setting realistic and achievable development plans for action. The increase in skills required is not restricted to advisory or senior roles, as we saw in section 1. As it affects all role types in the finance function the need for proactive management of their own training and development will affect most individual finance professionals.

2.5 Organisational support by geographic region


There is huge variation in the level of support for different types of training across different countries, and there is quite considerable variation too in different regions of the world (Figure 2.4). Figure 2.4 Time allowed for training by region (reported by senior management)
Average number of days allowed
Key 6 Qualified: Other external Other: External training Qualified: CPD 4 Training: Other external Qualified: In-house Training: In-house 3 Other: In-house Training: PQ

EU/EEA excluding UK

Asia

UK

NAmerica

ANZ

Region where respondent works

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From ledgers to leadership a journey through the finance function

It is particularly notable that training for professional qualifications on average is the most supported education activity by employers throughout most countries. This reinforces the need for specialist technical qualifications in the finance function that we discussed in the previous section, but we see that the levels of support vary significantly, for instance six days on average are allowed for training for a professional qualification in the UK and Australia/New Zealand, falling to five days in the rest of the EU, four days in Asia and only one day in the USA.

2.6 Organisational support by size of organisation


The bigger the organisation the more time is allowed for all forms of training, but especially in-house training as the benefits of economies of scale in training provision are enjoyed. Cost is again the key factor here as training cost per head reduces in larger organisations. Furthermore, we see that having consistent training and development programmes for many staff and across locations becomes more important to organisations as they grow. This leads to higher use of in-house programmes where the training can be controlled and delivered consistently to groups and in multiple locations. But size has less effect on the time allowance for undertaking a professional qualification which is relatively consistent at four to five days once an organisation has more than 250 employees. This again illustrates the importance placed by all types of organisations worldwide on having finance functions staffed with people with professional finance qualifications (Figure 2.5). Figure 2.5 Time allowed for training (reported by non-senior management)
Average number of days allowed
Key 5 CPD Other: External training 4 In-house training Professional qualification 3

1100

101250

251500

5012,500

2,50110,000

Over 10,000

Own country employees

2.7 Organisational support by sector


There are relatively few inconsistencies if we analyse our results by industry or business sector. However, there are much greater time allowances for several activities in the public sector than in other sectors, notably for professional qualification, in-house training and CPD, though senior management report higher levels than non-senior finance professionals in the public sector. Yet again there appears to be a difference between policy and practice in relation to training which in the case of the public sector is substantial: for instance senior personnel in the public sector report a ten day allowance for professional qualification training while non-senior staff report receiving only five. This is mirrored in the financial services sector, which also provides comparatively more in-house and CPD training. Our consultations point to the need for a higher level of regulatory training and the high degree of competitiveness in securing the best talent in this sector as being key drivers to understanding these differences.

33

LEADERSHIP

Training and development of finance professionals

Figure 2.6 Time allowed for training by sector (reported by non-senior finance professionals)
Average number of days allowed
Key 5 CPD Other: External training 4 In-house training Professional qualification 3

Manufacturing

Finance and insurance

Other services

Public sector

Sector

2.8 Actions
There are some key conclusions and actions that may be drawn from the analysis above: Learning through doing and knowledge sharing are the most useful development activities, yet are among the activities that are least often applied and used, cost and time being cited as the primary barriers. The real return on investment is being missed by the many organisations that choose simpler traditional activities and avoid those that are most useful and provide most return. Real value may be missed, and in the long term this approach becomes more expensive and time-consuming, and brings less value to the organisation or individual. Professionals highly value their finance qualification but sometimes this is the training and development area that is least supported by organisations. A large proportion of organisations choose to recruit the talent and skills-set rather than develop and train from within. As skill-set requirements shift, organisations need to ensure that they have adequate plans to upskill existing staff. More time is allowed in principle for training than is actually experienced in practice, suggesting that the planning and execution of the organisations training and development strategy (beyond learning through doing) throw up problems which mean that the strategy is not always carried through in full. Constant monitoring, review and engagement are recommended. The research points to cost considerations and time restraints as key drivers of the perceived gaps in training support, but there are also possible limitations on the ability to communicate and cascade the availability and support of training opportunities throughout the organisation. Some employees are simply not aware of the opportunities their employer has available. Employers need to work harder and better at this dissemination. Individuals need to take responsibility for their own development. During our consultations senior finance management clearly see the need for individuals to be proactive, to make time for training and to be the drivers in the planning and implementation of activities for their development. Our consultations point to the need for the CFO and also the CEO to engage with and drive the training and development strategy, focusing on organisational and individual needs and using the whole mix of training and development tools to ensure full return on investment and to drive the function in providing value.

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From ledgers to leadership a journey through the finance function

Finance transformation insight


Mark Lubienski, Vice President of Finance EMEA Ariba, Inc. Ariba, Inc. is a leading spend management solutions provider with more than 1,000 customers across all industries, sizes and geographies including 94 of the Fortune 100.
The role and expectation of CFOs and finance professionals is continuing to evolve. This is especially evident in this tough economic environment, with an increasing emphasis being placed on the important yet difficult balance which a CFO or finance professional needs to achieve in meeting CEOs demands for a business partner with business acumen, coupled with the more traditional yet vital focus on value preservation, efficiency and governance. The best business partnering CFOs will operate at the core of the business where the greatest value is created, where the greatest financial risks are taken and where they and their teams can best help the business understand the financial implications of operational decisions and can help promote business. Some years ago, a forward-looking general manager gave me responsibility for a large IT support function. He reasoned that my finance business partnering background would facilitate a closer relationship of that function with the business, would provide a greater clarity to business priorities and would allow more credible challenging of business management. For very similar reasons, finance professionals can come from non-finance disciplines to the role, although the essential need for strong core financial skills will always be there, as will the need for a strong ethical and moral code of conduct. That comes from the individual rather than being a product of the professional route they have chosen. Todays finance business partners are expected to demonstrate excellence in a broader range of strategic, business, commercial, communication, organisational and people skills which are not typically found in more traditional finance functions. These allow them to engage successfully with an increasingly demanding and finance-literate business population. That not only helps to deliver business performance and effectiveness, but makes finance an exciting discipline in which to work, promotes personal development, increases personal motivation and makes it easier to attract and retain the best talent. The good news for business partnering finance professionals is that CEO and GM roles are increasingly being filled from their ranks, precisely because of the broad skill-sets and experience which they possess. Optimising the effectiveness of finance requires a culture of business partnering throughout the function and an alignment with business goals, but there will always be a core requirement for the more-technical less-business facing finance roles, such as accounting and treasury. The real question and challenge here could be to what extent an organisation chooses to retain those roles in-house versus outsourcing them. That would allow greater focus on the evolution to a business partnering finance model but, of course, without any drop-off in the execution of the process, policy and governance basics, nor any increase in risk. The best CFOs will successfully strike a balance between having a robust strategic relationship with their business that is based on hard-earned trust and respect, while maintaining the objectivity, independence and fiduciary stewardship required of them by the stakeholders of the business. Achieving that balance has, however, been made more challenging by the corporate scandals of the past decade and the subsequent increase in focus on governance, controls and reporting. Going native can be a legitimate concern for less experienced finance business partners, so it is the responsibility of the business to manage the risks that brings and to promote independence by, for example, creating a strong support infrastructure, having a solid reporting line into the CFO and fostering a culture of open communication. In terms of the level of support that an organisation makes available to their staff in terms of training and development, it is an ongoing challenge in todays tough economy, where training budgets are often one of the first expense items to be cut, to ensure continued investment in people. That is short-sighted and it has even been shown that higher performing businesses have a greater level of commitment to, and therefore investment in, business partnering roles.

LEADERSHIP

Recruitment and retention of finance professionals

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36 From ledgers to leadership a journey through the finance function

3.1 Introduction
The Centre of Excellence at the University of Bath explored at length the changing nature of the finance function, especially its ongoing transformation into a business partner and value creator through its first report Finance Transformation: the evolution to value creation. The evolutionary but fundamental nature of this change would suggest that not only the competencies, skills and training of finance personnel but also how they are recruited and retained would be greatly affected. In this final section therefore, we shall look at issues surrounding recruitment of the next generation of finance professionals and, as importantly, at how to retain the best of the current generation.

3.2 Recruitment criteria: issues and preferences


When an individual is recruited into the finance function it is a fair assumption that the organisation is looking for the highest calibre candidate it can obtain someone for whom the long-term plan, all other things being equal, is for them is to take up a senior position in the future. Especially where the finance function is looking to take on the business partnering role, the focus is put on the recruitment of someone with leadership potential, whether this role will be in the finance function or not. Selection criteria are usually used to help assess the calibre of potential employees. Seven relevant criteria were rated and ranked as to how critical they are when identifying potential employees and leaders of the future (Table 3.1 and Figure 3.1). Table 3.1 Importance of recruitment criteria Rank 1 2 3 4 5 6 7 Criterion Personal characteristics Relevant professional qualification Relevant work experience gained externally Relevant work experience gained internally Graduate with business relevant degree Graduate (any degree) Post-graduate with business relevant degree e.g. MBA Rating Critical Critical Critical Critical Important Important Important

It is clear that the individuals personal characteristics rather than their experience or education dominate other criteria. This does not mean that personal characteristics alone are sufficient to merit recruitment: the most attractive of potential recruits in terms of their intelligence, compatibility with other personnel etc. would still not be suitable without some relevant experience or education. Instead the ranking of the criteria should be seen in terms of their relative importance and usefulness in helping to distinguish between individuals who in most ways are equally good candidates. Possession of a professional finance qualification is more important than work experience, university degrees or masters degrees as a criterion for selection. This trend continues to be highlighted here, as it has been throughout the research in both the responses to our global survey and the interviews and consultations carried out. What is interesting is the apparent gap between this clear preference for a professional qualification and the trends we saw back in section 2.3. Here we reported that non-senior finance professionals rate external education, such as professional qualifications, as being the most useful training and development method but report it as being the least widely experienced in practice. This would indicate employers having a preference for recruiting already qualified staff and therefore limiting the need to make support available for such qualifications and training in post.

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Recruitment and retention of finance professionals

Furthermore it is worth noting that of the organisations which claim they do not provide support for training and development, over 30% give the rationale that they already recruit professionally qualified finance people supporting the importance of the criterion at recruitment time. This suggests that these organisations do so with the view that no further development or training is required. We already know that the needs of organisations and the demands on the finance function change, affecting the skills and competencies that its staff requires. The implication is that relying only on recruiting in technical talent is a risky approach. Work experience gained outside the organisation is preferred to that obtained within it. Internally gained experience might be perceived as making the individual better suited to progress within that organisation since they are aware of institutional routines, organisational culture etc., but there is a perceived advantage to importing and buying in skills into the organisation since the external recruit embodies the lessons gained from experience in other organisations. Figure 3.1 Importance of recruitment criteria
Importance
3

Personal characteristics

Professional qualification

External work experience

Internal work experience

Businessrelevant degree

Any degree

Postgraduate

Recruitment criteria

Personal characteristics, experience and a professional qualification are all substantially more important in recruiting future leaders than all university degrees. It is striking that degree level education is seen as relatively unimportant, and though business relevant degrees are preferable to non-relevant degrees, it is even more surprising that a non-relevant degree (such as philosophy, say, or geography) is rated as more important than an MBA. Consultations show us that the ability to train undergraduates in a professional qualification is the key factor here. Post-graduates such as MBA holders, it appears, are less likely to have the technical skills required and may also be less likely to continue to study for the professional qualification in finance that organisations actually need. As such, there seems to be no widespread demand for finance professionals to have MBAs, nor for this qualification to be treated as a substitute for conventional professional qualifications in finance as is often touted. A possible reason for the reluctance to change in this way was encapsulated by a participant in one of our stakeholder consultations. financial MBAs instead of accountants? It wont work, Ive seen it. As soon as an MBA arrives all theyre interested in is taking over the world you cant get them to concentrate on the detail of finance. Finance Director of MNC subsidiary

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From ledgers to leadership a journey through the finance function

An organisations geographical location has often been assumed to make a difference in terms of how recruitment criteria are rated and thus on how career paths for finance professionals vary around the world. For instance there has long been a perception of a continental European tradition whereby individuals enter companies direct from education and receive training in accounting and finance from the employer, contrasting with the professional qualification route favoured in Anglo-Saxon countries. While we might expect these traditions to lead to different preferences in respect of professional qualification depending on location, in fact this does not appear to be the case (Figure 3.2). Instead there is remarkable consistency around the world, with the only significant differences in ranking being: in the EU and Asia, where post-graduate degrees are rated more highly than first degrees in North America, where external work experience is rated more highly than a professional qualification in the UK, where business relevant degrees are rated lower than non-relevant degrees in Australasia, where internal work experience is rated lower than a business relevant degree. Figure 3.2 Importance of recruitment criteria across regions
Criteria importance
Key Critical Personal characteristics Professional qualification External work experience Important Internal work experience Business-relevant degree Any degree Postgraduate

Not important

EU/EEA excluding UK

Asia

UK

NAmerica

ANZ

Region where respondent works

A professional qualification at the point of recruitment is rated as between important and critical by organisations in all countries except Japan, where it is seen as either not important or not relevant (Figure 3.3). The next lowest ranking for a professional qualification is in the US. This is backed up by finance professionals themselves; a clear majority feels that a professional qualification is essential to their role in all countries except Japan and the US. Japan does not seem to have a history or background in specialist professional education, and the US finance qualification seems to be acknowledged to be more focused on the accountant in practice with a strong tax and audit coverage, so it is seen as less useful for finance professionals in business. Overall, however, finance professionals with specialist finance/accounting duties and also those in senior finance positions rate a professional qualification as being more critical than those in more general roles and in more junior positions.

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LEADERSHIP

Recruitment and retention of finance professionals

Figure 3.3 Proportions stating that a professional qualification is essential to their role by country
Percent qualification essential
100%

80%

60%

40%

20%

0%

Japan

France

Sri Lanka

Germany

United Malaysia Kingdom

South Africa

Australia

Ireland

United States

India

Country where respondent works

Thus when planning to recruit someone who is expected to attain a senior position as a future leader, or who will continue in a specialist role, personal characteristics and a professional qualification are the top criteria that help an organisation to distinguish the best candidate, followed by quality of work experience.

3.3 Preferred professional qualifications


The obvious next question therefore is which characteristics, qualification and work experience will help the candidate to stand out? Support for the importance of professional qualification is very clearly evident across all markets and from both finance professionals and senior non-finance management. What is less clear is which qualification is most preferred, with the CIMA, ACCA, CFA and ICAEW qualifications being cited by a large proportion of the sample. There is some evidence that individual respondents will more often choose and support their own professional qualification, highlighting an element of loyalty and value recognition for their own training and affiliation. Interestingly however, respondents also acknowledge other qualification routes, not being partisan in expressing their preferences. Domestic or local accounting qualifications are often cited in particular markets namely by respondents in Japan (50%), France (30%) and Germany (35%). It is also interesting to note that the US is the only market where a professional qualification is regarded as less critical. This may be due to the local finance qualification, the AICPA, being perceived as useful for training individuals in tax and audit and therefore as less important for finance professionals in business. These trends were reinforced in stakeholder interviews, although some preferences emerged where a particular role is envisaged. Audit based qualifications are often preferred for finance and regulation role types, whereas the CIMA qualification is favoured for advisory roles. In section 1.3 we saw the balance of skills and competencies that is needed by the different role types, and in particular that an almost equal mix is optimum for individuals developing into senior, leadership roles. The strategic and advisory role and the management accounting role both require a balance of business and technical competencies and, as such, qualifications which provide both the technical core and the skills for these roles could be deemed as preferable.

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From ledgers to leadership a journey through the finance function

Being a good business adviser is not about what qualification youve got but what youll do even senior people can be well-qualified but poor managers and not committed to the job Where theres a choice, audit based qualifications are better for those involved in financial reporting as theyre more used to investigating numbers; for the business advisory role, CIMA people are better suited. Finance Director of UK public sector organisation .I dont care about which qualification, Ive recruited as many ACCA and CIMA people as chartereds. However, the person matters more than their qualification. Divisional FD of large, international SME (industrial services) Qualification is important for teaching a way of thinking as much as technical skills. Theres a strong preference for CIMA as management accounting is where skills are really needed in [our organisation]. Director responsible for development of finance professionals for a major UK government department

3.4 Recruitment challenges


Moves towards the business partner role for the finance function place a strain on the timing of recruitment in organisations, probably because a wider search is needed for candidates who possess both the technical and business competencies demanded by the role. Up to 20% of senior finance personnel reported that in the period up to 2009 it had taken longer to recruit the right people into finance roles, with many reporting that it was taking more than 50% longer. There may be a short-term respite in the recruitment battle in the current economic crisis, but the search for the best talent remains tough where a combination of skills and competencies are required. Our interviews and consultations refer to finance professionals with the technical background plus commercial and negotiation skills still being a scarce resource. Recruitment was also becoming more difficult in that it sometimes required greater effort and even some compromises, including: employing candidates with the right technical competency but who needed training in business competency employing candidates with the right business competency but who needed training in technical competency widening the search for talent to international markets. Of these three types of compromise, the one that organisations were most likely to make was to recruit an individual with the appropriate technical competency but with a shortfall in their business competency. Thus when faced with the necessity of compromising, technical expertise wins; in recruitment, technical competency clearly takes precedence over business competency despite the fact that organisations rate business competency highly, as we have discussed. We can summarise, therefore, that of the criteria used for rating recruits the financially oriented MBA is not being favoured, and the business partnering model is not forcing or incentivising organisations to recruit business managers with some financial competency rather than finance professionals with business competency. While it certainly seems that a proportion of finance people are not fully equipped with the business skill-set that organisations are seeking when looking to fill finance posts, the strategy overall seems to be to develop them in the role, exposing them to more commercial and business situations and hence developing the softer skills.

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LEADERSHIP

Recruitment and retention of finance professionals

Individuals who wish to enter finance need to equip themselves with a professional finance education, and it is clear that finance qualifications which also equip them with business management skills help them to excel within finance. Furthermore, both new recruits and those already in finance who want to progress into senior roles should invest in getting exposure to business and commercial experience and training to improve their skill-sets. The potential for a shift in preferences towards recruiting business people into the finance function could be something to track, especially at the top levels, and this is recognised by a limited number of senior people with regard to some roles. However, the majority concur that it is the technical skills that will remain in demand.

Its mainly accountants who fill the accounting and finance positions but in the future this could swing to business professionals accountants need to learn new skills like negotiation. At the top level [in each country in the organisation] about a third are not accountants. Director in finance function transformation team at a major MNC (FMCG) Lack of business acumen is still a problem. Were having to expose finance professionals to business situations [so they can learn], they arent joining with that acumen. Director in finance function transformation team at a major MNC (FMCG) Weve got enough people who can do the numbers and put the reports together but we havent got enough people who can put together a really commercial bid and negotiate with clients accountants used to dealing with the outside world and having negotiating skills are a scarce resource. Divisional FD of large, international SME (industrial services)

3.5 Retention issues


Given the relative importance of people who are both business and technically competent, and the difficulty in recruiting these professionals, retention strategies will become ever more crucial in the war for talent. With the ongoing transformation in the role of the finance function towards business partnering, and the ever increasing emphasis on both business and technical competency, it would perhaps not be surprising if finance professionals in mid-career felt that they had been somewhat left behind because of a lack of exposure to business situations or appropriate training and development, and a lack of will on the part of organisations to retain them. Reasons why otherwise highly valued finance personnel might leave an organisation could be as follows: perceived lack of scope for promotion desire to work in another country career change perceived lack of training and development opportunities personal/family reasons offer of a salary increase elsewhere other. In fact the lack of development opportunities is a reason for people to leave in only a minority (18%) of organisations; very much more common reasons are for personal advancement in terms of salary increase (60%) and promotion (50%) Figure 3.4.

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From ledgers to leadership a journey through the finance function

Figure 3.4 Reasons for leaving the organisation


Proportion citing
70%

60%

50%

40%

30%

20%

10%

Salary increase

Restricted promotion

Career change

Personal reasons

Lack of development

None of the above

Work in other country

Reasons for leaving

Career change is the third most frequent motivation for high calibre finance professionals to move on, and this factor is particularly pronounced in Japan and the rest of Asia, an area where we have seen training and development support is weaker. This could point to a certain stagnation in the finance professionals progression, thus prompting a change in direction. It appears therefore that training and development problems are not currently a significant issue in terms of retention of good staff. In part this is because organisations, medium and large ones in particular, have a relatively good track record of using appropriate retention strategies beyond simply raising salaries to match external offers, including: personal development planning formal talent management, for example structured training programmes employee engagement initiatives such as flexible working exit management strategies, for instance interviews/surveys of leavers. Personal development planning (PDP) is the most popular retention strategy in all sectors while formal talent management is relatively infrequently employed (Figure 3.5). However, none of the strategies is used by a majority of organisations, formal talent management is used by only 30% and alarmingly 25% of organisations have no retention strategies at all, an area for immediate action.

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LEADERSHIP

Recruitment and retention of finance professionals

Figure 3.5 Employee retention strategies


Proportion citing
60%

50%

40%

30%

20%

10%

Personal development plan (PDP)

Exit management

Employee engagement

Talent management

None of the above

Retention strategies

Retention strategies are used to different degrees around the world; with relatively high usage in the UK and Australasia, and relatively low levels of usage in the rest of the EU and North America (for instance 60% of French organisations have no retention strategies at all). Larger organisations make much greater use of retention strategies of all types, with only exit management strategies becoming less popular as size increases (Figure 3.6). Figure 3.6 Employee retention strategies by size
Proportion citing
Key 70% None of the above Talent management 60% Employee engagement Exit management 50% PDP

40%

30%

20%

10%

1100

101250

251500

5012,500

2,50110,000

over 10,000

Employees in respondents country

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From ledgers to leadership a journey through the finance function

Thus finance professionals generally do not appear to be so dissatisfied with their opportunities for personal career development that they leave their organisations. Where there are pressures arising from the changing role of the finance function and the individual finance professional, these have largely been dealt with by organisations internally via formal retention strategies in medium to large organisations and in certain parts of the world. We have seen in previous sections the changing need of organisations for a mix of technical and business skills, and we have also noted through our consultations the scarcity of people with this balance of skills and/or experience. This points to a proportion of existing finance people that do not have the required mix, in particular the business skills that will be more and more in demand. There is a risk that without personal will and the support of the organisation, through training and exposure to business situations, these individuals will become less fit for purpose, and recruitment and retention will in fact become even more difficult for both employers and finance professionals themselves.

3.6 Actions
Possible actions to note from the research and consultation for organisations: To aid in candidate selection, when planning to recruit someone expected to go on to a senior position or who will continue in specialist roles, personal characteristics and a professional qualification are the top criteria to look for, followed by quality of work experience. As for which qualification should be sought, while there is a preference for professional training in finance there is no clear preference for any particular professional qualification from our global survey. However, our consultations point to audit based ones being preferred for finance and regulatory roles and the CIMA qualification being preferred for the management accounting and strategic and advisory role types. Post-graduates such as MBA holders, may be perceived to be less likely to have the technical skills required and may be less likely to continue to study for the finance professional qualification that organisations seem to require. Candidates and existing staff with a balance of technical and business competency are still a rare resource, so organisations need to ensure that staff with a mix of these skills and experience are identified and engaged with, and retention strategies for them are applied. In particular the organisations should focus on competitive salary levels, provision of opportunities for career development, and training and development. For individuals working in finance, or wishing to get into finance, this area of research is consistent and supports the actions that we have seen throughout the report, namely: Choosing a professional qualification in line with your aspirations is a good place to start. Those looking at the financial role and at specialist finance/accounting duties could consider audit based qualifications; for those wishing to follow the strategic and advisory and management accounting roles, the CIMA qualification may be better suited. We see that experience is also important, as is continuous development. For those with ambitions of leadership within their career plan it is vital to gain further skills, in particular business and commercial ones. The skills within the strategic and advisory and management accounting role types are more aligned with those needed for seniority and leadership, so such roles should be carefully considered. To remain fit for purpose in the wave of finance transformation, those qualified and working in finance regardless of their role need to take proactive steps in ensuring that technical skills are maintained while focusing on development of softer business competencies. This is essential if they are to have a competitive edge at the point of promotion and new job selection.

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Finance transformation insight


Keith Luck, Director General Finance, The Foreign and Commonwealth Office UK the FCO The Foreign and Commonwealth Office the FCO is the government department responsible for promoting British interests overseas and supporting its citizens and businesses around the globe. The FCO is made up of 14,900 people working in over 170 countries.
Public sector finances are coming under enormous pressure. Working in central government I already see this shift as the emphasis moves to value for money. We have been doing efficiencies for years, but a new approach is needed: one where services are maintained or even improved but delivered at lower cost. Finance will be key to this transformation. The good news is that all major government departments now have a qualified accountant on the board and financial management is now taken far more seriously. So the trend towards reaching a true business partnering role is definitely up. But results have been mixed. I see some departments where my finance colleagues are more of a business partner than in others. Much depends on the attitude of other colleagues as much as on the capabilities of the finance professionals. Finance professionals require a changing mix of skills with technical skills still a critical requirement at the recruitment stage, but there is also a definite shift towards business and management acumen. All finance roles require more business competencies and I also see that non-finance roles are also shifting in skill-set and perhaps becoming more finance savvy. Technical skills are taken as a given, however those that move up the organisation have other complementary skills. As a management accountant I would say that business and commercial acumen give you the edge. Its the USP of management accountants after all. Add to that Continuing Professional Development (CPD) and a modicum of ambition and you have a hugely valuable employee. Non-finance skills are important, so our trainee accountants learn these from the start, alongside their technical skills. As a CFO equivalent it is my wider analytical, influencing, communication and strategic skills that I draw on most in my daily work, but Ive also pushed greater financial understanding and literacy right across the organisation from my board colleagues downward. After all if you are a budget manager it helps if you know something about finance! Its become a more crowded market out there, thats for sure. I still see the bulk of those who make finance their career opting for a professional accounting qualification. Those who swap into finance from other professions have usually gone for (finance based) MBAs. They bring much to the table, but Id like to see them all taking a professional accounting qualification as they have to keep up-to-date and live by a code of conduct and ethics. Im surprised employers dont demand all their finance staff are regulated. You can only achieve this by being professionally qualified and a member of an institute. With the move towards business partnering some believe that this objectivity could be compromised with the finance professional going native as they integrate with the business, but this shouldnt be a concern where the organisations finance staff are financial professionals, retain their membership of an accounting institute, complete its CPD requirements and comply with its discipline and ethics codes. The level of organisational support both in terms of financial and time for education, training and CPD is important and it is a priority for me. But it must also be a priority and of greater importance to the finance professional. Long gone are the days when HR managed peoples careers. Now you are your own career manager. Why the disparity? Despite much of the training being available online, people are time poor. Individuals need to take responsibility for their development. Looking forward, I expect to see the separation of transaction functions from those added value functions of analysis and strategy continuing, meaning greater outsourcing and shared services; certainly in the public sector. The difficulty for the finance function and accountancy educators is how does one acquire all the basic technical and the business skills needed without moving organisations? The good news for finance professionals is closer working with the business. For most this will also mean more varied and interesting work.

Finance transformation insight


Steve Cresswell, EMEA CFO and COO, Jones Lang LaSalle Jones Lang LaSalle is a financial and professional services firm specialising in real estate services and investment management. The company has more than 30,000 people in 750 locations in 60 countries globally.
Finance teams partnering with the business are being asked to act as free thinking businessmen/ women and as such should explore ways of adding value wherever they see the opportunity rather than feel constrained by an artificially narrow remit. Their freedom to pursue a broader partnering role will depend on their own ability and the appetite of the business but certainly an ability to forge business relationships will help. In terms of a shift in the focus of the finance function towards value creation this feels like a natural extension of many current models. However clearly there will always be a place for the core activities of cost reduction and operational efficiency especially in the current climate. I am always a little wary of presenting these developments as leading edge as in many smaller and medium-sized companies, finance teams have naturally (as there is no one else to do it) embraced broader business partnering. A sound knowledge of finance, including technical skills, provides an excellent platform for any career in business, but it is clear that to make an impact in any role you need a broader palate of skills, not least communication. I certainly believe you need to acquire broad business skills if you wish to have a broad, varied and rewarding career in finance. Thankfully the days when finance staff were just seen as techy number crunchers are largely behind us (sadly, I never go to a meeting without a calculator) but the quid pro quo for being taken seriously as business influencers is that you have to demonstrate that you can make a difference and to do that you need a number of different business skills. There is no optimal formulaic mix of finance and business competencies because (thankfully) we are all different, all performing slightly different roles in organisations that all have slightly different cultures but good finance training provides a great start. There will be some technical roles that remain the preserve of finance trained professionals, however I see no reason why those with a different functional background or who chose to study finance and business through a non-finance qualification shouldnt be effective business partners for the simple reason that effective partnering relies on much more than a pure technical skill-set. Individuals are naturally attracted by different aspects of business and finance depending on their own strengths and interests. Those wishing to pursue a partnering or advisory role will be required to display a broader range of skills and may feel more comfortable than others but supported with good training and coaching they can be mastered. Training is vital to staff development and therefore an important component of staff retention. It needs to be relevant to the organisation and the breadth and depth of it will inevitably be influenced by the prevailing economic climate. Jones Lang LaSalles approach has been to ensure that staff and their managers are both actively engaged in its planning and provision to ensure it is relevant, cost effective and that staff make the most of it; increasingly there is a recognition that a lot of training can be more effectively delivered in-house. I believe to be a great business partner you need some emotional attachment to the business some passion. From my experience, the stronger the relationship you have with the business the better able you are to add value and influence but this should not, and must not, prevent you from losing perspective or independence; if you lose either, youre not serving your partner well. A strong line into a finance lead has always enabled my teams to strike and retain the right balance.

LEADERSHIP

Conclusions and next steps

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48 From ledgers to leadership a journey through the finance function

4.1 Conclusions
There is plenty of evidence that technical accounting skills are the core foundation of the finance function and the finance professional, but there is a prominent shift in the need for business and commercial skills alongside them. Finance professionals are keen to develop their business competency in line with their technical competency, both to meet the challenges of business partnering but also more generally to fulfil all the needs of the modern organisation. While the spirit may be willing however it appears the flesh is weak, with organisations on the whole giving out mixed messages about their commitment to training in principle and in practice, and not fully focusing on the real return on investment from these learning and development activities. This is disappointing for recruits and may mean that the full potential of employees is not being realised. Both elements of competency (knowledge and skill) being required to undertake an activity or role highlight the increasing importance of more business oriented roles in finance. The right mix of skills however is even more important as there is a strong message that business skills, particularly in communication and problem solving, are considered more and more vital across the board and across all roles in finance. Nevertheless, there is variation within and among organisations, and when considering how to deploy resources they need to be sensitive to the need to build the right pool of finance competencies. The mix of skills demanded depends on: The role of the individual those spending more time on strategic and advisory and management accounting activities, or working in business facing roles (whether from within the finance function or integrated within business units) need a greater emphasis on business skills and the interplay of technical and business competencies. The seniority of the individual business skills become more critical as more senior roles are undertaken. The size of the organisation with increasing size there is a tendency for business skill requirements to become more dominant, reflecting the increasing complexity of the business environment, the need for communication and the potential for outsourcing more routine accounting activities. Consequently, organisations should target their training and development activities, not by cost or time allocated, but where they will deliver most value for money or value for time in light of these demands. In terms of maximising value, the support organisations provided and the methods they adopt for training and development should be sensitive to some key issues: Learning through doing was clearly seen as the most useful approach and organisations should consider both whether their current approach automatically or routinely integrates this development method, and whether changes in organisational structure may constrain opportunities for development. For example, if accounting processes are outsourced it may nevertheless be seen as critical that future finance managers have experience of how they are performed, so getting such experience may require seeking secondment to the outsource supplier for a short period. The importance of standardising and globalising ideas and best practice was clear, particularly for larger organisations, but the opportunity of achieving this knowledge sharing through information technology (which can be a cheaper and faster method than running internal courses) seems not yet to have been fully taken up. There is scope for much wider adoption of such methods. A policy of organisational support for professional qualification is widespread, being justified by both the importance of qualification to the roles of the individuals in our sample and by the fact it is one of the most important recruitment criteria. Senior finance personnel also saw the CPD that follows qualification as important. It is only post-qualification that the individual can tailor their professional development to best meet the needs of their organisation and their chosen career path. Organisations should therefore support the individual in CPD activities but ensure the activities are meeting both the individuals and the organisations needs.

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LEADERSHIP

Conclusions and next steps

Developing future finance leaders involves all the above approaches but it is recognised that there are limits to what can be developed in the individual by formal training and development processes these will be of limited success unless the organisation also identifies individuals with the appropriate personal characteristics, particularly in terms of their leadership, interpersonal and communication skills, to be developed towards that goal. Building on the results of this first research cycle, we see two other key issues for our continued and future research. First, the concept of the finance function as a portfolio of talents suggests an important line of research aimed at defining best practice in constructing the portfolio most suited to the organisations needs clearly an important issue for management. Secondly, research needs to be directed towards the likely trajectory of future developments. The first research cycle has necessarily concentrated on the current position and recent change and transformation, but whatever further change in the finance function is in prospect requires investigation, especially in the context of recent developments in the economic environment, the repercussions of which are likely to be felt for many years to come.

4.2 Next steps


The CIMA Centre of Excellence at the University of Bath School of Management is continuing to research Finance transformation best practice in the development of the finance function. Key areas that the Centre will be exploring include: how to shape the finance functions personnel portfolio to meet the needs of the organisation what measures of success can be used to define best practice in the finance function how the finance function has adapted to the recent financial and economic crises, and how it can support the organisation through and out of these crises looking further into the future, how finance roles and structuring of the finance function is changing.

4.3 Get involved


To participate in upcoming research, or find out more information about the Centre and its work, please email transformation@cimaglobal.com

4.4 About the Centre of Excellence at the University of Bath School of Management
The CIMA Centre of Excellence at the University of Bath School of Management is undertaking a five year programme of research into the changing nature of the finance function and its implications for finance professionals. Its Director is Dr Philip Cooper, a Senior Lecturer in Accounting in the School. He is a chartered accountant and worked for 15 years in the City before returning to academia.

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From ledgers to leadership a journey through the finance function

5. Research methodology
The research on which this report is based involved both extensive stakeholder consultations and also a large-scale international survey. The consultations informed the design of the survey which was employed to acquire data on the current position in practice across a full range of organisations globally. It was conducted through a web-based self-administration format over the period October 2008 February 2009. Views were canvassed from individuals outside the finance function as well as those within it. To accommodate the differing perspectives of respondents, particularly as regards their role within/outside the finance function and seniority, and to target questions appropriately the respondents path through the questionnaire was structured according to previous answers. The survey was predominantly carried out in English but translated versions were also used for respondents in Japan, France and Germany. A total of 4,567 usable responses were generated in the survey and a summary of the characteristics of respondents and their organisations is given below. Survey sample characteristics Table A1.1 Finance specialism Duties General finance/accounting Treasury/risk management Tax Internal audit Specialist finance/accounting Finance/accounting support of operating units Operations Planning/strategy Project management Sales/marketing Purchasing/procurement Human resources Information technology General management Head office/central administration Other (e.g. academic, M&A) Other functions/units Consulting for other organisations Total Finance specialism Total 1,540 103 102 97 302 1,071 242 304 141 119 44 23 88 321 184 32 1,498 143 4,554

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LEADERSHIP

Research methodology

Table A1.2 Role within the organisation

Table A1.3 Size number of employees in respondents country


24

418

33

400

3 64

1,03

960

1,5

20

678

75

55 7

1,726

391

Total = 4,567 Senior non-finance (CEO, director etc.) Senior finance (CFO, finance director, head/chief of accounting/finance) Financial controller/senior manager Accountant/management accountant Other finance professionals Other

Total = 4,567 1-100 101-250 251-500 501-2,500 2,501-10,000 Over 10,000 Not disclosed

Table A1.4 Country/region where respondent mainly works


143
54

Table A1.5 Sector in which respondents organisation operates


298

56

611

561

86

1
48 5

2,334
215
38 8
56 3

539

603

0 65
269

Total = 4,567 Australia, New Zealand Asia Europe (excluding UK) Middle East, Africa North America UK Other

Total = 4,567 Manufacturing Utilities, resources, construction Trade, transportation, storage Information and communication Financial services Professional and consulting services Other services Public sector Other

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From ledgers to leadership a journey through the finance function

Research methodology

Table A1.6 Size number of employees within and outside respondents country 1 100 Australia New Zealand ANZ Hong Kong India Japan Malaysia Singapore Sri Lanka Other (11 countries) Asia Caribbean (4 countries) France Germany Netherlands Switzerland Other (12 countries) EU/EEA Europe, other (5 countries) Ireland South Africa UAE Other (28 countries) MEA Canada United States N. America United Kingdom Regional/International Missing data Total 21 9 30 7 62 92 25 8 16 14 224 9 75 64 2 5 10 156 4 77 16 11 30 57 11 329 340 621 0 1,518 101 250 17 6 23 6 32 8 22 7 11 5 91 2 22 14 0 0 1 37 0 39 10 6 17 33 5 62 67 263 1 556 251 500 14 2 16 2 19 10 10 4 10 3 58 1 5 20 2 3 3 33 2 27 2 1 19 22 3 42 45 183 4 391 501 2,500 26 9 35 3 31 17 17 4 15 6 93 2 14 24 2 5 8 53 2 45 15 6 18 39 11 62 73 409 2 753 2,501 10,000 20 5 25 0 13 6 12 3 7 9 50 0 15 18 3 4 9 49 2 21 18 5 17 40 5 50 55 434 2 678 Over 10,000 13 1 14 4 16 10 2 2 6 4 44 1 22 25 2 2 1 52 1 11 13 4 7 24 6 64 70 424 2 643 Total 111 32 143 22 173 143 88 28 65 41 560 15 153 165 11 19 32 380 11 220 74 33 108 215 41 609 650 2,334 11 4,539 28 4,567

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LEADERSHIP

6. Figures, charts and tables


Tables Table 1.1 Table 1.2 Table 1.3 Table 1.4 Table 1.5 Table 1.6 Table 1.7 Table 2.1 Table 2.2 Table 3.1 Table A1.1 Table A1.2 Table A1.3 Table A1.4 Table A1.5 Table A1.6 Figures Figure 1.1 Figure 1.2 Figure 1.3 Figure 1.4 Figure 1.5 Figure 1.6 Figure 1.7 Figure 2.1 Figure 2.2 Figure 2.3 Figure 2.4 Figure 2.5 Figure 2.6 Figure 3.1 Figure 3.2 Figure 3.3 Figure 3.4 Figure 3.5 Figure 3.6 Importance of finance activities ordered by time spent on them (most time at the top) Importance of skills to the finance professional Correlation between role types and skills Relative importance of competency by organisation size The relationship between business partnering and competencies Importance of finance professionals skills to non-finance management Skills most in need of improvement by finance personnel Usage of training and development methods Usefulness of training/development methods (non-senior finance professionals) Time allowed for training by type of training and category of employee Time allowed for training by region (reported by senior management) Time allowed for training (reported by non-senior management) Time allowed for training by sector (reported by non-senior finance professionals) Importance of recruitment criteria Importance of recruitment criteria across regions Proportions stating that a professional qualification is essential to their role by country Reasons for leaving the organisation Employee retention strategies Employee retention strategies by size 14 17 18 20 20 21 22 28 30 31 32 33 34 38 39 40 43 44 44 Role types and principal associated activities Engagement in role type by finance professional duties Business competency Technical competency Relative importance of competencies to role types Relative importance of competencies to front and back office duties Relative importance of competencies to non-senior finance, senior finance and non-finance role groups Usefulness of training and development methods (senior personnel) Percentage of organisations providing support in policy and practice (as reported by senior finance management) Importance of recruitment criteria Finance specialism Respondents role within organisation Size number of employees in respondents country Country/region where respondent mainly works Sector in which respondents organisation operates Size number of employees within and outside respondents country 15 16 16 17 18 19 19 27 30 37 51 52 52 52 52 53

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