The typical company drawing board is revolutionizing towards a more strategic layout with more diagrams and flow charts thrown in rather than numbers and figures. Investors have become more active than ever. Cost minimization in the face of radical competition has cropped up in corporate meeting discussions. Layoffs are more prevalent now than ever.
Recently, Snapchat layed off 120 engineers from New York in order to “streamline and unify Snap’s engineering team”. Jerry Hunter, Chief Engineering officer in Snap couldn’t give a more opaque reason to defend the layoff. But deep down we know that Snap needs to cut down on its cost given Instagram is slowly but surely trying to steal its users and has been pretty successful lately. (Remember Snap’s recent ‘update’ fury?)
Now Snapchat is your typical millennial tech company. It represents the new-age companies sprouting up in the Silicon Valley that hardly cares about its users. I can hear you saying, “What rubbish, how can a company not care about its users? After all we drive their revenue, right?” Wrong!
We as users are mere products of companies like Snapchat, Google, Facebook and similar tech companies. Our information is being sold albeit subtly, to relevant outsiders so that we can be shown appropriate ads. How cruel!
From an observer perspective, these developments make more corporate sense than the average layman may think.
Its time companies call in their finance departments and tell them to move to a more strategic system instead of the traditional number crunching systems. The drawing board needs to be prepared with ultimate aim of bringing innovation in company processes rather than mere budgeting and planning.
Technology is doing everything it can to help modern CFOs to unleash its true human capital and make finance the most lively department in the company. Manual processes have been automated, and that’s old news. But when we look at the majority Indian companies, they seem to be more laidback about the whole development and status quo is preserved.
Let’s not blame them and see what actual challenges are faced by Indian CFOs to invest their time aptly:
Limited external and internal knowledge: Managers of average companies are hired on the basis of high grades and corporate favoritism, while innovation takes the backstage at every step of the corporate hierarchy.
Companies are killed because people in them have immense respect for existing systems and their comfort zone. Why take a risk when you are getting your paycheck in return of a steady, complacent and monotonous work schedule? Such is their thinking!
Did you know that Google has an internal program where any employee can pitch an idea to the top management and if it matches the Google’s level of scalability and culture — employees can themselves lead the project and take home the rewards. With such levels of growth, there is a reason why companies like these aren’t average.
Poor adoption of existing technology and people: This has always been my personal pet peeve. When you can use technologies like Mailchimp and MailMerge to send mails, why do you spend hours on mailing your clients?
Why use siloed manual finance processes when the majority of us have moved to cloud based systems that vastly simplify financial reporting and analysis?
The challenge here is to recruit more people with fin-tech knowledge so that companies can leverage use of proper information and shift to a more diabolical way of analysis involving clear cut roles for man and computer.
Only a fool cannot spot the trend!
Addressing key pain points: Is your finance team spending ample time in risk management? Or is it spending maximum time on budgeting and reporting? Frankly speaking, this is a time-subjective and role-subjective topic and taking care of such things is more challenging than it seems. But if you are in a fast-paced industry like consumer goods or retail, it is imperative that you know where your resources are being spent and in what direction you are heading.
The solution to this lies in critical thinking about the specific industry requirements and then balancing the team’s value and work towards that particular area. For instance, if you are a boutique investment bank, you need to realign your team’s effort towards driving away M&A competition.
Having studied the major challenges faced by the finance departments, let’s have a look at what CFOs have to say about it according to a research carried by Bain & Co.
Here’s the excerpt:
CFOs still struggle to align their energies to strategic priorities. Fully 40% say their company’s strategy is not the primary factor in its resource allocation.CFOs spend just 35% of their time on direct strategy support such as strategy creation, business planning, target setting, resource allocation and performance tracking. Overwhelmingly, they say they want to spend more time on this. They estimate they devote about 30% of their time to stakeholder — external stakeholders, executives and the board — management, and generally feel comfortable with this time allocation. Another 20% of their time goes to specific finance responsibilities such as balance sheet management, audit and compliance, while a final 15% is spent managing the finance organization. Overall CFOs say they’re spending insufficient time in the areas of strategic planning and budgeting and talent management.When asked to discuss their challenges, CFOs reported that the biggest one they face involves managing their internal organization, specifically the need to improve such capabilities as performance management and advanced analytics while boosting the effectiveness of their organization. The next-biggest challenges: finding sources of growth and allocating resources effectively, as well as managing external stakeholders. What legacy do CFOs want? Among those surveyed, 45% want their legacy to be commercial success as measured by growth, shareholder returns or the quality of the business, or in their strategic advice to the CEO — all evidence of the movement in which CFOs are becoming more of a business partner. Another 25% want to be known for building the organization’s capabilities.
CFOs know that they need to spend more time in strategy building, and that’s a good sign. While ample use of technology is crucial, hiring the right (technically inclined) people is also a facet most seem to ignore. I am not entirely pessimistic about the scenario. I have seen hundreds of startups hell bent in changing the face of existing systems, I have also seen firms with backward people employing backward processes to do mundane tasks day over day.
We, at Padrea believe that craziness and change inhibit life-changing results; both in life and in businesses. We stress on an ‘innovation culture’ where we provoke clients to do things differently. We strive to remove the ‘boring’ tag from the corporate world and make it as lively as an IPL match yet as classy as the ASHES test.