Traditional career paths have been disrupted by an increased push for efficiency in finance functions, as well as the intense need for a CFO’s organization to embrace more strongly business partnering and risk management roles. The ladder from operation to CFO is not a viable blueprint in a world of analytics, advanced risk management, and industrialized finance operations delivered by shared services, outsourcing, and Global Business Services organizations. Specialization and embracing the related talent sourcing, as well as the development required, have the opportunity to strengthen finance business partnering, risk management, and operations roles.
Drying the traditional well of finance talent
For most large corporations, the finance-operating model for the future looks very dissimilar to the past and even current landscape. Finance traditionally mushroomed around operating units—factories, delivery hubs, headquarters, sales offices, profit centers. However, with the significant geographic spread of businesses, continuous mergers, and acquisition activities, for most global companies, the typical finance landscape became even more fragmented with disparate technology as the backbone.
While not being the most efficient operating model, that landscape provided a terrific training ground for would-be finance leaders. For many of us who started our careers in multinational corporations as management trainees, this provided a unique opportunity to get our hands dirty in operational finances of various hues and then climb the management ladder into more business partnering roles on the strength of operational experience and cultural affinity within the business.
Those days and business models are soon becoming history for most companies. Multinationals are now in different stages of a journey to a much more efficient, standardized, centralized, and modular target-operating model with a Global Business Services strategy. In many cases, there is significant sourcing from third party service providers. In that scenario, it is not surprising that some of the senior finance leaders who were educated in the old model are concerned. What is the future finance leadership-training model and do the new Global Business Service model and outsourcing take away the training ground advantage?
Aligning talent profiles to finance’s new role
The answer to that question does not lie in how to train the new operating model but is actually more fundamental—what constitutes relevant training for future finance leaders?
The finance function has typically played three roles: the custodian and reporting roles, which are where most operational finance skillsets becomes relevant, and the business-partnering role, which is where the general management skillset and financial funding, deal making/structuring acumen becomes more relevant. The additional role that is becoming increasingly critical in the new world is that of risk management—not just compliance and regulations (which by itself is a daunting enough challenge) but also investments and portfolio management. In addition, the skillset for this requires a very different form of training, exposure, and background.
For example, most traditional training in operational risk management focuses on COSO framework and transactional controls; but what’s becoming more relevant for the future is analytics and risk modeling. Similarly, investment decision stewardship in the past meant a solid understanding of basic financial modeling for hurdle rates and accounting/tax treatment of different types investments and returns. What is pertinent for the future is acumen in option pricing and portfolio maximization strategies because most investment decisions today have far higher levels of uncertainty and many more variables than before. In the same vein, if, in the past, business scenario planning depended on modeling discrete variables, in the interconnected world, it’s all about understanding the range of outcomes from multivariate dynamic modeling situations.
Now, let us look at what is happening in the operations landscape, where industrialization of operations is rampant. Technology—both core ERP and the fast evolving space of specialized applications and automation, including cloud and mobile platforms—is making transaction processing and operational finance more about right design and governance than day-to-day art. There is no reason and no way for finance not to benefit from scale, centralization, and standardization, which means that most operational finances (including basic analytics—running the models and data governance) is increasingly becoming centralized in large global hubs with specialist centers of excellence (tax, treasury etc.) serving regional needs. In addition, because of advantageous economic fundamentals as well as the increasing irrelevance of distance driven by collaboration technology, these centers are migrating to lower cost countries.
Leaders of these centers add value with process management skills, domain expertise, insights, and the ability to transform continuously those processes, which necessitate investment in process frameworks, benchmarks, and intellectual properties that are very different from many core business requirements. As a result, outsourcing companies that can leverage and generate benefits from those core skillsets and technology have grown consistently for almost two decades. In addition, in an outsourced environment, finance operating leadership means managing provider relationships, contracts, and transformation journeys rather than executing financial processes.
Embracing the change will benefit finance
Given the emerging needs of finance leadership and the shifts happening in the operating landscape, should companies even look at operational finance as a source of finance talent, especially for business partnering? It is not a coincidence that some of the world’s leading Fortune 500 companies recently hired CFOs from investment banks and consulting companies—training grounds for the emerging skillsets referred to above.
As a result, it is legitimate to think of a future where industrialized, outsourced operational competencies co-exist with in-house business partnering talent, sourced from different backgrounds. In addition, for the few roles where operating leadership talent is required, there will be enough shared services and service providers from whom to source.
A rethinking of traditional finance talent paradigms is what is required for that future to come true and for finance to continue its trajectory of increased strategic relevance to business.
This has been authored by Shantanu Ghosh, Senior Vice President and Global Head for CFO Services and consulting, Genpact.
For more information, contact, firstname.lastname@example.org and visit, genpact.com/what-we-do/business-services/finance-accounting