Excellence in Leadership
Issue 3 | 2013 | £12
Excellence in Leadership George Connell, vice-president of strategy, finance operations, at Shell, on why middle managers are finance’s new rock stars V Balakrishnan, chairman of Infosys Lodestone, on the need for constant innovation Russell Elam, financial controller and head of operations at Islandbridge Capital, on taking an alternative route to the top Sanj Valanju, consultant, on the importance of experience when transforming the finance function Skills and talent
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Excellence in Leadership | Issue 3, 2013
FOREWORD
Cover image: Corbis. This page, illustration: Masao Yamazaki/Dutch Uncle
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Skills and talent
housands of years ago our ancestors On page 22 he talks us through the career choices that discovered fire, formed communities led up to his appointment as a financial controller at and fashioned tools. And, to survive the age of 29. Elam also explains how being a chartered in their hostile environment, they global management accountant put him on the fast learnt to innovate. In some ways, track for career success and he offers some first-class things haven’t changed since then. guidance for aspiring financial managers. For businesses to survive in today’s Harnessing talent effectively can necessitate a hostile economic climate, they must considerable amount of reorganisation. On page 12 – much like our forebears – keep developing new tools. George Connell, Shell’s vice-president of strategy, Harnessing the value of human capital – one of finance operations, discusses the developing role of the most crucial parts of the business toolkit – is a big middle managers in the company’s shared-services challenge, though. Four out of 10 respondents to a environment and how multilayered communication recent survey by CGMA magazine agreed that their skills are being developed in these centres so that organisations’ ability to innovate had been restricted these managers can “lead and inspire all staff, daily”. by a failure to manage human capital effectively. In a broader sense, too, the role of the finance In this issue we look at the value of human capital function itself is going through rapid change and management in the drive towards sustainable success. management accountants are being handed a much I recently had a fascinating wider remit. On page 18 discussion on this subject with Sanj Valanju, a CIMA-qualified ‘Despite the clear incentives for accountant and consultant, V Balakrishnan, a mover and equal treatment, women all over discusses the rise of “super shaker at Infosys. On page 8 he shares his insights on a the world are still being paid less temps” – project consultants range of key issues, including: with extensive experience of than their male counterparts’ how the company is adapting working in the heart of the to its changing business finance function. He explains the environment; the new dynamic between the CEO and value of these hybrid consultants and the qualities they the CFO; and the link between the empowerment need in order to excel in this particular field of expertise. of finance professionals and innovation. I very much hope that this issue of Excellence in Rewarding talent in an organisation can be done Leadership will help leaders in both the public and in many ways, but financial incentives are the most private sectors to pick out the stepping stones they prevalent method, of course. On page 28 we highlight need to move towards more effective methods of the ongoing gender pay gap and discuss why, despite the developing their talent. The tools that we use today clear ethical and business incentives for equal treatment, may be very different from those of our forefathers, women all over the world are still being paid less than but the instinct for survival – and the fire of competition their male counterparts. In the same article we list key – burns just as brightly. measures that organisations can take to tackle this pernicious strain of sexual discrimination. When thinking about nurturing skills in tomorrow’s Charles Tilley, business leaders, traditionally we have seen universities chief executive, as the main channel for developing talent. But more CIMA and more members of generation Y are opting to bypass the standard degree route and instead pursue on-the-job training and professional qualifications. Russell Elam, ACMA, CGMA, is one of those who decided not to go to university before taking the CIMA qualification.
Excellence in Leadership is the official publication of CIMAplus. For more information visit: www.cimaglobal.com/cimaplus
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Excellence in Leadership | Issue 3, 2013
CONTENTS
Any which way... Why finance chiefs must acknowledge ‘non-traditional’ routes to a career in finance p22
Innovate today Why innovation is key to every company’s future success p8 3 Foreword 6 Vital statistics 8 Innovate to survive... V Balakrishnan, chairman of the consulting arm of Infosys, tells Charles Tilley that the biggest danger to any business is the failure to innovate
Restless times The issues keeping finance chiefs awake at night p26 12 Tomorrow’s rock stars George Connell, vicepresident of strategy, finance operations at Shell, says middle managers hold the key to a bright future 18 Finance reborn The emergence of a new breed of interim project
manager is prompting firms to review how they implement change
explores the pressing issues that are keeping UK finance chiefs awake
22 All roads lead to finance Why the “traditional” route to finance is not always the best 26 Sleepless nights Robert Half’s Phil Sheridan
28 Battle of the sexes Why finance chiefs must address the gender pay gap 30 CIMA events 31 CIMA Directory 32 Get involved with CIMA
Editorial advisory board Malinga Arsakularatne chief financial officer, Hemas Holdings
Bogi Nils Bogason chief financial officer, Icelandair Group
George Riding chief financial officer, Middle East and north Africa, SAP
Jeff van der Eems chief financial officer, United Biscuits
David Blackwood group finance director, Yule Catto & Co
Kai Peters chief executive, Ashridge Business School
Arul Sivagananathan managing director, Hayleys BSI
Jennice Zhu finance director, Unilever China
6 Excellence in Leadership | Issue 3, 2013
VITAL STATISTICS CIMA is the Chartered Institute of Management Accountants 26 Chapter Street, London SW1P 4NP 020 7663 5441 www.cimaglobal.com
CFOs’ views on skills, talent and training
Nearly nine out of 10 CFOs don’t believe they have the right mix of skills in their teams to deliver full value to their organisations. Source: Corporate Executive Board Company, 2013.
78% of CFOs in the UK believe that skilled financial professionals are hard to come by.
Source: Robert Half, 2013.
63% 52% 51% During the international downturn of 2008-11, 63% of finance departments stopped recruiting, 52% put their training and development programmes on hold and 51% reduced their budgets for learning and development. Source: Corporate Executive Board Company, 2013.
78%
66% of CFOs in the UK are concerned about losing talent from their teams during the coming year.
66%
Employees’ views on career development 16% of employees say they would look to leave their employer immediately if they were unsuccessful in securing a promotion.
67% of employees say they would leave their employer within 12 months if they were unsuccessful in securing a promotion.
Only 9% of finance staff would expect to stay with their employer beyond two years if they were unsuccessful in securing a promotion.
Source: CareersinAudit.com, 2013. The products and services advertised in Excellence in Leadership are not necessarily endorsed by or connected in any way with CIMA. The editorial opinions expressed in the publication are those of the individual authors and not necessarily those of CIMA or Seven. While every effort has been made to ensure the accuracy of the information in this publication, neither Seven nor CIMA accepts responsibility for any errors or omissions.
CIMA contact: Learning and development specialist Gillian Butler Email: gillian.butler@ cimaglobal.com
Excellence in Leadership is published for CIMA by Seven, 3-7 Herbal Hill, London EC1R 5EJ Tel: 020 7775 7775 Group editor Jon Watkins Group art director Simon Campbell Designer Josh Farley Managing editor Darren Barrett Technical editor Neil Cole Chief sub editor Steve McCubbin Deputy chief sub Christina Ryder Deputy picture editor Louise Fenerci Picture researcher Alex Ridley Editorial director Peter Dean Managing director Jessica Gibson Creative director Michael Booth Production manager Mike Doukanaris Group publishing director Rachael Stilwell Advertising Nick Beaton Lisa Govier Email: lisa.govier@ seven.co.uk Tel: 020 7775 5578 Chief executive Sean King Chairman Tim Trotter © Seven © CIMA Cover image Corbis The contents of this publication are subject to worldwide copyright protection and reproduction in whole or in part, whether mechanical or electronic, is expressly forbidden without the prior written consent of CIMA/Seven. All rights reserved.
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Excellence in Leadership | Issue 3, 2013
Innovate to survive and thrive As a multi-billion-dollar organisation, Infosys is continually developing and adapting to the changing business environment. CIMA’s chief executive, Charles Tilley, recently went to meet V Balakrishnan, a board member and chairman of the company’s management consulting arm, who believes that the biggest risks to any organisation stem from a failure to innovate
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n 1981, seven engineers started Infosys with $250. Today, the company is a global leader in consulting, technology and outsourcing, with an annual turnover of $7.4bn. It has a growing global presence, employing more than 155,000 people across 67 offices and 69 development centres in Australia, China, Japan, India, the Middle East, Europe and the US. The business was founded on the principle of building and implementing great ideas that drive progress for clients and enhance lives through enterprise solutions. Clients in 30 countries rely on Infosys to support their innovations and maximise their growth and competitive strength. The company also passionately believes that its responsibilities extend beyond business. The Infosys Foundation was established to provide assistance to some of the most socially and economically depressed areas in which the company operates. With more than two decades of experience in financial leadership, V Balakrishnan is a member of the board of Infosys. He heads the outsourcing, Finacle (banking software) and Indian business unit, and was recently appointed chairman of Infosys Lodestone, the group’s management consulting arm.
His insights on how to achieve sustainable business success in difficult times are as follows: • The biggest risks arise from a failure to innovate. We live in a volatile world – there is no doubt about that. But, if you look at the Standard & Poor’s 500, these firms are sitting on $3trn and not investing in anything. Everybody is profitable, but nobody is making any investments because confidence is low. Clients are focusing more on reducing cost and improving efficiency, which is where we can play an important part. But we are also working to become a leader in intellectual property services, platforms and products, and a high-value consulting company. Innovation is key to this mix. A good example is the Airtel money platform. We worked with Airtel, the largest telecom company in India, to create a mobile wallet where low-value financial transactions can be made through a mobile phone. In India 70 per cent of the people live in villages with no access to traditional banks, so this product is essential. Whatever you try to do, you must try to move up the value chain and become a premium player in the industry. • The finance team is the heart of the business. Finance is the only function that has a 360-degree »
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Excellence in Leadership | Issue 3, 2013
‘Two people are the face of any organisation: the CEO and the CFO. If they don’t work well together, it results in disaster’
view of the enterprise and the CFO must drive the business. Ultimately, two people are the face of any organisation: the CEO and the CFO. If they don’t work well together, it results in disaster for the company. A CEO must be highly optimistic even in the worst situations, but the CFO should be more realistic and help the business to move forward by making it understand the realities and operate efficiently. At Infosys we need our finance professionals to be very articulate, because they must deal with multiple stakeholders – customers, shareholders, employees and investors – and balance all their interests . You have to wear multiple hats at different times. It takes talented people to do that. • Corporate reporting must continue to advance. We went for an IPO in India in 1993 and wanted to become the world’s best company in terms of transparency and reporting, so we benchmarked our practices. At that time in India we used to report numbers every six months, with a lag of three to four months. So, when investors received the numbers, these were already stale. So we started reporting quarterly, which was not mandatory at that point. We used transparency to our advantage. We started to provide a lot of non-financial information in our annual report. If you look at our market cap, it is $20bn. If you look at our balance sheet, it is $4bn to $5bn. So how do you make the investors understand the difference? We started reporting HR valuation. We value all human resources because our market value becomes zero when our employees go home at night – and it’s vital that they return. If you look at our annual report, I think it is the most transparent in the world. Transparency is our biggest competitive advantage and we use it to the hilt. • Value your people. In our organisation people are the biggest asset. If you value their input and put this on the balance sheet, they feel good about it. They feel empowered. Very few companies do this, but, if your workforce is not happy or motivated, you have a big problem. Balakrishnan’s comments about innovation resonate with recent CGMA research. Long-term
business success depends on an organisation’s ability to react to, and manage, change. Finance professionals have a reputation for blocking innovation as opposed to enabling it. But there are very few successful innovations that haven’t had input from the finance team. The role of finance is to create a suitable environment in which innovation can thrive. The finance team should be involved from the very outset of projects and can then work with the wider business to achieve a successful conclusion. The team can create the business case, apply the right incentives to drive innovation and ensure that the appropriate funding is in place at each stage. Balakrishnan’s insight about the dynamic between CEOs and CFOs is very interesting. The finance professional must act as the organisation’s co-pilot. A pilot needs a co-pilot on whom he can rely to take the controls of the aircraft. The same relationship exists in business, with a CEO needing a CFO who can step in when necessary to drive the business forward. I was also encouraged by Balakrishnan’s thoughts on how corporate reporting must develop. At CIMA we aim to be transparent at all times. I am a member of the International Integrated Reporting Council and our 2012 annual review adopts as many characteristics of an integrated report as possible, based on current guidelines. Integrated reporting is a new approach that is steadily gaining international recognition. It demonstrates the links between an organisation’s strategy, governance and financial performance and its social, environmental and economic context. Along with our colleagues at the American Institute of Certified Public Accountants, we are supporting this exciting journey.
Charles Tilley, FCMA, CGMA, is chief executive of CIMA. He writes “One-to-One”, a regular column for CGMA magazine, where he interviews industry leaders on topical business issues. Visit www.cgma.org to read his previous interviews.
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Bridging the gap
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In the latest of a series on the role of finance at Shell, George Connell, the firm’s vice-president of strategy, finance operations, tells members of Loughborough University’s shared-service centre research team about the crucial role that middle managers play in Shell’s SSC
14 Excellence in Leadership | Issue 3, 2013
‘Even the most mundane and automated activities need continual attention if they’re to stay fit for purpose’
Middle management has been the target of cost-cutting in many organisations over the past two decades. The once bloated middle has become pinched and organisations have perhaps even taken on an hourglass shape. You believe that middle management has assumed a new role. What does that look like in the context of finance operations? If the classic purpose of top managers was to forecast, plan, organise, command and control, the middle role in the process was to pass information up and down the organisation while keeping control of what the front-line staff were doing. That view is a little simplistic, of course, but it’s fair to say that it was in essence a passive role, in that there tended to be a culture of “keep your nose clean if you want to move up”. Not surprisingly, in recent years there has been a significant delayering of the middle, as computers have enabled head office to see more of what is happening at the bottom of the organisation and communicate directly with the front line. Today the middle management role still entails a lot of communication, but this process is faster and less vertical than before. SSC managers are at the hub of a complex network of relationships. They are not only the link between the strategic and the operational aspects of the company; they are also the linchpins of the multiple complex horizontal relationships among partners in the business, other support functions (including HR and IT), customers and suppliers. They are also a gateway between third-party service providers, such as outsourcing specialists, and the divisions of the business. In setting up an SSC on a quasi-market basis, Shell has created the sort of extended supply-chain model that developed between manufacturing suppliers in the 1990s. Managing those relationships is a key task. It seems less of a technical role and more of a job requiring a lot of interpersonal skills. Absolutely. It’s all about relationships. Myriad connections involve the middle manager. Doing
business in the global knowledge-based economy is much more dynamic than it used to be and SSCs are often on the front line of changing information requirements and working methods. This is the new territory for middle managers. Is this the idea of emergent strategy? In a way, yes. Continuous improvement is about chasing a moving target – in our case, a downward trend for cost. Top managers still set an overall framework for the company, but now middle managers design frameworks to guide and challenge empowered front-line staff. New possibilities are emerging all the time and there’s much less resistance to change based on the attitude: “If it’s not in the plan, it will have to wait until next year.” This idea of managing change sounds interesting, but aren’t SSCs meant to be about standardisation? Surely there would be less need for middle managers in this context. That’s one theory, but even the most mundane and automated activities need continual attention if they’re to stay fit for purpose. There’s still a lot of change around. Even after a number of years we’re still adapting to the changing needs of our customers and internal business partners. Standardisation needs to be sensible and appropriate, because we have to respond to our market. Also, we are continually challenging our IT platforms as new technology comes along. We’re currently rolling out a global enterprise resource planning system, for example. There is no such thing as a perfectly designed system – ask yourself how many times you have contacted an organisation to be told: “Yes, I know it’s complicated, but that’s just how the system is.” At Shell we expect our people to know why the system is that way and to be able to explain this to customers. And they should be able to suggest in their process teams how the system can be improved. We also have to plan for various scenarios – business resilience in the SSC is constantly being tested. »
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16 Excellence in Leadership | Issue 3, 2013
For example, we need an integrated and practical business continuity plan to ensure that our service will carry on if part of the network becomes unavailable. These plans are tested regularly and the lessons learnt in the process are shared internally. So does the SSC work to a business strategy of its own? In a sense, professional functions are becoming businesses in their own right, so we are indeed setting our own strategy for delivering value to our customers and business partners. Because the SSC model brings a new transparency to functional areas such as finance, senior managers can be more comfortable with our operational flexibility – as long as there is a logical business case and the planned outcomes are achieved. Performance management systems – for example, the behavioural framework we discussed in the previous article – are clearly present at Shell, but how do you project these to staff? Our overall objectives in finance operations are defined clearly as “delivery, speed, simplicity, external focus and commercial mindset”. These are at the heart of everything we do. The job of middle managers is to help staff apply these sensibly. Getting the underlying behaviour right helps us to achieve the required performance levels. We put a lot of effort into communicating the SSC’s objectives and explaining how these fit into the wider business, so that everyone knows exactly what’s expected of them. We use the obvious communication channels – emails, portals, blogs, leaflets, posters – but the best method is talking face to face. We have regular “town hall” events, where managers engage with a large number of employees. These give us a platform to get our points across and they also enable staff to raise queries. We also put a lot of emphasis on teamwork through what we call huddles, in which members of staff discuss their performance along with problems that need solving. Through the huddles, new team
members are introduced to the processes and objectives of the department and also to how people work together. There are strong resonances here with the notion of the community of practice. Individuals have to know that they are valued as people first and foremost if they are to be motivated to strive for constant improvements. How do you see this developing in the future? When measuring performance it’s easy to fall into the trap of being driven too much by the metrics – maybe we have done that in the past. We need to balance the hard metrics with what is actually happening underneath. Daily discussions at team level provide a forum for tackling problems. We look to recognise and reward good performance, while we encourage open dialogue to manage ongoing issues and deal with underperformance. So communication and team leadership are the key roles for your middle managers? Definitely. We need to be able to trust our middle managers to ensure that the business’s objectives are achieved on the ground. If we want our SSC to be seen as world class, middle managers must lead and inspire all staff daily. I think they can facilitate knowledge creation by involving top managers and front-line workers. That’s a skill in itself – high‑quality leadership means that leaders must develop leaders. We cannot simply formulate our objectives and methods, pull our management levers and then sit back and watch it happen. For us it doesn’t work like that. We need leaders who are effective communicators and can get points across to inspire the front line to help achieve our objectives. Ian Herbert, FCMA, CGMA, is deputy director of the Centre for Global Sourcing and Services at the School of Business and Economics, Loughborough University, where Lin Fitzgerald, ACMA, CGMA, is professor of management accounting. This series of articles is supported by CIMA’s general charitable trust.
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Excellence in Leadership | Issue 3, 2013
‘When measuring performance it’s easy to fall into the trap of being driven too much by the metrics – maybe we have done that in the past’
GEORGE CONNELL
is Shell’s vicepresident of strategy, finance operations, and its Glasgow SSC lead. Connell has been with the energy giant for 15 years. He has an MBA in accounting and finance from the University of Glasgow and holds the CGMA designation.
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Experience equals success
Getty Images
The emergence of a new breed of interim project manager, with extensive hands-on experience of working in the finance function, is prompting firms to review how they implement change programmes, writes Sanj Valanju. So who are these professionals – and what particular advantages do they offer?
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Excellence in Leadership | Issue 3, 2013
A changing landscape
Typically, CFOs seeking to implement transformation programmes have resorted to varying combinations of internal (from within the finance function) and external support, often from the big consulting firms. Decisions for resourcing such projects are typically predicated on cost, urgency and complexity, but they can overlook a number of fundamental considerations. These include questions such as: • Does the external partner really understand transformation (remodelling) as opposed to “business as usual” improvements (repairing)? • Does the partner have enough experience? • Will the partner avoid recommending solutions that it wouldn’t implement in its own organisation? • Will each team member act as if they were individually accountable for the ultimate outcome? • Will everyone involved focus on building long-term capabilities from day one? As a result, transformation programmes can be hit-and-miss affairs. While the usual reasons for the failure of such projects are inadequate planning, poor
stakeholder management and ambiguous objectives, another set of causes has begun to emerge. These are as follows: • The project is being driven by external best-practice models rather than the specific needs of the business. • The focus is more on short-term wins as opposed to long-term investment and resource planning to sustain the transformation. • The work to develop the finance function’s capability covers only technical skills. • The transformation of finance is viewed as a purely functional change and not a holistic organisational one. In some cases, CFOs are questioning whether their external partners would be flexible enough to tailor their approach to suit their businesses’ particular needs and whether they would be willing to offer a discount in the event of a missed target. As a result, many are turning to “hybrid” consultants, project consultants and super temps – highly skilled professionals with a mix of finance experience in industry and consulting. These professionals are ideally placed to work on critical projects to redefine the strategy, process and technology of finance as part of their operational role. They are also well equipped to help CFOs identify the real need for transformation by, say, challenging short-term perspectives on cost reduction or promoting the idea of running the finance function as a business in its own right.
Premier league
No two organisations operate exactly the same financial processes, which makes it foolhardy to apply a single approach to achieving every transformation. Project consultants can make a truly valuable contribution here by combining entrepreneurial creativity with the strong functional focus of an experienced financial manager. An article entitled “The rise of the super temp” in May 2012’s Harvard Business Review identified this group as a “new league of top managers and professionals – from CFOs to consultants – who have been trained at top schools and companies and chosen project-based careers independent of any major firm”. Not everyone is cut out for a career as a project consultant, of course. The work can be lonely and daunting. As outsiders, consultants can be treated with suspicion by permanent staff worried about their jobs. In addition, some organisations have concerns about data protection and confidentiality. Despite all this, CFOs are starting to see encouraging results from working with lean teams of external experts. Taking reporting as an example, transformation consultants would have been quick in the past to suggest solutions involving the implementation of
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any finance teams are struggling to cope in a commercial environment characterised by increasing stakeholder demands and a strengthening view that the function must become more agile if it’s to satisfy the needs of the business it serves. While the debate rages on how the profession should equip itself for “the new normal”, and the rhetoric on “finance transformation” and “business partnering” abounds, financial leaders also have to keep abreast of key developments in areas such as strategy, technology and performance management. There’s plenty for them to think about. The pressure of dealing with these issues is beginning to take its toll. A recent survey from executive search firm Spencer Stuart found that CFO turnover at large British companies has risen for the third consecutive year in 2013. Although some observers attribute this to the country’s gradual economic recovery and the improved opportunities it is creating, others believe the main reason is that the job is getting bigger, tougher and riskier. So how can the function respond – and which particular attributes must it acquire in order to provide the best possible service to the organisation? The answer lies increasingly with “super temps”: project consultants with extensive experience of working in the heart of the finance function.
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Excellence in Leadership | Issue 3, 2013
‘Talented people remain the defining success factors of quality, effectiveness and efficiency’ decision-support tools. Today we are seeing a move towards more pragmatic and creative – albeit sometimes more risky and controversial – recommendations, such as the cessation of certain reports. The rationale for doing this is that the actual value of a given report would be determined by gauging the number of calls from users asking what has happened to it. If very few people miss the information, its continued production is questionable. A more strategic example can be found in the process of determining a business’s vision. Rather than simply focusing on making a company “best in class”, project consultants aim to support a vision that reflects its appetite for risk and is based on wider
considerations, such as the external compliance environment; the need for differentiation in internal and external client services; and growth and revenue diversification opportunities for finance. As successful transformations start to attract more attention from boards and industry analysts, it has never been more evident that talented people remain the defining success factors of quality, effectiveness and efficiency. And so the business case for owning and delivering transformation from within the finance function using the right people grows stronger.
About the author Sanj Valanju is a CIMA-qualified accountant and consultant with a big-four background and more than 15 years’ transformation experience with some of the world’s largest companies. He is a director at Resources Global Professionals (RGP), where he manages a portfolio of finance engagements for global clients.
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All roads lead to finance
Alamy
Russell Elam, financial controller and head of operations at Islandbridge Capital in London, is determined to show finance leaders that there are plenty of routes into the profession that don’t go via university. He describes his unconventional career path and extols the virtues of working in family-run organisations
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‘I needed broader skills that would help me to understand the business and how it worked. CIMA was a good fit for that’
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here was a time when the career path for management accountants was set out clearly before them: a degree or similar qualification; a first job learning the ropes; a move to a more senior role, perhaps in a different organisation; a move to a bigger firm to gain global experience and the chance to work overseas; followed perhaps by a move to a blue-chip company or a CFO role. Today, management accountants tread several different paths, adding value to organisations of all different sizes and operating in many different markets. A management accountant’s skills are no longer required in the finance function alone, while the ultimate destination is not necessarily a senior job in a big corporation. Russell Elam is one professional accountant in business who has chosen a different path: instead of going to university, he has used the CIMA qualification to carve out a career in finance with both big organisations and medium-sized companies. Here he shares his experiences. What made you choose a career in finance? When I came out of sixth-form college with my A-levels, I decided to take a gap year before going to university. I joined a small firm of London solicitors in a junior accounting job. But, very early that year the firm said it was keen for me to take a finance qualification – and I quickly saw that there was an alternative to pursuing a degree course at university. Initially I studied with the Association of Accounting Technicians and quite enjoyed that. When I moved to a small court-transcription
business, I continued these studies. After that I wanted more responsibility, so moved to a familysized investment firm. It was there that I first came into contact with CIMA. The business had a finance department of about a dozen people, about half of whom were taking the CIMA qualification. I was in the financial analysis and planning team, so needed broader skills that would help me to better understand the business and how it worked. CIMA was a good fit for that. I spent seven years with the company, qualifying with CIMA during that time. What path has your career taken since? The investment firm was a really enjoyable place to work and it helped me to complete my CIMA studies. But it was quite a lean finance team, with the people above me looking unlikely to move on, so my career options were limited there. With that in mind, I decided to look for a new challenge. I entered the world of investment banking with Nomura, a huge organisation compared with where I’d been, employing around 35,000 people across the globe. I had been at Nomura for only about a year when I was approached about a senior finance and head of operations job here at Islandbridge Capital, managing a team of six people. Islandbridge is a multi-firm office operating two funds of hedge funds. Our expertise lies in selecting appropriate fund managers. We specialise in providing hedge fund advisory services to wealthy individuals. Those clients like to receive a personal, family-sized service, which is what we offer. We tailor a selection of hedge funds to each client’s needs – some want a certain level of growth; some want to take more or less risk.
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Excellence in Leadership | Issue 3, 2013
‘The other thing I really value is my ability to write a good and concise report. It’s a skill that many people don’t have’
What tempted you to that role from a big corporation with lots of room for progression? I like the fact that this is a family office but also very active. We work with wealthy individuals, manage transactions and provide hedge fund advisory services. There are three different segments to the business and that type of diversity appeals to me. In a bigger organisation I felt that I had set responsibilities in a set area – and that the chance for me to expand into other areas and influence the broader business wasn’t there. What other aspects of working in a smaller organisation appeal to you? I love the fact that here you are recognised for the value you add, the influence you can exert and the contributions you make. In some large organisations you can go away for two weeks and no one would really notice that you’ve been off. In a smaller business you are pivotal and involved in many more areas. It’s a real chance to show your worth and it’s good for your personal development. I also like the pace at which things happen. You can make a decision and act on it very quickly here – there’s not so much red tape. In larger organisations it can take a long time to get a plan signed off at the various stages of the hierarchy. What skills and abilities do you need for the job? I definitely need a broad scope of understanding and knowledge of how the business runs. The ability to adapt to different tasks is invaluable, too. Working in a smaller firm, you also need to have the right personality and fit for your organisation, because you’re working very closely with a small number of colleagues for a large part of your week.
What specific skills has your CIMA qualification equipped you with for working in a medium-sized organisation? The syllabus is hugely diverse, which is important for a job in a family-owned business, where I am expected to stretch beyond standard finance responsibilities to help shape other projects and initiatives. It has also given me the valuable technical skills I need for this sector – for instance, treasury management for our wealthiest clients. We have clients with multiple sets of accounts, investments and currency exposures. CIMA has equipped me to handle those areas as well. In short, the nature of the family-owned model is that our clients expect us to be more responsive and agile, so I need to have the skills for that – which is what CIMA has given me. The other thing I really value is my ability to write a good and concise report. I think it’s a skill that many people don’t have. Do you feel that not having a degree has held you back in any way? I have always had this concern in the back of my mind that it could be a sticking point. Fortunately, for Islandbridge and every other firm I have worked for, it hasn’t been – and I feel that it shouldn’t be for any other employer. The managing director of this business was familiar with the CIMA qualification and recognised that it prepared me as well as a degree would have done to perform this role. Where do you go from here? This company is moving in the right direction and I like the working environment here, so I want to stay. Obviously I’m ambitious, so my next aim is to get on to the board.
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Sleepless nights With so much change occurring across the finance function in an uncertain economic climate, there is plenty to occupy the minds of finance chiefs. Phil Sheridan, UK managing director of Robert Half, sets out the findings of the company’s latest survey, looking at what’s keeping them awake at night
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hroughout the downturn, the CFO and the finance team have played a vital role in organisations, providing strategy and financial stewardship while confronting critical issues such as cash flow, business growth, regulation and corporate governance. But today’s finance department is increasingly expected to deliver efficiency and direction across areas such as operations, HR, sales and marketing, giving rise to partnerships that deliver growth across the organisation. With multiple and often competing priorities, CFOs face a rising tide of responsibility and a mounting number of issues that may keep them awake at night. So what is causing their insomnia?
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Finance leaders’ key concerns
Five years on from the start of the downturn, the economy continues to weigh heavily on the minds of British finance chiefs. More than half (53 per cent) of the respondents to Robert Half’s recent research indicate that the UK economy remains one of their chief concerns, followed by the eurozone economy (44 per cent) and the global economy (33 per cent). Worries about the national economy are particularly prevalent in London and the south-east (63 per cent) as well as the north and Scotland (60 per cent), whereas regional economic concerns are relatively more pronounced in the Midlands, Wales and the south-west. As the economic unpredictability continues and businesses face ongoing difficulties in securing financing from the institutions, it is unsurprising that cash flow remains high on the agenda for finance leaders – virtually unchanged from their response to the survey conducted 18 months ago. Nationally, 41 per cent of CFOs consider cash flow a top concern, rising to 46 per cent for those in small and private firms and 48 per cent for those based in the north and Scotland. A theme that has decreased in prominence from the previous survey is the concern about managing the balance
sheet – cited by 51 per cent of respondents in 2011, but only 17 per cent this time round. While this instrument continues to play a key role, demonstrating that a business is well run and under control, other topics have crept up the agenda. These include managing/delivering growth (26 per cent), audit costs (25 per cent) and regulatory issues (23 per cent). Despite the improving global economic climate, the prevalence of slow-paying customers is the main factor contributing to executives’ worries about cash flow. This is cited by 61 per cent of FDs – up from only 26 per cent 18 months ago. More positively, the proportion of respondents citing “lower revenue” as a contributing concern has dropped from 50 per cent – the top answer in 2011 – to 38 per cent, the fifth-most common answer today. This suggests that turnover is not as big a preoccupation as it was.
Financing woes
While 23 per cent of finance leaders are worried about a lack of access to investment financing, they are also concerned about the factors that make it hard to secure funding. At the top of this list is the state of the industry concerned, as 36 per cent of respondents say that operating in a perceived risky or depressed sector is the chief barrier to obtaining finance. This is followed by perceived exposure to bad debt and risk (33 per cent) and a poor credit rating (28 per cent). The prevalence of weak balance sheets, which 18 months ago was cited by 60 per cent of CFOs as the primary factor, has dropped to fourth (26 per cent). Overall, the lending climate has eased, with individual company financials posing less of a concern than they did in 2011.
Recruitment implications
More than a third (35 per cent) of finance leaders cite the lack of time to complete projects as having a negative impact on their business, with 21 per cent indicating that they face a shortage of permanent employees. Many finance departments are running with lean teams and have been reluctant to increase staffing to
pre-recession levels. Many are therefore struggling to manage their workloads. Compounding the problem is the fact that nearly a quarter (24 per cent) of CFOs believe that their departments’ commercial skills are inadequate, while 16 per cent report that poor technical skills are having an adverse effect. At a time when finance is working increasingly with strategic and commercial teams throughout the organisation, having the right talent representing the function remains as important as ever. When it comes to optimising departmental effectiveness, 38 per cent of CFOs believe that improving communications among teams is the best way to achieve this. This is followed by improving financial systems (31 per cent) and business processes (29 per cent). To cope with these initiatives, finance teams have become more reliant on interim and temporary professionals, with 31 per cent of CFOs citing an upsurge in their use. In 2011, 20 per cent of finance team members were classed as interim or temporary professionals, but today that proportion is 26 per cent. Balancing a core group of permanent staff with highly skilled interim professionals can help companies to cope with skills gaps while also improving overall efficiency. It is clear that the finance function has not yet completed its transformation. Ongoing concerns, as well as emerging ones, will continue to challenge finance chiefs, who are under pressure to deliver growth in both bull and bear conditions.
What’s worrying SMEs The concerns of finance leaders from small and medium-sized enterprises (SMEs) are generally in line with those of their counterparts in larger firms. Cash flow remains a worry among 41 per cent of CFOs in SMEs. The main reasons for this unease include slow-paying customers (cited by 63 per cent of respondents), customer/client insolvencies (45 per cent), rising business costs (40 per cent) and falling revenues (39 per cent). Only 23 per cent cite a lack of access to investment financing as a big concern.
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Excellence in Leadership | Issue 3, 2013
Total equality management Aside from the clear ethical imperative, there are good business reasons for paying female workers as much as their male equivalents, yet the gender earnings gap is still prevalent worldwide. So how can employers ensure that they aren’t treating women unfairly?
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here are as many qualified women as men entering the workforce in the finance profession, yet that’s about as far as sexual equality seems to extend. Recent research has revealed that discrimination in terms of pay continues to affect women in much of the developed world. The OECD report “Closing the gender gap: act now” (Dec 2012) reveals that the disparity is biggest in South Korea, where female workers earn 39 per cent less than their male counterparts on average. It’s also a still a huge issue in Japan (29 per cent less), Germany (22 per cent) and the US (19 per cent). Workplaces in Hungary (4 per cent less), New Zealand (8 per cent) and Norway (9 per cent) are positively egalitarian by comparison. Studies have found that employees are likely to be more productive if they think they are being paid fairly, so employers that discriminate in this way are jeopardising their competitiveness. They also risk getting embroiled in lengthy and potentially expensive pay disputes. So what should they do to address the problem and what role can finance play? Gender equality experts in the US and the UK recommend that organisations conduct equal pay audits to keep their remuneration practices up to date. Managing an equitable pay regime, they argue, should be seen as a principle of good management accounting. Any failure to do so could lead to discrimination claims, which are on the rise. According to a research report by the American Association of University Women (AAUW), “Graduating to a pay gap”, the average female college graduate in the US will earn 23 per cent less than the salary paid to a male counterpart. It suggests that this is largely because more men are entering higher-paid professions and working slightly longer hours. But even under like-for-like conditions, in which men and women hold the same qualifications and jobs, there is still a disparity of 5 per cent. The AAUW’s director of research, Catherine Hill, believes there is another
cause apart from simple discrimination: men are more effective at negotiating their pay. “Sadly, men and women are not treated the same in negotiations. People are somewhat less tolerant of negotiation coming from a woman,” she says. “One piece of advice we always give to women is to enter the discussion with information about what other people in your field are earning. You also need to sell your skills and demonstrate the ways in which you can be valuable to your employer.”
A lifetime of inequality
On the other side of the Atlantic, new figures published by the Chartered Management Institute (CMI) and salary-survey specialist XpertHR reveal that the average female executive in the UK will earn £423,390 less over her lifetime than her male counterpart. “Although the pay gap has been closing over the past decade, it is disappointing that the rate of change is coming through only in small percentages,” says Petra Wilton, the CMI’s director of strategy and external affairs. “Last year it was estimated that it would take 91 years for the pay gap to close. This year, because of the flat economy, the estimated time is even longer.” Wilton reports that the annual salary difference for managers is £10,060 – and that the gap widens at senior management level, particularly for directors and chief executives. Some observers attribute the lifetime pay gap to the fact that many women put their careers on hold to raise a family, thereby slowing their progress up the hierarchy. Others point to a lack of transparency as the main cause. In British workplace culture, employees rarely discuss pay, which makes it hard for them to identify discrimination in this area. In the US the Paycheck Fairness Act has been reintroduced to Congress. The proposed legislation, which the Senate has vetoed twice before, would make it illegal for organisations to penalise employees who discuss their pay with their peers. The number of pay discrimination hearings heard annually by the US Equal
Employment Opportunity Commission has risen by 19 per cent in the past decade. In 2012 the commission awarded $138.7m in the cases it resolved. If a case cannot be settled here and goes to court, the damages awarded can be substantial. In 2010, for example, when a federal jury found Novartis guilty of discrimination the pharmaceuticals company was ordered to pay compensatory and punitive damages in excess of $285m. The reasons for tackling this age-old issue, it seems, are manifold.
How to make pay fair Here are some practices recommended by experts for identifying pay inequality in an organisation: • Conduct pay audits. Frequent assessments enable managers to address any imbalances. These should be viewed not as a gender equality tool, but as a good management tool. • Ask the workforce. An effective way to gauge the perceptions of employees is by conducting surveys that ask them if they feel they are being paid fairly. “It may be that you have a public relations problem rather than a real problem,” says the AAUW’s Catherine Hill. • Encourage openness. Staff should not be punished for discussing pay with colleagues – sometimes it is the only way that they can work out whether they are being rewarded fairly. Transparency is widely seen as one of the best ways in which gender inequality can be addressed. • Plan a realistic remedy. If there is a pay imbalance, try to find a solution that addresses the issue over a sensible period. “Sometimes it can be about highlighting certain levels of pay if these are beyond the scope of a role, or about introducing frameworks that put particular jobs in pay bands,” says the CMI’s Petra Wilton. “You can then see what you are rewarding, which might be based on skills or experience.”
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Excellence in Leadership | Issue 3, 2013
EVENTS
Beyond the financials
Persuasive writing Risk management
13-14 November London
19 November Coventry
2 December Newport
This two-day CGMA European conference will combine keynote presentations with smaller breakout sessions on a variety of topics, including thought leadership research outputs, best practice sessions for employers and personal development for individuals.
Do you wish you were more commanding or concise when you write? Would you like more cooperation from colleagues? Could you get ahead further and faster with well-written words? If so, then this event is for you.
This event will cover the risk management process, current tools and techniques used to assess and communicate risk, disclosure of risk in the annual report and whether risk management adds value.
www.cgma.org/europeanconference
www.cimaglobal.com/westmidlands
www.cimaglobal.com/ southwestenglandandsouthwales
Further events Raising finance in uncertain times Portsmouth, 21 November How do you raise finance for your business in these times of austerity? This event will examine the finance options available and their suitability for different types of organisations. www.cimaglobal.com/ centralsouthernengland
CIMA CPD Winter Academy London, 2-3 December This two-day event is designed to help finance professionals maximise their CPD learning and also provides an opportunity to network with peers. It will cover a range of topics, including updates in management accounting and IFRS, a persuasive writing workshop and a session exploring developments in data analytics. www.cimaglobal.com/winter
Networking and beyond Cambridge, 4 December This session will teach you how to enter the room with confidence and a plan. You will learn how to make that effective first impression and be able to answer the big question: “What do you do?” www.cimaglobal.com/ eastmidlandsandeastanglia
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CIMA offices CIMA corporate centre 26 Chapter Street, London SW1P 4NP Tel: +44 (0) 20 8849 2251 Email: cima.contact@ cimaglobal.com www.cimaglobal.com CIMA Australia Paul Turner: country manager 5 Hunter Street, Sydney, NSW 2000, Australia Tel: +61 (0)2 9376 9902 Email: sydney@cimaglobal.com CIMA Bangladesh Zareef Tamanna Matin: manager Suite 309, RM Center (3rd Floor), 101 Gulshan Avenue, Dhaka 1212, Bangladesh Tel: +8802 881 5724 +8802 881 6306 Email: zareef.matin@ cimaglobal.com CIMA Botswana Kenneth Mabote: country manager Plot 50374, Block 3 1st Floor, Southern Wing, Fairgrounds Financial Centre, Gaborone, Botswana Tel: +267 395 2362 Email: gaborone@ cimaglobal.com CIMA China: head office Li Ying Vicky: regional director Unit 1508A 15th Floor, AZIA Center, 1233 Lujiazui Ring Road, Pudong, Shanghai 200120, PR China Tel: +86 (0)21 6160 1558 Email: infochina@ cimaglobal.com CIMA China: Beijing Xina Zhang: manager Room 605, 6/F Guangming Hotel, 42 Liangmaqiao Road, Chaoyang District, Beijing 100004, PR China Tel: +86 (0)10 8441 8811 Email: beijing@ cimaglobal.com CIMA China: Chengdu Steven Zhang: manager Unit 1705B, 17th Floor, Tower A, Times Square, 2 Zongfu Road, Chengdu 610016 Tel: +86 (0)28 8665 6792 Email: infochina@ cimaglobal.com CIMA China: Chongqing Flora Hu: manager Room 2107, Tower 4, Chongqing Tiandi,
No 56, Ruitian Road, Hua Long Qiao, Yuzhong District, Chongqing 400010 Tel: +86 (0)23 6371 3538 Email: infochina@ cimaglobal.com CIMA China: Guangzhou Frank Liang: manager Room C, 5th Floor, 293 Middle Guangzhou Avenue, Guangzhou 510600, PR China Tel: +86 (0)20 8736 0960 CIMA China: Shenzhen Eric Pan: manager Room 1121, Tower A, International Chamber of Commerce, Fuhua Yi Lu, Futian District, Shenzhen 518048, PR China Tel: +86 (0)755 8293 1445 Email: shenzhen@ cimaglobal.com CIMA Ghana Paul Aninakwah: country manager 3rd Floor, Ayele Building, IPS/Attraco Road, Madina, Accra, Ghana Tel: +233 (0)30 254 3283 Email: accra@ cimaglobal.com CIMA Hong Kong Erica Chen: director Suite 2005, 20th Floor, Tower One, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong Tel: +852 (0)2511 2003 Email: hongkong@ cimaglobal.com CIMA India Unit 1-A-1, 3rd Floor, Vibgyor Towers, C-62, G Block, Bandra Kurla Complex, Bandra (East), Mumbai 400 051, India Tel: +91 22 4237 0100 Email: india@ cimaglobal.com CIMA Ireland Denis McCarthy: director 5th Floor, Block E, Iveagh Court, Harcourt Road, Dublin 2, Ireland Tel: +353 (0)1 643 0400 Email: cima.ireland@ cimaglobal.com CIMA Malaysia: head office Irene Teng: regional director Venkkat Ramanan: head of CIMA SEA Lot 1.05, Level 1, KPMG Tower, 8 First Avenue, Bandar Utama, 47800 Petaling Jaya, Selangor Darul Ehsan, Malaysia Tel: +60 (0)3 77 230 230/232 Email: seasia@cimaglobal.com
CIMA contacts: Kenya Email: gmathesh@ yahoo.com
New Zealand Tel: +64(0)48017132 Email: cima@cima.org.nz
CIMA Malaysia: Penang Tan Chiew Ann: manager Suite 12-04A, 12th Floor Menara Boustead Penang, No 39, Jalan Sultan Ahmad Shah, 10050 Penang, Malaysia Tel: +60 (0) 4 226 7488/8488 Email: seasia@ cimaglobal.com CIMA Middle East Geetu Ahuja: regional head 804, 8th floor, Liberty House DIFC, Dubai, United Arab Emirates Tel: +9714 434 7370 Email: middleeast@ cimaglobal.com CIMA Nigeria Landmark Virtual Office, 5th Floor, Mulliner Towers, (former NNPC Building) 39 Alfred Rewane Road, Ikoyi, Lagos, Nigeria Tel: +234-1 463 8353 (ext 518) Email: lagos@ cimaglobal.com CIMA Pakistan Javaria Hassan: country manager No.201, 2nd Floor, Business Arcade, Plot No 27-A, Block-6 PECHS, Shahra-e-faisal, Karachi, Pakistan Tel: +92 21 3432 2387/89 Email: pakistan@ cimaglobal.com CIMA Pakistan: Islamabad Zunaira Riaz: manager 1st Floor, Rehman Chambers, Fazal-e-Haq Road, Blue Area, Islamabad, Pakistan Tel: + 92 51 2605701-6 CIMA Pakistan: Lahore Sahar Saqiq: manager Flat No 1, 2-1st Floor, Front Block 3, Awami Complex at 1-4, Usman Block, New Garden Town, Lahore, Pakistan Tel: +92 42 35940311-16 CIMA Poland Jakub Bejnarowicz: country manager Warsaw Financial Centre, 11th Floor, ul Emilii Plater 53, 00-113 Warsaw, Poland Tel: +48 22 528 6651 Email: poland@ cimaglobal.com
CIMA Russia Fiona Harvey: regional director Regus Office 4009, 4th Floor, Zemlyanoj Val 9, Moscow 105064, Russian Federation Email: cis@cimaglobal.com CIMA Singapore Shavonne Sim: country manager 3 Phillip Street, Level 19, Royal Group Building, Singapore 048693 Tel: +65 6824 8252 Email: singapore@ cimaglobal.com CIMA South Africa Zahra Cassim: country head 1st Floor, 198 Oxford Road, Illovo 2196, South Africa Tel: +27 11 788 8723 Email: johannesburg@ cimaglobal.com CIMA Sri Lanka Bradley Emerson: regional director Radley Stephen: country head 356 Elvitigala, Mawatha, Colombo 05, Sri Lanka Tel: +94 (0) 11 250 3880 Email: colombo@ cimaglobal.com CIMA Sri Lanka: Kandy Roshini Wirasinghe: manager 229 Peradeniya Road, Kandy, Sri Lanka Tel: +94 (0) 81 222 7883 Email: kandy@ cimaglobal.com CIMA UK David Rowsby: regional director 26 Chapter Street, London SW1P 4NP Tel: +44 (0) 20 8849 2251 Email: cima.contact@ cimaglobal.com CIMA Zambia Kennedy Msusa: country manager 6053 Sibweni Road, Northmead, Lusaka, Zambia Tel: +260 (211) 290219 Email: lusaka@ cimaglobal.com CIMA Zimbabwe Moses Sikiwila: country manager 6th Floor, Michael House, 62 Nelson Mandela Avenue, Harare, Zimbabwe Tel: +263 (0) 470 2617 Email: harare@cimaglobal.com
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Get involved with CIMA Ethics: do the right thing CIMA has produced a CPD tool to show financial professionals how to comply with the institute’s ethical standards. This interactive new resource is designed to guide any business person through ethical decision-making scenarios, so it can be shared throughout your organisation to promote an ethical culture. Visit www.cimaglobal.com/ ethicstool to find out more.
Now on CGMA.org • Essential tools for management accountants. CIMA has brought together all the key techniques that management accountants use to define and manage their organisations’ strategies, resources, customers and costs. Classified according to the application for which it is best suited, each tool is accompanied by an analysis of its effectiveness, as well as implementation tips and links to extra
resources for developing your knowledge. Visit www.cgma.org/resources/tools for further information. • “Building resilience: an introduction to business models”. This report looks at how business models function and the factors that contribute to their success and failure. It explores cases in which innovative business models have disrupted their markets plus those in which models have failed, explaining how management accountants can help to build resilience into strategic planning. Visit www.cgma.org/resources/ reports to download a copy. • “The boardroom and risk”. Research has identified a key group of risks that go beyond traditional risk management analysis. This report, from London-based think-tank Tomorrow’s Company, shows how boards can understand their risk exposure better and ensure that their organisations are as robust as
possible. As expectations of good corporate behaviour increase in an ever more complex business environment, it is vital that boards are able to tackle strategic risk issues effectively. Visit www.cgma.org/resources/reports to download a copy. • “Managing innovation: harnessing the power of finance”. This report demonstrates how management accountants, who sometimes have a reputation as regulators of risk rather than as instruments of innovation, can help to promote a culture of creativity and renewal. From helping to support and foster an innovative attitude in an organisation to implementing new ideas effectively and managing risk across a portfolio of projects, there are several ways in which finance professionals can support the innovation process. Visit www.cgma.org/resources/reports to download a copy.
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