Six techniques for building a strategic finance department

Finance teams want to perform strategic duties in their organizations, but new research shows many of them are not building the right competencies to fulfill these duties.

Typical finance teams are weak in the nontechnical competencies that matter the most, according to a white paper reporting results of a survey by member-based business advisory company CEB.

A survey of more than 2,200 finance professionals at more than 75 global companies assessed hiring, training, and performance management programs, and asked finance managers to rate their direct reports on their likelihood to exhibit behaviors in CEB’s competency model.

The model separated about 150 behaviors into five competency categories:

• Doer. These behaviors included strong functional expertise and ability to break down problems into manageable tasks.
• Learner. These behaviors included seeking feedback for own performance, looking for opportunities to improve, and asking for help when appropriate.
• Strategist. These behaviors included strong understanding of business operations and discussing financial performance in terms of key value drivers.
• Persuader. These behaviors included articulating views clearly, challenging business assumptions, and adapting and tailoring communication style.
• Builder. These behaviors included creating vision and fostering buy-in, developing people and talent pools, and setting business-aligned goals for the team.

The highest-performing finance teams possess more builder, strategist, and persuader competencies, according to the white paper. These teams are more productive and more likely to influence strategic decisions and retain top employees, the survey showed.

But most finance teams are strongest in the doer and learner proficiencies, and weakest in the persuader, strategist, and builder competencies, the survey found.

“They’re actually lacking that set of skills and competencies that’s really going to drive effective decision support for the business,” said Kruti Bharucha, CEB’s senior research director on finance and talent issues and a co-author of the white paper. “So they’re not going to be in step with the business needs, the changing business requirements, as well as the increased complexity that the environment will bring.”

Heads of finance have perpetuated the problem, Bharucha said, by continuing to develop the learner and doer competencies at the expense of other skills. But she described several hiring and talent management strategies that can help finance departments improve their staff’s builder, strategist, and persuader competencies, which are heavily composed of communication and leadership traits:

1. Have job candidates give a presentation. Traditional finance and accounting hiring practices often rely heavily on the number of degrees and certifications, and functional Q&A interviews, Bharucha said. Some progressive companies are attempting to find leadership and communicative skills by requiring candidates to make a presentation to the team based on information they are given before the interview. This helps gauge candidates’ ability to communicate complex ideas.
2. Focus on candidates’ communication. Rather than having team members grade job candidates on their general communication abilities, some leading companies are taking a more focused approach. They are breaking communication into about 10 components and having staff members evaluate how candidates fared on each of them, Bharucha said. This gives a more detailed assessment of which communication skills candidates possess.
3. Connect with HR. Human resources departments do not understand the roles finance is trying to fill, according to 63% of finance managers surveyed. And 57% of HR managers say finance hiring managers do not understand the recruiting process. “Both sides are realizing that it’s not OK for that disconnect to persist,” Bharucha said. Finance increasingly is taking the lead in letting HR know what competencies to look for in the function, she said.
4. Start early with leadership training. Often, companies wait until staff members reach senior positions to build leadership competencies, according to Bharucha. “You’re not setting up a pipeline of leaders for tomorrow,” she said. Providing early leadership training can help fill that void.
5. Coaching over classroom. Traditional classroom training has been shown to be less effective than some other methods for driving competency improvement, according to Bharucha. One-on-one coaching is a more effective approach for improving competencies, she said, and she advocates investing in that approach.
6. Build a team, not individuals. Just 1% of finance staff members excel at the builder, strategist, and persuader competencies, according to the research. So rather than attempting to infuse each member of the finance team with the perfect mix of those skills, Bharucha said, it’s best to work to infuse the finance team as a whole with a good mix of competencies, without domination by learner and doer behaviors.

“The right unit of analysis is not the individual anymore,” Bharucha said. “It has to be the team. Are you building a team that has a balanced set of competencies? As you look at the accounting team, do you have a well-rounded skill set on the team so that you have some doer profiles, but you also have builder and strategist profiles?”

Over time, individual competencies can grow as team members learn from one another, Bharucha said. But she said it’s imperative that finance teams as a whole build a mixture of the right skills to deliver the strategic acumen companies are looking for.

In particular, she said, it’s important to build junior and entry-level staff into the strong leadership profiles that businesses will need in the future.

“There’s a real risk of [poor skills development] actually harming finance’s ability to have a seat at the table when we have discussions with business partners,” Bharucha said, “and also a real risk that they’re not going to be able to influence decisions as much as they should.”

—Ken Tysiac (ktysiac@aicpa.org) is a JofA senior editor.