Council Discourse: Harmonizing Skills: Matching Business Goals with Monetary Prudence
In many types of enterprises, individuals holding diverse titles such as financial controllers, CFOs, directors of finance, and numerous others, lead the financial department. The role's responsibilities vary based on the company's size, complexity, specific roles, and organizational structure.
Companies have specific objectives and goals, necessitating investments in people, equipment, and infrastructure. The finance lead plays a critical role in guiding the business in selecting, timing, and negotiating these investments. However, this occasionally pits them against various stakeholders, potentially creating tension.
Ambition versus Sustainability
Many businesses struggle to balance ambitious goals with financial stability and operational efficiency when pursuing ambitious objectives. This conflict is more noticeable in non-finance businesses, where the CFO might clash with the technical/operational side of the business. This disagreement can lead to misdirected resources, missed opportunities, operational inefficiencies, and stunted growth.
Effective and efficient financial management ensures that these objectives are achievable and financially sustainable. An essential question to consider is whether the expected returns make the investment sustainable. This concept often goes beyond pure financial returns.
Engaging Stakeholders
Stakeholders are typically a diverse group of people with contrasting backgrounds and motivations. In non-finance businesses, this group can range from somewhat uneducated individuals to experienced professionals to highly technical experts. They are frequently driven, with priorities focused on innovation, service delivery, and product quality.
For instance, in a healthcare facility, clinical experts might want to acquire cutting-edge diagnostic equipment to enhance the institution's reputation. However, financial constraints may require considering factors such as payback period, cost of recovery, and a comprehensive buy or outsource assessment. Successful businesses manage to reconcile these seemingly conflicting positions and balance operational aspirations with financial realities.
Understanding the Numerical Landscape
The finance function must continue to discuss and elaborate on the numbers with all stakeholders during the alignment process. This could involve:
• Establishing multifunctional committees to improve decision-making
• Having accurate financial forecasting tools in place
• Implementing data-driven decision-making
• Providing financial training for non-financial experts
• Agreeing on key performance indicators (KPIs) to monitor both financial and non-financial activities
• Implementing preferably zero-based budgeting, which ensures that each expense is justified before being approved
• Communicating effectively. All parties should freely share essential information and data, identify constraints, and discuss them openly to establish proper accountability.
Conclusion
The central objective of this article is to address an issue that frequently arises in organizations and can lead to a toxic work environment and, in some cases, business failure. For a business to thrive, its drivers must be ambitious, competitive, and growth-oriented. However, without appropriate financial management, these objectives may fail to materialize, leading to a return to the starting point. It is crucial for leadership to strike a balance between ambition and financial discipline, fostering success and ultimately driving financial profitability.
Disclaimer: The information provided here does not constitute investment, tax, or financial advice. You should consult with a licensed professional for advice tailored to your specific circumstances.
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In the context of the healthcare facility, Richard Okon as a financial lead might need to negotiate with clinical experts over the acquisition of expensive diagnostic equipment, ensuring that the investment is financially sustainable and considers factors such as payback period and cost of recovery.
During the alignment process, it's essential for Richard Okon to effectively communicate financial data and findings to all stakeholders, including establishing multifunctional committees, implementing zero-based budgeting, and agreeing on key performance indicators.
