Make finance strategically relevant
Build growth enabling capabilities
For a fast growing technology business, 3 long term priorities typically take precedence over everything else: People, product and revenue. They are considered critical value drivers. If you head up finance at such a business, you have probably (hopefully) asked yourself how you can best contribute.
This note by Jason Lemkin is a good starting point. I concur with most of those thoughts, but wanted to spend a bit of time sharing what I have found to work well to actually get to “great” in terms of building the right capabilities.
The key functions of finance
My experience is finance’s role can be summarized as:
- Protecting existing value: control operating spend and cash, ensure compliance, manage risks etc. (“avoid bankruptcy” falls in this category…)
- Adding new value: optimize operations, inform strategic decisions, identify and evaluate strategic opportunities etc.
The biggest pitfall I see finance teams fall in at high growth businesses is dedicating too much focus and resources to #1. The finance leader then becomes a “Chief Admin Officer” and the portfolio of tasks very back-office operational. In any strategic questions finance plays a reactive support role.
The work in #1 is foundational to a finance function, but if #2 is not prioritized the function will have left an incredible amount of value on the table and lost a lot of its’ strategic relevance. Your CEO likely spends 80% of his/her time on #2 and simply expect you to handle #1. In the end it even becomes an obstacle to the business itself because finance by definition owns a lot of the information required to take the right strategic decisions.
To avoid falling into this trap, this is what has worked well in my experience.
1. Get into your CEO’s shoes
Your CEO is your biggest customer so his/her mindset and priorities should inform yours. These are usually related to the 3 mentioned above, but you need to understand what it means for your business. If it’s a pure software or SaaS enterprise, it could be Go-To-Market drivers you should be focusing on. In a marketplace it could be all about supply chain or delivery etc.
The upshot to me is that finance teams, when asked to identify improvement opportunities, are inclined to focus on financial and operational efficiencies (e.g. cost savings) because they have a natural skillset there. But growth opportunities are much more important to a high growth business — whether that’s revenue or people. So this is where you should be looking first.
2. Decide which problems you can solve
Strategic problems and opportunities come in many shapes, but there are limits to which ones a finance team can realistically support or enable. E.g. my experience from the software sector is that most often commercial or GTM issues become the natural strategic strike zone for finance teams. It is just harder to contribute to product with a finance skillset.
To decide which strategic problems, processes or functions you should take ownership of, look for two properties:
- Pivotal skill-synergy: Financial acumen, data-driven problem solving, process management or contractual skills are pivotal to drive solutions.
- Pure cross-functionality: The process or function requires consistent execution across several functions/teams to deliver full value AND can be separated from mission critical tasks in each team.
Be mindful that for #1 those skills must be need-to-have, not nice-to-have. Data-driven problem solving is useful everywhere in a business, but it is not always an essential skill to solve the problem. The same goes for #2. A lot of processes exhibit some sort of cross-functional interfaces, but consistent cross-functional execution might not be critical (good hand-off points will do).
I cannot stress the importance of avoiding over stretching your team with too many functions. That will have the opposite effect of making you strategically relevant. So use the criteria above to both scope your ownership “in and out”.
If the process or problem fulfills both the above, you should align with your CEO and critical stakeholders (e.g. other VPs or C-level execs) that your team should probably own it. If only one of them is true, finance could perhaps own it but it’s most often because “no-one else” had the bandwidth or skills.
At Cobalt.io this resulted in the following Finance team structure:
I have been particularly satisfied with the level of visibility into the business performance RevOps ownership has given my team. But even deal desk has to me become a critical finance capability.
Of course these headlines are the ones we chose. There are other ways to categorize them (e.g. many tasks could be considered either FP&A, BizOps or RevOps or Corporate Development). And the ownership might change as the business grows (at some point this might be too much in one function)
The critical point is that you must be able to assume ownership of the capabilities that make you a natural strategic contributor and business partner to the CEO.
3. Build internal capital
The last critical step is to establish you and your team as a trusted authority and natural strategic contributor, not just with the CEO, but in the whole organization.
It’s not enough to have established a team with the right skills and task ownership. You are dependent upon the goodwill of the entire business, top to bottom, every day, to get the information you need, ensure they seek your advice in significant financial and strategic decisions etc. And life is just so much easier when everyone’s collaborative because they expect that your work will make their life easier in the long run.
A culture of enablement must be the bedrock of your entire team — finance, ops, legal etc. People must view your team as a source of solutions and pragmatism, not a millstone around their necks. I believe this was my own #1 success factor in all my prior jobs (it was not skills…)
As with all culture questions, hiring, training, promotions and firing are your key levers. Good stakeholder skills are some of the first things I look for in new hires. Do not hire people who are unapproachable — not even for the very introvert tasks. Your team does not need to be natural socialites, but they must have the ability to successfully enter a collaborative context.
Lastly, you and your team will often end up in situations where you are arbiters or negotiators. Spend a bit of time teaching them how to do this properly. Check my reading list here for inspiration.
All of the above is easier said than done. And your team needs to figure out what the lessons mean in your business. The only way to discover this is by trial and error. And of course leverage your network and peers.
