Is your finance department seen merely as a compliance function, focused on keeping the books in order? Or is it a strategic powerhouse, actively driving value creation and helping your company achieve its strategic objectives?
While compliance and control are undoubtedly crucial, the true potential of finance lies in its ability to act as a business advisor. Many outside of finance may struggle to see this capability, but this is precisely where Business Partnering comes into play. At its core, business partnering is a straightforward concept: finance professionals collaborating closely with business leaders across departments like Sales, Marketing, and Operations to achieve and exceed their goals.
Decoding Business Partnering: More Than Just Number Crunching
The term “business partner,” already familiar in fields like IT and human resources, is gaining significant traction in the evolving role of finance professionals, particularly controllers. In the context of controlling, business partnering signifies a fundamental shift in approach. It moves beyond simply presenting figures and analyses to providing proactive, in-depth support to business managers. This necessitates a proactive mindset and strong management skills.
Business partnering can be distilled into a simple yet powerful equation:
Insights x Influence = Impact
Let’s break down each component:
- Insights: This refers to the valuable information finance professionals possess, derived from accurate data, that is often unknown to business leaders. These insights can be instrumental in informing better decision-making.
- Influence: This is about building trust-based relationships, communicating effectively in a language business leaders understand, and presenting recommendations clearly and concisely.
- Impact: This is the ultimate outcome – enhanced value creation through improved decisions and more effective execution of strategies.
Key Takeaways:
- Business partnering is a strategic activity where finance professionals leverage insights to influence business decisions and ultimately increase shareholder value.
- Successful business partnering is evident when a company consistently meets or surpasses its targets, business stakeholders acknowledge and value finance’s contributions, and finance professionals can clearly articulate their role in driving business success.
- Finance business partners don’t need to be the sole source of ideas, but they excel as facilitators and in ensuring actions translate into desired results.
Measuring Success in Business Partnering: Beyond Financial Reports
How do we translate the “Impact Equation” into measurable success metrics? Given that business partnering is a collaborative endeavor, how do we quantify individual contributions?
The essence of business partnering lies in collective success, not individual accolades. Therefore, measuring success should primarily focus on the overall achievements of the business and the stakeholders you support. Is the company thriving? Are the business leaders you directly support achieving or exceeding their objectives? Do they recognize and appreciate your role in their success? And can you articulate how you contributed to those achievements?
These questions converge into three key goals for effective business partnering:
- Business Success and Strong Performance: Consistent achievement or exceeding of company goals is the paramount indicator.
- Customer Satisfaction: Measured through metrics like Net Promoter Score (NPS) from business stakeholders, reflecting their satisfaction with finance’s support.
- Value Log: A documented record articulating the specific role finance played in contributing to business success, providing tangible evidence of impact.
Let’s elaborate on these goals. Finance, as a function, doesn’t exist in isolation. It was established to support the business. Therefore, a significant part of finance’s success (beyond compliance) must be tied to the overall success of the organization. This is why “business success” is the primary success criterion for finance business partners.
However, business leaders might achieve success independently of finance. An organization could perform well even with a siloed finance function. This highlights the importance of measuring business leader satisfaction with finance. Regular surveys, perhaps quarterly or semi-annually, can gauge this satisfaction. A crucial question to include is: “How likely are you to recommend Finance/your finance business partner to another business leader?”. The responses provide valuable insights into current satisfaction levels.
Furthermore, some business leaders might be content with simply receiving timely reports from finance. While this might contribute to high scores on the first two measures (business success and satisfaction), it doesn’t represent true business partnering. If all you’re doing is sending reports, you’re not engaging in proactive business partnering.
Defining Finance Business Partnering: An Example in Action
So, what exactly is finance business partnering? Let’s illustrate with a real-world example. Years ago, while working as a finance manager for a drilling company in the US, we secured two new contracts for new-build drilling rigs in the Gulf of Mexico. Each rig had an initial start-up budget of $20 million.
However, due to previous financial underperformance, the company needed to tighten its financial belt. Operations managers for the drilling rigs were instructed to cut their budgets by 10%. With a looming deadline and no clear solutions, the operations team was facing a significant challenge.
During a routine financial review meeting, one of the operations managers posed a question: “What about that savings target? Should we organize a workshop to address it?”. I immediately seized the idea and scheduled a workshop for two weeks later. In the lead-up to the workshop, I took ownership of planning the session and setting the agenda.
On the day of the workshop, I began by setting the stage for the first 30 minutes. Then, I divided participants into two groups, ensuring finance representation in each. They were tasked with a 45-minute brainstorming session to generate ideas. The final 30 minutes were dedicated to consolidating ideas and evaluating their feasibility. The outcome? We identified viable solutions that achieved the necessary 10% budget reduction, translating to $4 million in savings.
Finance’s Role: Facilitation and Value Creation
What was finance’s role in this scenario? We acted as facilitators, fostering collaboration, calculating the business case for ideas, and ensuring follow-up on execution. Would this successful outcome have materialized without finance’s active involvement? Perhaps, but finance was instrumental in making it happen, becoming an integral part of the solution.
5 Steps to Cultivate a Business Partner Mindset
The example above highlights the critical importance of mindset. To transform finance from a cost center to a profit driver and become a successful business partner, a fundamental shift in mindset is essential.
Transforming Your Mindset: From Cost Center to Profit Driver
This transformation is not easy; it requires a conscious and challenging shift in perspective and behavior. In simple terms, it’s about:
“Transitioning from thinking like a cost center to operating as a profit driver.”
For too long, finance leaders have prioritized “cost of Finance as a % of revenue” as the key metric for finance transformation success. This narrow focus led to an excessive emphasis on cost reduction and outsourcing finance functions. It also shaped a negative perception of finance as cost-cutting naysayers, hindering overall business development – an undesirable position.
Key Takeaways:
- Finance must evolve from a cost center mentality to become a driver of profitability.
- Successful business partnering hinges on embracing five key mindset shifts.
- Anyone can become a finance business partner with a willingness to adapt and change.
It’s time to redefine finance’s brand as profit drivers and value creators – a function that actively contributes to the company’s success in achieving its strategic goals. This requires a fundamental mindset shift, focusing on five key factors.
The 5 Essential Mindset Shifts
Changing mindset involves challenging deeply ingrained behaviors and beliefs about how finance should operate. These five key mindset shifts provide a clear roadmap for transformation:
- From Minimizing Finance Costs to Maximizing Business Value: Shift focus from simply reducing finance department expenses to actively contributing to overall business value creation.
- From Explaining Past Performance to Improving Future Performance: Move beyond historical reporting and analysis to proactively using insights to shape and improve future business outcomes.
- From Eliminating Risks to Taking Calculated Risks: Transition from a risk-averse approach to understanding and enabling the business to take appropriate, calculated risks for growth and innovation.
- From Primarily Working with Data and Reporting to Influencing Business Decisions: Rebalance time allocation from data processing and report generation to actively using insights to influence strategic and operational decisions.
- From Striving for Individual Success to Enabling Others’ Success: Embrace a collaborative approach, focusing on empowering business partners and contributing to their success, recognizing that collective achievement is paramount.
Applying these shifts to daily work will quickly reveal areas needing change. Currently, finance often spends approximately 70% of its time on data, reports, and analysis, with only 30% dedicated to sharing insights and influencing decisions. This allocation needs to be reversed. Mindset shifts alone are insufficient; process revamps and technology upgrades are also crucial for this transformation journey, which is likely to be a multi-year undertaking. It begins with individual change, pushing comfort zones. Does this mean only extroverts can excel as finance business partners? Not necessarily. However, self-awareness of strengths and weaknesses is key to leveraging personal attributes effectively.
Personality Traits of Effective Business Partners
Because business partnering heavily relies on influencing decisions through strong relationships and effective communication, it’s often perceived as a domain solely for extroverts. However, this is a misconception. Anyone aspiring to be a finance business partner should understand their own strengths and how to leverage them. If public speaking or casual networking aren’t natural strengths, structuring processes for influence becomes even more critical.
Leveraging Different Personality Styles: Two Examples
Let’s consider two key aspects of business partnering and how different personality types can approach them:
Relationship Building: Sociability is often seen as advantageous. However, if it’s not a natural strength, a structured approach works effectively. Identify key business stakeholders, prioritize them based on importance, and schedule one-on-one meetings. Focus on understanding their business, current priorities, and challenges. Then, develop solutions that directly address their needs and help them achieve their goals. While this approach might not lead to instant friendships, it will cultivate appreciation for professionalism and recognition for impactful contributions.
Communication: Being engaging and lively in group settings is often perceived as beneficial. However, if this isn’t a strong suit, structure becomes invaluable. The Pyramid Principle is a powerful communication framework. It emphasizes presenting the most critical points first, followed by main arguments, and then detailed analysis. Finance professionals often present in reverse order. Structured communication, using frameworks like the Pyramid Principle, can be more impactful than relying solely on an entertaining presentation style.
Driving Value Creation: The Core Impact of Business Partners
Any business partnering initiative should begin by answering fundamental questions: Why invest in business partnering? Why should a business partner be involved in critical business decisions?
The answer is clear: Effective business partners drive higher shareholder value creation by enhancing the quality of business decisions and ensuring those decisions are effectively implemented. The unique strength of business partners lies in their understanding of how various business decisions impact value creation. Other functions may prioritize goals that don’t necessarily maximize shareholder returns. By providing insightful analysis and constructively challenging financial implications, business partners elevate the quality of business decisions.
Therefore, the ultimate purpose of a business partner is to enhance value creation within the company.
Defining Value Creation: A Broader Perspective
What constitutes “value creation”? While many equate it solely with improved bottom-line results, finance professionals understand that balance sheets, cash flow, and risk are equally critical. Our definition of value creation is therefore broader. The value driver tree below illustrates this comprehensive perspective.
As illustrated, value creation encompasses numerous components. In simplified terms, we define it as “discounted cash flows to equity owners,” further specified by ten distinct value drivers:
- Turnover Growth
- Margin Expansion
- Tax Optimization
- Net Working Capital Efficiency
- Fixed Asset Management
- Net Interest Rate Optimization
- Net Interest-Bearing Debt Management
- Operating Risk Mitigation
- Liquidity Risk Management
- Financial Risk Management
Each of these value drivers exists in every organization, although their specific breakdown and team responsibilities may vary.
As a business partner, value is created when you positively influence any of these ten value drivers. Continuously evaluate your activities: Are they contributing to improving a value driver? If not, it’s likely time is being misallocated.
Measuring Your Value Creation Impact
Quantifying the impact of business partnering is often perceived as challenging because impact is typically achieved collaboratively.
In simple terms, there are three key ways to document your impact:
- Improved Business Results: Demonstrable improvements in key business performance indicators.
- Stakeholder Recognition: Business stakeholders acknowledge and attribute improved results, in part, to your contributions.
- Documented Behavioral and Financial Change: Specific problem-solving or insightful contributions are documented, demonstrating positive behavioral and financial changes.
Effective business partners consistently track and strive to improve these three parameters.
One global pharmaceutical company took this a step further by implementing a “value log” to track finance’s positive impact contribution, setting an annual target of $150 million. The purpose of this log isn’t about claiming individual credit, but to cultivate a culture where all finance employees are actively conscious of their contribution to the company’s value creation.
Reflecting on Your Past Year’s Impact
Looking back at the past year:
- Have you actively participated in and improved the quality of business decisions?
- Were you involved from the initial stages of decision-making or only brought in to validate decisions already made?
- What feedback have your stakeholders provided about your contributions?
Conclusion: Embracing Your Role as a Value Creator
Whether you are an introvert or an extrovert, success in business partnering is achievable. Extroverts often excel in relationship building, communication, and demonstrating the value of information. Introverts typically possess strengths in deep thinking, numerical analysis, and navigating complexity. The combination of these strengths creates an exceptional finance business partner.
Start your journey today by embracing the mindset shift – recognizing yourself as a value creator within your organization. Identify and leverage your personal strengths, and develop structured processes to address your challenges. Are you ready to embrace your role as a finance business partner and drive significant value creation?
