Directors of finance have been all-powerful in most sectors for hundreds of years, frequently first in line for a vacant chief executive position. But in the public sector that influence has waned over the last 20 years with the rise of technology.
This article was originally published in the MJ
Technology has automated many finance and audit functions and given non-finance managers access to powerful tools to undertake financial planning and analysis and presentation. At the same time, finance teams have gradually lost responsibility for IT as it became too important to be treated as a cost centre, controlled by the accountants.
And when the digital agenda arrived with a focus on process re-engineering and job design, finance teams were not seen as the natural inheritors.
A NEW PARADIGM
But the role of finance directors, especially in the public sector, is changing once again to be the powerful centre of the organisation. Austerity and cuts mean council CEOs are looking for greater financial control and resource discipline across the business, giving Finance a mandate to intervene to ensure conformity, common and lean business processes and tight management of strategic risk.
Politicians are looking at the finance team in a new light too, to protect services by making resources go further, to invest reserves wisely to reduce operational overheads, to propose resource plans that support transformation and appropriate risk-taking.
And as councils are becoming more business-like and commercial, so finance leaders need more than strong financial skills. They need to judge investment in change programmes, define financial and other risks in shared and sold service proposals, lead complex business case and ROI development, and define due diligence on contracts and partnerships.
Some will say this was always part of the Finance role, but these more strategic activities often got swamped by day to day financial management and reporting – tasks which are now automated and devolved.
Mounting finance pressure means everything needs a business case to quantify the hard and soft benefits. Every service area needs to understand its operating costs and how resources can be better deployed. The emphasis is on growing the beans, not just counting them. Not all finance teams are there yet, all will seek to follow the trend and limit the proportion of time that used to be spent on operational accountancy.
UNAFFORDABLE BEST PRACTICE
In the days of (relative) public sector prosperity, councils were quick to accumulate 'best practice’. This is seen in policy and practices from frontline services to corporate support - from HR, procurement, IT, to public engagement. But this was mostly not accompanied by an understanding, challenge or assessment of the cost of ownership of these apparent exemplars.
This has included recognised and award-winning charter marks, IIP, ISO accreditation, ‘green’ and other policies and processes. Now every such practice is must challenge for its necessity and affordability, and no professional area is better placed to do this than Finance.
DATA AND AUDIT
Data and information are key to this scrutiny, showing what works, return on investment of projects and where efficiencies or productivity improvement could be made. Some argue data matters more than people at present, since we all depend on data and information to perform.
Integrated IT systems therefore need to be designed around new ways of working and to deliver accurate, timely, secure, shareable and properly managed data. While there is a strong dependency on IT skills to do this well, there is also a new relationship being formed between IT and finance around this complex and deeply analytical area, with a strong understanding of data flows, process design and data handling.
For example, areas such as systems and risk audit are becoming more important and more challenging, as more work automated systems become more complex and financial risks are trickier to identify.
Almost overnight, finance managers are becoming data scientists, able to ensure integrity, security and auditing of integrated systems to oversee and measure risk. And that requires digital skills – understanding new digital operating models, workflows, risks and process redesign. So IT is more closely integrated with Finance once again – not because it is about money, but because Finance has to be about digital transformation.
A NEW BREED OF FINANCE LEADERS
I see a new breed of finance directors emerging as a result of these changes, responsible for much more than strategic and operational finance. They need to be capable of supporting and leading transformation, challenging business strategy and service design in all areas. They need to be custodians of strategic risk and wider resource deployment in times of rapid and uncertain change
Finance directors in local government who can bridge true operational and strategic resource leadership in a digital context will be seen as the CEOs of the future once again, bringing strong commercial, interpersonal and leadership skills alongside finance. They probably won’t have ‘finance’ in their job title, but are responsible for finance, amongst other corporate services.
But this new breed of finance leaders must learn to leave operational finance to technology automation and devolved responsibility, concentrating on strategic resource deployment, including digital possibilities. They will need to be more entrepreneurs, than accountants and bank managers.