Let's start looking at how we build credibility in this lesson and the next. with the end in mind, let's identify the role your finance function should be playing as it supports the growth agenda, so that we have the future state in mind as we work through the transformation. First finances ensuring that the company is liquid. In other words, it has pre approved financing, or access to credit by maintaining the financial profile of the company in capital markets. Secondly, finance ensures that routine and necessary business processes are as efficient as possible, which will help free up resources for more strategic purposes later on. Thirdly, finance produces reports to shed light on performance of different product lines, branches, units, divisions or operations.

And to do this, the software and the analytics must be usable by the finance staff without having to rely on specialized high tea expertise. The biggest Faster the organization desires to grow, the greater the requirements for leading technology. And then finally, finance will develop the metrics, the measurement mechanisms, the analysis and the insight to focus management team in quantifying and qualifying the growth plan. Having described all this is entirely possible and highly likely that there's a gap between what I have described and where your finance function is operating today, FBI senior executives to identify the key internal and external barriers to realizing their growth objectives. The top internal barrier was a shortcoming of the existing organizational structure, system and leadership capacity. The top external barrier was a shortage of good people.

Gaps will inevitably exist in one or more of these areas, people processes or technology in this lesson, let's deal with the people barriers. And in the next lesson, we will tackle the infrastructure and systems using credibility as our lens. Let's turn our attention to some approaches for building your people credibility. I always start with people because without people, nothing happens. All the greatest processes and technology in the world cannot overcome a deficiency in people. At the compliance driven maturity stage, you're likely relying on a few good people to hold the department together.

But these people are just so darn busy trying to keep up with the financial reporting that moving beyond this focus seems impossible. The strategies for building credibility at this level, require an honest and frank assessment of your existing team to help identify gaps in both skills and roles. Don't mistake good people for being the right people. The two are not necessarily synonymous. Right people in the sense of The role we need them to play to execute strategy and to be open to adopting some of the ideas of finance transformation. I've developed in Newsday, a competency map tool for all of my finance teams, and this tool helps establish my staffing and development plan and is reinforced with integration to the performance evaluation process.

Competency assessment, and development happens at both an individual and team level. competency assessment helps you with job design and recruitment and straining and succession planning and performance evaluation. As the finance function matures, you also need to consider organizational structure because this too becomes a determinant of credibility. In the initial stage of maturity. The organizational structure may be informal and overlapping. Many organizations run a finance function with one senior person and a handful of clerks.

When finance is perceived as a cost center, the first barrier you'll confront is one of Human Resources. Many staff will already have an overflowing workday and have limited time to work on a special project to prepare new analysis or redesign a business process or to implement a new system. If you're serious about becoming a center of excellence or achieving world class finance, it's going to take an investment in the short term, perhaps the next year or two, you may need more staff not fewer. For instance, I hired a second controller during the turnaround to the food processing company, recognizing that my existing staff were already overworked. At the second level of maturity, the division of duties becomes more refined and internal champions are designated for each of the required competency areas, formality and structure and roles elevates the opportunity to improve competency hence building more credibility.

Finance should be recognized as a voice reasoned and actively provide the rest of the organization with sound financial advice. To become world class though, requires finance to transcend its traditional silos and find ways to collaborate with sales and marketing and operations at the front lines. In other words, finance must expand its sphere of influence. organizations will attempt to do this in a variety of ways. Everything from relying on informal networking to dotted line reporting relationships to fully decentralized organizational structural solutions. How you do it is not as important as the outcome of having done it.

Before we've did another poll of its community on how well finance was integrated with the frontline sales and marketing function. More than half the organizations have no formal mechanism for interaction between the front and back offices. If finance is unable to break outside of its traditional department. Walls it's nearly impossible for to add value that people in finance need immersion in the business. The accountants needed to get the accounting right and to add value to the financial reports they prepare the analysts needed to help forecast business activity and assist those frontline managers in making better decisions. And you you as the CFO need the frontline connection to enhance your own business acumen and enable strategic thinking.

The credibility of the finance function is in large part determined by your own credibility. So besides getting you and your staff closer to the business, let's talk about four ways you can build your own credibility as a senior financial executive. Firstly by establishing clear leadership, secondly, by controlling communications with key stakeholders. Thirdly, by bringing clarity to information, and finally, by adopting a no surprises approach, let's explore each other The first one is to establish clear leadership, both leadership of your own team and leadership more broadly across the executive team. Within finance leadership is established when there's trust and emotional connection between you and your team. Now I use a number of tools such as sharing my own personal philosophy with my team, which establishes my expectations, I expect no more or less of my team than I expected myself, and that is to continuously learn improve, while having fun doing it and striving for flawless execution.

Now I've taken this one step further to then create a mission statement for the finance function as you see on the screen. The mission statement can be used to define the mandate of finance, and should align with the mission of the rest of the organization. The mission statement is developed using the maturity level I wish to achieve either level two or level three, and it summarizes the competency map giving everyone a role to play and sets a very high standard This facilitates a nice team and individual conversation with the staff. It draws a line in the sand that you can use for years to come to develop your team and hold them accountable. As you evolve, you will then share this mission statement with other departments use it to change the perception of finance and enhance credibility as you're able to fulfill your own definition of mission.

Let's consider the second item on the list controlling communication with stakeholders. And I'm religious when it comes to the circulation of information, particularly when it's going to the executives or the board of directors. I don't like to delegate this responsibility to my assistants or any of my staff, at least on initially. Here's what I don't like but often see as a corporate director, I don't like receiving an email with some report attached with no covering note. Most of us read emails away from our desk, so have a short note accompany every email mail is very helpful and should refer to the attachment. And when I say short, I mean sure, I mean two or three paragraphs, maximum 200 words or less.

But in this short message, I want the key reason or key insight to glean from the attached information. This is such an important opportunity for finance to add value to the information, yet so few people do this in my experience. Secondly, when I open the attachment, I like to see something that is clean and easy to read. I don't want an Excel file that pops up with all sorts of messages about macros and linked workbooks. I want a sustained, self explanatory report that supports the key insight. What I often get is an ugly report that strings four pages or report with unformatted numbers that is utterly painful to read, often with tiny print.

This is where Excel is useful for the CFO. I've been called the gift wrapper more than once during my career because sometimes All I do is I take a report from the system, and then put it into a pretty looking reporting format. But that's my job. My job is to communicate knowledge and wisdom and not simply spread information and data, expecting its interpretation is self evident to my audience. This rolls right into the third thing that you should be doing to build credibility. And that is to clarify information.

Financial Information always has a story behind it. And that story comes from integration of operating statistics, gathering, tracking, and correlating the operating statistics to the financial information helps to bring that clarity. We will talk more about ideas to gather this information using an integrated technology. But even in the absence of having that technology, the role of finance is to track more than just dollar amounts. It's to make sense of it all. Where there are areas of strengths or weaknesses.

These should become self evident to the reader. And depending on who the reader is, whether it's a board member An executive or a manager will determine the right level of detail. Our director doesn't want to know about every last various because he's relying on the executive and management to deal with these details. If you do this right, the information should facilitated discussion at the right level that is both productive and actionable. This is a very tall order and one that only the wisest of senior finance people can pull off. Now, I love creating one page reports or short slide decks that can facilitate an entire meeting.

It takes a lot of thought as to what to include, but that's your value add. Executive dashboards can be highly effective ways of staying on top of a business. And lastly, no surprises. As a director. I hate surprises as a CFO I hate getting surprised. This is not the same thing as I don't want to hear bad news.

Sometimes bad news is unavoidable. But if you want to build and maintain credibility you cannot surprise people. Finance is an unbiased reporter of the business activity. If you want to build and maintain trust, then you need to report the facts. Honestly, when things do go sideways, there's a way of dealing with surprises to minimize the erosion effects of the surprise on your credibility. First of all, as soon as you know something has gone wrong, communicate it.

Even if you haven't finished analyzing the issue fully, give the CEO a heads up and then make a commitment to keep them updated as you continue your work under promise and over deliver. Secondly, if the bad news is likely to be surprising, heading into an important meeting, say a board meeting, then you and the CEO should be discussing the situation with each director individually ahead of that meeting. If you don't, you will feel your credibility, melting off your body like melting skin during that board meeting. Part of leadership is being diplomatic and part of being diplomatic is making sure that when everyone gets together for a meeting, there are no negative surprises to take the emotional charge out of the discussion. This lets the discussion focus instead on the issue itself, and less on shooting the messenger. So thinking about people first, and that includes you is where most finance transformation plans start.

First by recognizing that there's likely to be a gap between the mandate finance should be delivering and the current level of performance. Secondly, recognize that the people issues always Trumps all other issues. When you're working on enhancing credibility. We talked about using a tool like a competency map to distinguish and develop the right people from the good people. And finally, we talked about ideas for building your own credibility. This stuff isn't technically hard, but it's the simple things that I see lacking most in some of the turnaround companies I'm involved with.

In our next lesson, we're going to look at the technology and process parts of the credibility solution.