In this lesson, we're going to look at how you start to the finance function to maximize alignment, alignment to the overall organization's vision and mission. And also in the sense of how you exercise control over your staff. Very few finance organizations are structured exactly alike. And so this lesson is not a prescription of how you must structure your group. It's more of an idea generator for things to consider. In the back of my mind, I always have this idea of growing outward, that is to expand your sphere of influence.

You will begin with your own team and then desire to get your tentacles into the various operating units to make you even more effective. The further you reach the greater your sphere of influence. But how do you do that? Let's begin with a typical finance organizational chart. Obviously, this is probably a company with some scale behind small enterprises, we'll see a number of these functions combined or outsourced. for argument's sake, let's use this organizational chart to illustrate a few ideas.

Notice that there are seven functional areas within finance identified corporate finance, which matches financial planning, analysis and decision support internal audit financial operations, which is often led by the corporate controller, Investor Relations if you're a public enterprise, corporate Treasury to deal with cash management, risk management, corporate finance, tax, and corporate development, which deals with strategy mergers and acquisitions. Generally speaking, design the span of control which generally translates to how many direct reports a manager has to match the nature of the work. Routine transactions lend themselves to higher spans of control, such as accounts payable processing. Non routine transactions are generally supported by a smaller group of higher skilled professionals with a narrower span of control, such as taxation. Ensure that you design your organizational structure to allow for high quality Be nothing erodes the credibility of finance faster than circulating misinformation. Design Review activities at the layer of the structure that best ensures first time quality.

Also ensure that finance is well positioned to support the strategic focus of the organization. Strategic functions should be appropriately structured high enough in the organizational chart to enable those in that role to take a big picture view of the enterprise. look for opportunities to improve economies of scale and scope. transactional type processing activities are candidates for a shared service organization, and or outsourcing. specialized expertise such as tax and financing can be centralized and provided as a service to business unit controllers. An alternative approach is to make each business unit autonomous and responsible for setting up their own finance function.

This approach brings with it new challenges for you as the CFO as you are forced to rely Much more heavily on resources that may be beyond your direct control. In my experience, the person with a solid line accountability dictates the staff priority. If you're a CFO and head office with a dotted line to a business unit controller, often getting cooperation or a quarterly reporting and analysis for the mdna, for example, can be more challenging. There are two approaches to standardization and quality control. One approach is to make it someone's responsibility, which enhances standardization and trades off accountability. The other is to make it everyone's responsibility, which is enhance his accountability but trains off standardization.

This will depend very much on the scope of your business and the depth of your resources. I like internal audit functions internal audit technically reports to the audit committee of the board of directors. Strangely, if they will most often report to you. You can get all kinds of great insight into the business by deploying an internal audit online. meaningful projects where there's a high amount of risk. I see internal audit is one of those key mechanisms for continuous improvement across the organization.

Challenge your internal audit team to critically evaluate each of the functions they visit, and allow them the latitude to speak their mind freely about what is working well, and what is not working so well. For as many action items that arise, you may discover that best practices also exist that can be replicated and adopted elsewhere in the structure. A subtle point of your organizational design is to consider creating career opportunities with multiple advancement and pass and learning opportunities. One advantage of having a comprehensive competency map across all the positions is that staff member seeking advancement will better know what is expected and required and future promotions and transfers. Finally, finance needs to align with the business units to ensure financial and organizational support. Physically, you want to locate the true decision support staff with their customers.

But as to whom they report this is always a contentious issue for the CFO to consider. it's debatable as to whether the CFO or the business unit leader should get the solid line or dotted line accountability. No two companies deal with the centralization or decentralization the same way. So let's look at a few ideas to improve the linkage between finance and the rest of the organization. Regardless of the direct report accountability, Here are seven ideas on ways you can integrate finance into the business. In other words, expand your sphere of influence, using formal and informal structural solutions.

A structural solution, how you one have a solid long reporting relationship is the most blunt and direct way to accomplish control and insight into a business unit. But expect pushback from the business unit leader who will demand his own resource, relying on informal relationships. is the most often cited way of establishing connection in the absence of a structural solution. But let's face reality, many of us are accountants, and perhaps networking isn't our strongest enabling competency. So consider setting up specific roles were necessary using some of these Kwazii formal mechanisms as intermediate steps. The idea of establishing cross functional teams and cross functional individuals are more formal ways to get finance resources closer to the actual business activity without giving up the direct control of the resource.

With your team in place and the role is deployed. We're now in a position to begin initiating any changes you deem necessary. We'll pick this up further in our next lesson. You'll start to get a complete stop. Oh, stop.