Don’t Measure Finance’s Value Creation

One argument I hear a lot from other finance people when I discuss the value of finance business partnering and how the finance function can become more value adding in general is.

“How can I measure the value of my contributions specifically?”

Put in more general terms how can Finance measure its direct impact on the value creation when it collaborates with other functions to add value to the company? My answer is simple. You don’t. And you shouldn’t. When Finance works together with people from other functions in cross-functional teams there are only two things that matter when it comes to value creation.

1. Did the cross-function team add any value to the bottom-line as a team?
2. Did the people from the other functions perceive Finance’s contributions positively i.e. did they think the result became better having Finance as a part of the team?

If the answer is YES to both those questions then it’s quite simple really. Finance added value to the company.

Finance and value creation

You can always ask more basic questions such as what is value creation and where does Finance add value directly but knowing the differences between a discounted cash flow model and the term shareholder value (if there are any) or how Finance can improve working capital or bring down banking fees just isn’t all that relevant anymore. Yes, Finance should do those things but more importantly, Finance needs to be able to collaborate cross-functionally and help the frontline teams add value. The value that’s created from Finance’s point of view is then indirect value as it’s created through or together with others. That value should be measured through traditional means typically extra revenue or lower costs but it’s not important to quantify Finance’s part of the value. The only things that are important are 1) was value created and 2) if Finance was perceived to make a positive difference.

Value creation is where many transformations come to a halt

So when you’re not supposed to measure your direct value creation (even if it was possible) how can you then complete the business case for your finance transformation? You’ve invested heavily in talented FP&A and finance business partner resources and expect to see some dollars on the table. Then confusion comes because all your people seem to be doing a good job working with the other functions but struggle to come up with cases where they delivered a direct impact. It’s because you’re asking the wrong the question. What you should be asking is if the frontline teams are creating value and how your finance team is helping them do that. If value is not created at all both your team and the business have a problem but if value is created and your team is just not mentioned in the credits then you need to take a closer look at exactly how they are partnering with the frontline teams. I've written extensively about this previously so recommend you to read either “What Finance Business Partnering Really Is”, “You’re A Finance Business Partner, Now What” or “How Finance Business Partners Improve Company Performance” but here I will just leave you with the fact that if both the above conditions are met then your transformation is a success and Finance is helping add value to the company. Don’t wait for direct value creation from your team but demand value creation from the business and that your team takes the lead in making sure it happens.

So what are your success criteria for your finance function? Are you looking for them to improve the bottom-line all on their own or are you looking for them to make a positive impact on and together with the business so that more value is created? As always let me know what you think of the article by liking, commenting or sharing! For previous posts in my series about How Finance People Can Be More Successful please see below.

Bad Numbers Are Killing Good Finance People

What Accountants Must Do To Stay Alive

Creative Accountants Are No Longer Banned

Finance Needs To Clean Up Its Menu

Finance Needs More Storytelling

We Need More BUSINESS In Business Partnering

I also encourage you to take a tour of my old posts on finance transformation and finance business partnering and not least “Introducing The Finance Transformation Nine Box” which is really that starting point for the transformation. Last but not least, you should join my Finance Business Partner Forum where we will continue to discuss this topic.

Don’t Explain Yesterday, Predict Tomorrow

Variance Is Finance’s Best Friend

Why Accountants Are An Endangered Species

Financial Analyst vs. Finance Business Partner

Case Study: Becoming A Finance Business Partner

5 Ways For Finance To Seize The Day In 2016

The CFOs Roadmap To Transforming Finance

I’m A Finance Business Partner, To Whom?

Anders Liu-Lindberg is the Senior Finance Business Partner for Maersk Line North Europe and is working with the transformation of Finance and business on a daily basis. I have participated in several transformation processes among others helping Maersk Drilling to go Beyond Budgeting and transformed a finance team from Bean-counters to Business Partners. I would love the chance to collaborate with you on your own transformation processes to help you stay out of disruption. If you are looking for more advice on how to get the most of LinkedIn I also have a few tips to share as well as if you want help in your job search. Don’t be shy! Let’s get in touch and start helping each other.