This Is How Business Partners Have Impact And Drive Value Creation
Anders Liu-Lindberg
Leading advisor to senior Finance and FP&A leaders on creating impact through business partnering | Interim | VP Finance | Business Finance
Last week, we outlined our formula for successful business partnering: INSIGHT X INFLUENCE = IMPACT.
In the coming weeks, we will explain the different components of the model. As Simon Sinek, we start with “why”.
Any business partner initiative should start by answering the simple questions: Why should we invest in business partnering? Why would you want a business partner at the table, when critical business decisions are made?
To us the answer is simple. Good business partners enable higher shareholder value creation by improving the quality of business decisions and ensuring that decisions lead to action. The “superpower” of business partners is that we understand how various business decisions impact value creation. Other functions will tend to pursue other goals that might not necessarily maximize return to shareholders. Thus, by creating insight and constructively challenging financial consequences, we can improve the quality of business decisions.
The ultimate purpose of any business partner should, therefore, be to improve the valuation creation in a company.
Let’s agree on a definition of value creation
Now, what is value creation? Many people talk about it, but few actually bother to define exactly what value creation is. Many equate value creation with a better bottom-line, however, as finance professionals, we know that balance sheet, cash flow, and risk matters just as much as the bottom-line. That’s also why our definition of value creation is wider than most use. We’ve outlined it in full detail in below value driver tree.
As you can see there are many components of value creation but in simplified terms, we defined it as the “discounted cash flows to equity owners”. We then specify this as ten distinct value drivers.
- Growth in turnover
- Growth in margins
- Tax
- Net working capital
- Fixed assets
- Net interest rate
- Net interest-bearing debt
- Operating risk
- Liquidity risk
- Financial risk
Each of these value drivers exists in all companies although their further breakdown might look different as well as different teams could be working with only some of the value drivers.
As a business partner, you create value, if you can help move the needle on any of these 10 value drivers. You should constantly ask yourself: Is what I am working on helping to improve a value driver. If not, you are likely not spending your time on the right tasks.
How do you know if you are creating value today?
Measuring the impact of business partnering is seen by many as challenging, as you mainly create an impact in collaboration with the others.
In simple terms, there are three ways in which you can document your impact.
- Business results are improving
- Business stakeholders believe that you’ve contributed to the improved results
- By solving specific problems or delivering specific insights, you’ve documented behavioural and financial change for the better
Good business partners consistently track and try to improve all three parameters.
A global Pharma company took it one step further and have implemented a value log to track the positive impact contribution of Finance. The annual target: USDm 150. The purpose of the log is not “to claim success”, but to drive behaviour, where all finance employees actively are conscious about, how they contribute to the value creation of the company.
How much impact have you created in the last year?
Looking back at the past year:
- Did you take part in qualifying and likely improving any decisions?
- Were you invited from the start or only asked to validate decisions that had already been taken?
- What have your stakeholders said about you?
We would love to hear your reflections on these questions, so please feel welcome to share your Impact stories in the comment field or reach out to us directly.
Creating an impact is the alfa and omega in business partnering so we hope you’re well underway on your journey. If not, now is the time to get started and we hope to help you how by sharing more thoughts on how to generate INSIGHT from next week!
Business Partnering Institute can help you get started on your business partnering journey and support you in setting up ways to document your impact. You can reach us today at [email protected] or get directly in touch with Anders on +45 2926 6410.
This was the third article in the series "Business Partnering On A Formula". You can read past articles in the series below.
This Is How We Succeed With Business Partnering
Business Partnering On A Formula
If you want to become a better business partner you should consider taking our online course "Business Partnering Explained - Value Creation Unlocked" to get a better handle on the role. It's accredited for 5.5 CPD hours.
You can read a lot more articles about FP&A, Business Partnering, and Finance Transformation below. It all start's with “Introducing The Finance Transformation Nine Box” where you set the ambition for your transformation. You should join the Finance Business Partner Forum which is part of the Business Partnering Institute's online community where we will continue to discuss this topic and you can click here to follow me on Twitter.
Your Journey To Successful Business Partnering Explained
How To Create Value Through Business Partnering
Everyone Can Adopt A Business Partnering Mindset (part of a six-article series about FP&A Business Partnering)
From Business Partner To Working Within The Business (part of an article series where I interview finance professionals about their careers in FP&A and Business Partnering)
Is Your Product Optimized For Value Creation? (part of a toolbox series where we look at what tools FP&A professionals should leverage to drive value creation)
How Business Partners Turn Analysis To Insight (part of case study series where I interview business partners about how they drive value creation using real cases)
The Future Of FP&A: Two Ways To Take The Reins
What Is The Accounting Profession Paradox?
What Defines A Finance Master?
The New Career Path For Finance Professionals
How Finance People Can Be More Successful
The CFOs Roadmap To Transforming Finance
How To Become A Finance Business Partner
Financial Analyst vs. Finance Business Partner
Finance Business Partner Is A Bullshit Job
How Business Partners Keep A Plan On Track
Anders Liu-Lindberg is the co-founder, COO (Chief Operating Officer), and CMO (Chief Marketing Officer) at the Business Partnering Institute and owner of the largest group dedicated to Finance Business Partnering on LinkedIn with more 8,000 members. I have ten years of experience as a business partner at the global transport and logistics company Maersk. I am the co-author of the book “Create Value as a Finance Business Partner” and a long-time Finance Blogger on LinkedIn with 40.000+ followers.
Finance Leader | Expertise in cost reduction and Business Turnaround
4 年Powerful questions! An absolute must for the CFO function to ask these questions, as we tend to sometimes assume that we are 'entitled' to be business partners. Regarding your question on how I would assess/ document my team's impact: Last year we solved a 'lack of cost transparency' by connecting financial data with the non-financial (i.e. operational) data. This created a 'best-ever' cost transparency for our business partners, which now answers over 95% of their questions in under 5 minutes, and that too mostly in a self-service mode. Result: Our business partners experience a greater visibility on their costs and are now more comfortable in steering their business. Having created this foundation (which was pretty complex and time consuming) we are now ready to take our Business Partnering to the next level in 2020. So this article comes at a very appropriate time for me and my team! :-)?
Architect Practice Manager & Leader (EMEA) - Industry Solutions @Microsoft
4 年Michael van der Steen MBA Saskia Poelman - great article on value creation
Budding Entrepreneur|Blockchain Enthusiast|Finance Professional|Fortune 500|FMCG| Pharmaceuticals|Medical Devices|Big 4
4 年Excellent article as always and spot on. Performed a lot of the value creation which did result in cost / time saving, improvements, automation, streamlining...but more as a project in collaboration with other functions. However, it was all so adhoc and done in a random manner and most times got involved somewhere in between when realization dawned that it made sense to involve finance as well. As a result, there were no proper accountability or tracking and delays. There were successes and recognition but definitely with a clear value creation mandate as defined in the article would have been more beneficial and successful. Agree that the initiative has got to be driven by finance and communicated so that the expertise can be leveraged and impact mechanism in place to measure progress and benefits as outlined in this article. Thanks for sharing and enlightening us.