Richard Okon | CFO of a multi-location tertiary healthcare institution, St. Nicholas Hospital | CEO of an M&A investment and advisory firm.
The finance role is led by people with various titles, from financial controller to chief financial officer (CFO) to director of finance and so many others, depending on the size, complexity, specific roles and structure of the business or organization.
Businesses have clear goals and objectives that necessitate they make investments in people, equipment and infrastructure. A key role played by the finance lead is to guide the business in selecting, timing and negotiating these investments. However, this can sometimes put them in opposition to various stakeholders.
Vision Versus Viability
Businesses often face challenges when pursuing ambitious goals while trying to ensure the lights stay on and the business remains financially stable. This is sometimes more obvious in nonfinancial businesses where conflicts sometimes arise between the CFO on the one side and the technical/operational side of the business on the other. This conflict can lead to wasted resources, missed opportunities, operational inefficiencies and stalled growth.
Proper and effective financial stewardship ensures that these ambitions are both feasible and economically viable. Do the expected returns make the investment viable? This is a key question that needs to be answered, bearing in mind that returns here are usually not 100% financial.
Appealing To Stakeholders
Stakeholders are usually a varied group of people with varied backgrounds. In nonfinancial businesses, these can range from people with very simple backgrounds to professionals to very technical experts. In most cases, they are driven, and the main concerns are innovation, service delivery and product quality.
For instance, in a healthcare facility, the clinical experts might want to acquire state-of-the-art diagnostics equipment as part of building the profile of the establishment; however, this might conflict with the financial position, which would consider things like payback period, cost of recovery and an in-depth buy or outsource evaluation. Businesses that get ahead are those that can align these sometimes seemingly conflicting positions and balance operational aspirations with financial realities.
Knowledge Of How The Numbers Play Out
There is a need for the finance function to continue to elaborate on and discuss the numbers with all stakeholders as part of the alignment process. This could come in the form of:
• Setting up multifunctional committees to enhance decision-making
• Having good financial forecasting tools in place
• Implementing data-driven decision-making
• Offering financial training for nonfinancial experts
• Agreeing on key performance indicators (KPIs) to track both financial and nonfinancial activities. This could also cover budgeting, preferably zero-based, which better ensures that each expense is justified before being signed off on.
• Communicating effectively. All parties need to be open and transparent and freely share key information and data. Constraints should be identified and openly discussed to bring clarity and proper accountability.
Conclusion
The whole essence of this article is to address a key issue that comes up in organizations and that sometimes, when not addressed properly, can lead to a toxic work environment and possibly business failure. For a business to succeed, the drivers need to be innovative, competitive and growth-oriented. However, without proper financial stewardship, this could all end up back at square one. It is up to leadership to ensure a balance between ambition and financial discipline. This helps ensure success and ultimately leads to the profitability of the endeavor, enabling the organization to predict and adapt to changes in the environment and position itself to take advantage of future opportunities.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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