3 Ways to Achieve a Successful Finance Transformation

Finance transformation: two words that draw out the skeptics, particularly from finance organizations that consider themselves mature and efficient.

Excuses for not undertaking a finance transformation are plenty: all is working well, so why change things; the organization is experiencing too much change, so now is not the time; transformation is too costly and time consuming; the businesses don’t want/need it; we don’t have the resources, and so on.

Some of those may be valid, and a dose of healthy skepticism is good. As any CFO who has undertaken finance transformation knows, it is hard and time-consuming. It requires careful planning and resources, and it can be costly, especially without proper planning. But finance transformation also is critical if finance is to keep up with the changing needs and strategies of the business.

Finance transformations can take many forms, varying from company to company. But all successful programs have one common principle: alignment with, and support of, the organization’s strategic direction over the next five to 10 years. That requires a thorough understanding of what finance talent, processes and technologies a company will need to accomplish the strategic vision.

With CFOs becoming more engaged in corporate strategy, finance transformations are a critical path for them to prepare their organizations for the changes that strategy execution requires. How can organizations enter new markets, offer new products, acquire companies, assess customer behavior, find gaps in supply chains, and take advantage of big data and today’s analytic tools without some form of finance transformation? And what about cyber-security? Are today’s finance systems as prepared as they should be to manage cyber-security risks?

Win Over the Skeptics
It’s the CFO’s job to lay out in a clear and concise manner the business case for why a finance transformation is essential and the value finance will be capable of delivering as a result in order to support the corporate strategy. CFOs need to demonstrate how anything short of a finance transformation would put the corporate strategy at risk, as well as other potential lost opportunities.

Solid relationships with business-unit leaders and gaining their buy-in are critical, especially for a finance transformation that may be more far-reaching or ambitious than others.

Business-unit leaders need to understand how the finance transformation will directly help advance their business plans and goals. They also must know how it will provide them the data – and analysis ­– needed to execute their individual responsibilities in achieving the corporate strategy. Be prepared to answer the question, “What’s in it for me?” and do the homework to make a compelling case.

Anything short of that has may not gain the business unit leaders’ confidence and could undermine the transformation’s success.

Build the Right Team
Finance transformations can take months or years, depending on the organization and objectives. Each type of effort requires the right talent to make it happen successfully.

Consider today’s football organizations. It can take years to attract the right players, develop existing talent, fill positions and hone players’ skills to position the team for a winning season. The same can be said of building the team to lead and execute a finance transformation .

For large organizations it’s imperative to engage a senior leadership team representing the major business operations to help drive the transformation. From there, communications can roll down to the operating groups and their constituents.

Having the right talent for executing the finance transformation also is essential. If the existing team doesn’t have the necessary skills, there will be some tough decisions to make. With finance being expected to provide more support for data analysis and modeling, any finance transformation today should encompass these sought-after skills. Involve business-unit leadership in planning the new finance organization’s staffing and partner with the talent organization or human resources to identify and recruit needed talent.

IT also must be part of the effort. Any finance transformation, even if it doesn’t appear to have a system or technology component at the outset, should consider changing technology needs. For example, systems may need to be scalable to incorporate new operations from acquisitions, as well as the budgeting and planning around those expansions. New technology also may be needed to bolster finance’s ability to meet increased demands for data, analysis, risk sensing and scenario planning.

Be sure to include members from corporate development and treasury, as capital planning and allocation are key to strategy execution. For example, I’ve worked with our strategy and treasury teams in overhauling our budget, planning and analysis, so that we are collecting and analyzing data needed for capital strategy decisions.

And, of course, involve those dealing with regulatory changes, as finance is the lynchpin for compliance.

Keep Your Eyes on the End Goal
Making finance transformation happen in mature organizations, with their labyrinth of legacy systems, long-established processes and built-in biases, can be as arduous as starting from your own team’s end zone; the goal line can seem unreachable.

At Deloitte, we are undergoing a multi-year transformation of our own as we work toward a 2020 vision that includes taking advantage of special opportunities in the marketplace. Have there been challenges? Of course, but it’s my job to create a finance organization, backed by processes and technology, that can help drive toward our strategic vision.

Frank Friedman is U.S. CFO and managing partner of finance and administration for Deloitte LLP.

Find the Coaching in Criticism

by Sheila Heen and Douglas Stone

 
Feedback is crucial. That’s obvious: It improves performance, develops talent, aligns expectations, solves problems, guides promotion and pay, and boosts the bottom line.
 
But it’s equally obvious that in many organizations, feedback doesn’t work. A glance at the stats tells the story: Only 36% of managers complete appraisals thoroughly and on time. In one recent survey, 55% of employees said their most recent performance review had been unfair or inaccurate, and one in four said they dread such evaluations more than anything else in their working lives. When senior HR executives were asked about their biggest performance management challenge, 63% cited managers’ inability or unwillingness to have difficult feedback discussions. Coaching and mentoring? Uneven at best.
 
Most companies try to address these problems by training leaders to give feedback more effectively and more often. That’s fine as far as it goes; everyone benefits when managers are better communicators. But improving the skills of the feedback giver won’t accomplish much if the receiver isn’t able to absorb what is said. It is the receiver who controls whether feedback is let in or kept out, who has to make sense of what he or she is hearing, and who decides whether or not to change. People need to stop treating feedback only as something that must be pushed and instead improve their ability to pull.
 
For the past 20 years we’ve coached executives on difficult conversations, and we’ve found that almost everyone, from new hires to C-suite veterans, struggles with receiving feedback. A critical performance review, a well-intended suggestion, or an oblique comment that may or may not even be feedback (“Well, your presentation was certainly interesting”) can spark an emotional reaction, inject tension into the relationship, and bring communication to a halt. But there’s good news, too: The skills needed to receive feedback well are distinct and learnable. They include being able to identify and manage the emotions triggered by the feedback and extract value from criticism even when it’s poorly delivered.
 
Why Feedback Doesn’t Register

 What makes receiving feedback so hard? The process strikes at the tension between two core human needs—the need to learn and grow, and the need to be accepted just the way you are. As a result, even a seemingly benign suggestion can leave you feeling angry, anxious, badly treated, or profoundly threatened. A hedge such as “Don’t take this personally” does nothing to soften the blow.

Getting better at receiving feedback starts with understanding and managing those feelings. You might think there are a thousand ways in which feedback can push your buttons, but in fact there are only three.

 
Truth triggers are set off by the content of the feedback. When assessments or advice seem off base, unhelpful, or simply untrue, you feel indignant, wronged, and exasperated.
 
Relationship triggers are tripped by the person providing the feedback. Exchanges are often colored by what you believe about the giver (He’s got no credibility on this topic!) and how you feel about your previous interactions (After all I’ve done for you, I get this petty criticism?). So you might reject coaching that you would accept on its merits if it came from someone else.
 
Identity triggers are all about your relationship with yourself. Whether the feedback is right or wrong, wise or witless, it can be devastating if it causes your sense of who you are to come undone. In such moments you’ll struggle with feeling overwhelmed, defensive, or off balance.
 
All these responses are natural and reasonable; in some cases they are unavoidable. The solution isn’t to pretend you don’t have them. It’s to recognize what’s happening and learn how to derive benefit from feedback even when it sets off one or more of your triggers.
 
Six Steps to Becoming a Better Receiver Taking feedback well is a process of sorting and filtering. You need to understand the other person’s point of view, try on ideas that may at first seem a poor fit, and experiment with different ways of doing things. You also need to discard or shelve critiques that are genuinely misdirected or are not helpful right away. But it’s nearly impossible to do any of those things from inside a triggered response. Instead of ushering you into a nuanced conversation that will help you learn, your triggers prime you to reject, counterattack, or withdraw.
 
The six steps below will keep you from throwing valuable feedback onto the discard pile or—just as damaging—accepting and acting on comments that you would be better off disregarding. They are presented as advice to the receiver. But, of course, understanding the challenges of receiving feedback helps the giver to be more effective too.
 
1. Know your tendenciesYou’ve been getting feedback all your life, so there are no doubt patterns in how you respond. Do you defend yourself on the facts (“This is plain wrong”), argue about the method of delivery (“You’re really doing this by e-mail?”), or strike back (“You, of all people?”)? Do you smile on the outside but seethe on the inside? Do you get teary or filled with righteous indignation? And what role does the passage of time play? Do you tend to reject feedback in the moment and then step back and consider it over time? Do you accept it all immediately but later decide it’s not valid? Do you agree with it intellectually but have trouble changing your behavior?

When Michael, an advertising executive, hears his boss make an offhand joke about his lack of professionalism, it hits him like a sledgehammer. “I’m flooded with shame,” he told us, “and all my failings rush to mind, as if I’m Googling ‘things wrong with me’ and getting 1.2 million hits, with sponsored ads from my father and my ex. In this state it’s hard to see the feedback at ‘actual size.’” But now that Michael understands his standard operating procedure, he’s able to make better choices about where to go from there: “I can reassure myself that I’m exaggerating, and usually after I sleep on it, I’m in a better place to figure out whether there’s something I can learn.”
 
2. Disentangle the “what” from the “who”If the feedback is on target and the advice is wise, it shouldn’t matter who delivers it. But it does. When a relationship trigger is activated, entwining the content of comments with your feelings about the giver (or about how, when, or where she delivered the comments), learning is short-circuited. To keep that from happening, you have to work to separate the message from the messenger and then consider both.

Janet, a chemist and a team leader at a pharmaceutical company, received glowing comments from her peers and superiors during her 360-degree review but was surprised by the negative feedback she got from her direct reports. She immediately concluded that the problem was theirs: “I have high standards, and some of them can’t handle that,” she remembers thinking. “They aren’t used to someone holding their feet to the fire.” In this way, she changed the subject from her management style to her subordinates’ competence, preventing her from learning something important about the impact she had on others. 

Eventually the penny dropped, Janet says. “I came to see that whether it was their performance problem or my leadership problem, those were not mutually exclusive issues, and both were worth solving.” She was able to disentangle the issues and talk to her team about both. Wisely, she began the conversation with their feedback to her, asking, “What am I doing that’s making things tough? What would improve the situation?”
 
3. Sort toward coachingSome feedback is evaluative (“Your rating is a 4”); some is coaching (“Here’s how you can improve”). Everyone needs both. Evaluations tell you where you stand, what to expect, and what is expected of you. Coaching allows you to learn and improve and helps you play at a higher level.

It’s not always easy to distinguish one from the other. When a board member phoned James to suggest that he start the next quarter’s CFO presentation with analyst predictions rather than internal projections, was that intended as a helpful suggestion, or was it a veiled criticism of his usual approach? When in doubt, people tend to assume the worst and to put even well-intentioned coaching into the evaluation bin. Feeling judged is likely to set off your identity triggers, and the resulting anxiety can drown out the opportunity to learn. So whenever possible, sort toward coaching. Work to hear feedback as potentially valuable advice from a fresh perspective rather than as an indictment of how you’ve done things in the past. When James took that approach, “the suggestion became less emotionally loaded,” he says. “I decided to hear it as simply an indication of how that board member might more easily digest quarterly information.”
 
4. Unpack the feedbackOften it’s not immediately clear whether feedback is valid and useful. So before you accept or reject it, do some analysis to better understand it.

Here’s a hypothetical example. Kara, who’s in sales, is told by Johann, an experienced colleague, that she needs to “be more assertive.” Her reaction might be to reject his advice (“I think I’m pretty assertive already”). Or she might acquiesce (“I really do need to step it up”). But before she decides what to do, she needs to understand what he really means. Does he think she should speak up more often, or just with greater conviction? Should she smile more, or less? Have the confidence to admit she doesn’t know something, or the confidence to pretend she does?
 
Even the simple advice to “be more assertive” comes from a complex set of observations and judgments that Johann has made while watching Kara in meetings and with customers. Kara needs to dig into the general suggestion and find out what in particular prompted it. What did Johann see her do or fail to do? What did he expect, and what is he worried about? In other words, where is the feedback coming from?
 
Kara also needs to know where the feedback is going—exactly what Johann wants her to do differently and why. After a clarifying discussion, she might agree that she is less assertive than others on the sales floor but disagree with the idea that she should change. If all her sales heroes are quiet, humble, and deeply curious about customers’ needs, Kara’s view of what it means to be good at sales might look and sound very different from Johann’s Glengarry Glen Ross ideal.
 
When you set aside snap judgments and take time to explore where feedback is coming from and where it’s going, you can enter into a rich, informative conversation about perceived best practices—whether you decide to take the advice or not.
 
5. Ask for just one thingFeedback is less likely to set off your emotional triggers if you request it and direct it. So don’t wait until your annual performance review. Find opportunities to get bite-size pieces of coaching from a variety of people throughout the year. Don’t invite criticism with a big, unfocused question like “Do you have any feedback for me?” Make the process more manageable by asking a colleague, a boss, or a direct report, “What’s one thing you see me doing (or failing to do) that holds me back?” That person may name the first behavior that comes to mind or the most important one on his or her list. Either way, you’ll get concrete information and can tease out more specifics at your own pace.

Roberto, a fund manager at a financial services firm, found his 360-degree review process overwhelming and confusing. “Eighteen pages of charts and graphs and no ability to have follow-up conversations to clarify the feedback was frustrating,” he says, adding that it also left him feeling awkward around his colleagues.
 
Now Roberto taps two or three people each quarter to ask for one thing he might work on. “They don’t offer the same things, but over time I hear themes, and that gives me a good sense of where my growth edge lies,” he says. “And I have really good conversations—with my boss, with my team, even with peers where there’s some friction in the relationship.

They’re happy to tell me one thing to change, and often they’re right. It does help us work more smoothly together.”
 
Research has shown that those who explicitly seek critical feedback (that is, who are not just fishing for praise) tend to get higher performance ratings. Why? Mainly, we think, because someone who’s asking for coaching is more likely to take what is said to heart and genuinely improve. But also because when you ask for feedback, you not only find out how others see you, you also influence how they see you. Soliciting constructive criticism communicates humility, respect, passion for excellence, and confidence, all in one go.
 
6. Engage in small experimentsAfter you’ve worked to solicit and understand feedback, it may still be hard to discern which bits of advice will help you and which ones won’t. We suggest designing small experiments to find out. Even though you may doubt that a suggestion will be useful, if the downside risk is small and the upside potential is large, it’s worth a try. James, the CFO we discussed earlier, decided to take the board member’s advice for the next presentation and see what happened. Some directors were pleased with the change, but the shift in format prompted others to offer suggestions of their own. Today James reverse-engineers his presentations to meet board members’ current top-of-mind concerns. He sends out an e-mail a week beforehand asking for any burning questions, and either front-loads his talk with answers to them or signals at the start that he will get to them later on. “It’s a little more challenging to prepare for but actually much easier to give,” he says. “I spend less time fielding unexpected questions, which was the hardest part of the job.”

That’s an example worth following. When someone gives you advice, test it out. If it works, great. If it doesn’t, you can try again, tweak your approach, or decide to end the experiment.
 
Criticism is never easy to take. Even when you know that it’s essential to your development and you trust that the person delivering it wants you to succeed, it can activate psychological triggers. You might feel misjudged, ill-used, and sometimes threatened to your very core. 

Your growth depends on your ability to pull value from criticism in spite of your natural responses and on your willingness to seek out even more advice and coaching from bosses, peers, and subordinates. They may be good or bad at providing it, or they may have little time for it—but you are the most important factor in your own development. If you’re determined to learn from whatever feedback you get, no one can stop you. 

Sheila Heen and Douglas Stone are cofounders of Triad Consulting Group and teach negotiation at Harvard Law School. They are the coauthors of the forthcoming book Thanks for the Feedback: The Science and Art of Receiving Feedback Well (Viking/Penguin, 2014), from which this article is adapted.

Is your business ready to move on without you?

By: JACOLINE LOEWEN

You could ask business owners a million questions about their succession plans.
Most of them are keenly aware of the importance of this one: “What happens to the business, and to your family, if you are no longer able to lead an active role in the company?”

But succession planning often takes a back seat to daily operations, to the detriment of the company and its owner. Obtaining the best succession outcome not only comes from having a strong, well-managed company, it comes from planning for the future, so you don’t get caught flat-footed when life throws a curve ball.

I recently met with the CFO of a family business. If you need to determine an owner’s level of commitment to transitioning the business, he said, ask the following three questions:

1. Have you sat down as a family unit for a discussion?
People don’t have “money talks,” and “family talks” can be even more awkward. Many owners have plans in mind that never make it to paper, and they are certainly not shared at the dinner table. Research by Financial Executives International (FEI) shows that only 26 per cent of owners have sat down with their families to discuss their businesses and their futures.

2. What steps are you taking to get ready?
The plan could be to pass the business to a family member. Or to leave it to a group of family members and outsiders. Or to sell the business entirely and try to craft a deal that would keep family members employed to run the business. All are potentially sound plans, but the reality may not match expectations.

The trouble is that sometimes when an owner leaves, there is no longer a business. For example, if the owner has invested years in growing the business and in developing deep personal relationships while serving its clients, there can be a lot of loyalty to the person instead of the brand. When the owner leaves, the customers are often not far behind.

Another problem arises when owners carry too many of important details in their heads. It can limit the development of formal systems and professional processes, leaving a big gap if owners get taken out of the equation.

When the CFO I met with asks about the state of readiness to put a succession plan on paper, it implies there’s a quick fix if a business is not ready. Putting formal procedures and policies in place can take a lot of time and effort, especially if it’s going to be part of the organization’s culture. This sort of “professionalism” does not happen by snapping your fingers – it takes time, resources, and thoughtful forward planning.

3. What do you do in the winter?
The big succession question is how long the owner can step away from the business. If she goes down to Florida and stays for a week, but she’s on the phone checking orders and other details, there is no business to sell. If the owner says “I go to Florida and stay for a month” – or three – you know it can run without her and there may be an attractive company for sale.

Jacoline Loewen is a director at Crosbie, which focuses on succession advice for family businesses and closely held small to medium-sized enterprises. Crosbie develops customized strategies, particularly in relation to M&A, financing and corporate strategy matters. Ms. Loewen is also the author of Money Magnet: How to Attract Investors to Your Business. You can follow her on Twitter @jacolineloewen.

Is your business ready to move on without you?

JACOLINE LOEWEN

The Globe and Mail

You could ask business owners a million questions about their succession plans.
Most of them are keenly aware of the importance of this one: “What happens to the business, and to your family, if you are no longer able to lead an active role in the company?”

But succession planning often takes a back seat to daily operations, to the detriment of the company and its owner. Obtaining the best succession outcome not only comes from having a strong, well-managed company, it comes from planning for the future, so you don’t get caught flat-footed when life throws a curve ball.

I recently met with the CFO of a family business. If you need to determine an owner’s level of commitment to transitioning the business, he said, ask the following three questions:

1. Have you sat down as a family unit for a discussion?
People don’t have “money talks,” and “family talks” can be even more awkward. Many owners have plans in mind that never make it to paper, and they are certainly not shared at the dinner table. Research by Financial Executives International (FEI) shows that only 26 per cent of owners have sat down with their families to discuss their businesses and their futures.

2. What steps are you taking to get ready?
The plan could be to pass the business to a family member. Or to leave it to a group of family members and outsiders. Or to sell the business entirely and try to craft a deal that would keep family members employed to run the business. All are potentially sound plans, but the reality may not match expectations.

The trouble is that sometimes when an owner leaves, there is no longer a business. For example, if the owner has invested years in growing the business and in developing deep personal relationships while serving its clients, there can be a lot of loyalty to the person instead of the brand. When the owner leaves, the customers are often not far behind.

Another problem arises when owners carry too many of important details in their heads. It can limit the development of formal systems and professional processes, leaving a big gap if owners get taken out of the equation.

When the CFO I met with asks about the state of readiness to put a succession plan on paper, it implies there’s a quick fix if a business is not ready. Putting formal procedures and policies in place can take a lot of time and effort, especially if it’s going to be part of the organization’s culture. This sort of “professionalism” does not happen by snapping your fingers – it takes time, resources, and thoughtful forward planning.

3. What do you do in the winter?
The big succession question is how long the owner can step away from the business. If she goes down to Florida and stays for a week, but she’s on the phone checking orders and other details, there is no business to sell. If the owner says “I go to Florida and stay for a month” – or three – you know it can run without her and there may be an attractive company for sale.

Jacoline Loewen is a director at Crosbie, which focuses on succession advice for family businesses and closely held small to medium-sized enterprises. Crosbie develops customized strategies, particularly in relation to M&A, financing and corporate strategy matters. Ms. Loewen is also the author of Money Magnet: How to Attract Investors to Your Business. You can follow her on Twitter @jacolineloewen.