Like other parts of the utility spectrum the role of finance is being shaken up, but how do chief financial officers adapt to the new landscape where customer is king and data is the new oil?
In the second of Utility Week’s CFO Forums, finance chiefs gathered in central London to discuss more about the structural changes needed as they and their teams expand their roles and work more closely with operational colleagues. They were joined by Mark Craddock, managing director at KPMG, and George Markellos, director at KPMG, both experts in financial transformation, who shared their insights from leading companies through the process.
The discussion centred on four key themes: customer centricity; data and analytics; a flexible digital ecosystem; and the workforce of the future.
Customer centricity versus good financial governance
Customer centricity, the customer journey, customer engagement – all familiar and well used phrases in the lexicon of utility personnel. But they are not often used in the same sentence as the finance team. Yet as KPMG’s Markellos explained, they ought to be. The issue for participants was whether it was possible to combine customer engagement and an improved customer experience with the more traditional authority often needed for the job.
Markellos said finance departments needed to think about customer centricity in two ways. First, consider how finance systems impact on the customer and make them more customer friendly; and second, think of the finance function as a service, with business colleagues as customers.
“Finance has always been changing,” said Markellos “but now the speed of change is faster and sharper.”
And while the focus in the past, he said, was mostly about costs and efficiency, added to this now are outcomes and services. It was incumbent on the finance department to think about the processes they design through a customer lens – invoicing systems that work for the customer not just the finance department, approval systems that incentivise business policy, and so forth.
Another example quoted was the tension created if the sales team is being encouraged to discount to drive sales, yet the financial approval system makes it difficult. The thinking these days, said Markellos, is: “How can finance colleagues provide good customer service if they didn’t receive a good service themselves through the systems and processes used by finance internally?”
Roundtable participants highlighted the well-established structure of having business partners – members of the finance team who work directly with operational colleagues – and agreed there was a demand to think more along business and customer lines across businesses.
But the big question for participants was how could finance staff who weren’t intuitively “customer centred” change their mindset?
Some pointed to spells on the shop floor when they worked in other organisations, which had helped embed a customer ethos. KPMG’s Craddock described how one company set up business partners like sales reps, and got them to use Salesforce software to track meetings and outcomes.
Simply changing the language the finance team uses can break down barriers, said Markellos. “Finance has to think about interface points between finance and the business; and if they are designed more around customers, there are likely to be less inefficiencies and handovers. If they aren’t responding to that, there is a danger they become irrelevant as a function.”
However, some participants pointed to the need for finance teams to remain at arm’s length to maintain authority and provide good governance – to avoid “going native”.
Another added: “I see customer centricity as overarching business strategy, and how you bring that to life as a finance director is interesting. But customer service is just a fraction of what we do – and it’s not just about having a service mindset, we need to provide good governance as well.”
A water finance leader said: “It’s a fine balance. It’s about providing good customer service – but also challenging – and remembering they are a finance person.”
Has the CFO got the skills to be a data star?
“Those parts of the organisation that get control of good data and are able to provide the insights the business needs are the ones who are likely to get funding and be the stars of the show.” So said Craddock, turning to the role of the finance team in data analytics.
He maintained that there was not really a difference between “data analytics” and old-style-type accounts, but as participants pointed out, firms were increasingly bringing in data scientists at a senior level as businesses moved away from producing traditional financial accounts. The demand is increasingly for predictive information.
“The finance function is the natural guardian of data. But are you expanding your role to encompass chief data officer – do you see this as part of the finance team?” Craddock asked.
Some participants were further along this journey than others but it was generally agreed that interpreting data is now a must-have skill. But in an era that has seen 90 per cent of all data generated in the past two years, it could be difficult for teams not to get drowned in “data lakes”. Craddock advised CFOs to go back to basics and ask “what aspect of business performance are we looking to change?” and then focus on the data that can help drive that.
Workforce of the future
No crystal-ball gazing discussion, even looking at the near future, is complete without assessing the impact of artificial intelligence and robotics. The view from our speakers was that robots would not replace human workers, but it was inevitable that certain tasks would become automated.
The human workforce would also continue to evolve along the trajectory that is already becoming a way of working in some sectors, if perhaps not yet utilities. Flatter structures, a more flexible contingent workforce with less linear careers and more portfolio working would become the norm. The advent of online learning meant that the workforce would be continually upskilling.
Again, CFOs need to adapt to the way a younger generation want to work. The need to inject emergent skills around data analytics, process management, and customer centricity means that the evolution of the finance officer is under way. “In order to be successful, companies and individuals will need to commit to life-long learning – but people are resistant to investing in acquiring these new skills,” remarked one guest.
So where is finance on the transition journey? One CFO summed up the mood when he said: “Slow. That’s because we have to keep the wheels on the bus, so skills development takes longer.”
As another participant observed, it depends on where you’re starting from and the legacy – with windows of opportunity opening as people retire. It’s easier for those starting with a blank sheet of paper.
What is needed to drive it is the stick – and that could come in the form of tougher price controls.
Finance in the cloud and the role of IT
The generation of more data and the need to harness it to improve business performance sits alongside a growing and flexible “digital eco system”. A move to the cloud away from monolithic systems and enterprise resource planning (ERP), coupled with more automation, is also changing the way finance teams operate and their relationships with other departments.
Traditionally, the use of on-premises ERP systems has been driven by IT – but the move to the cloud, and with it a process of continuous updates and service provider custom analytics, is cutting out the middle man.
Nick Jackson, director, finance & performance innovation UKI ERPM, at Oracle, says: “We’re much closer to the finance community than IT because of how we service. We have customer engagement managers who talk through whether they want upgrades or not.”
But while the cloud is fundamentally changing what IT does, it also raises the question of who decides on other tasks like maintenance and training, and whether IT departments should be more embedded within the finance function. One view that came through strongly was the need for skilled people within a finance function who could knit the constituents of a digital ecosystem together. And this, it was agreed, was a challenge.
“A service integrator role is perhaps something that finance teams should think about,” said Craddock.
But what about smaller companies looking to transform their operation, where specialists like data scientists may be out of the question? “How do you access this digital transformation of finance functions, embrace data analytics and automation in a cost-efficient way?” asked the finance leader of a smaller supplier.
However, the development of analytics by software service providers is likely to bring this into the realms of smaller companies. Said Oracle’s Jackson: “It is so much easier to do things on a smaller scale as cloud and software as a service.”
He said that in one company, Oracle has been brought in to help draw out and analyse data as part of the submission of a business plan to the regulator – a task that may traditionally occupy more than 50 people for over six weeks.
The direction of travel was one where traditional finance teams were likely to shrink. “A chief executive of a FTSE-100 told me recently that it was their intention to not have a finance function,” said George Markellos.
His observation struck a chord with some of those gathered around the table. “We’re certainly seeing some of the disruptor retailers with small and agile finance departments: where I have over 90 staff they have three,” agreed one CFO.
Utility Week in association with Oracle has produced an exclusive CFO Insight report which reveals the pressures now facing chief financial officers across the UK utility sector, and the rapidly evolving nature of their roles. The report can be downloaded free here: https://bit.ly/2sXnY44