The New Talent Crisis in Finance

A new talent crisis is about to hit corporate finance. The word “new” is deliberate. This time, the challenge is not about the rising cost of good people. It’s about what good people do.

About 5 years ago, CFOs and controllers were complaining about the rising cost of accounting talent. In the wake of Sarbanes-Oxley, the proverbial work/life balance became unbearable, and the work itself grew highly technical, in the classic sense of applying accounting rules and controls testing. People who yearned for the excitement of swashbuckling M&A deals exited quickly. In just about every major American metropolitan center, the market for experienced corporate accountants tightened. Turnover soared, as did the salary requirements of finance folks on the move.

That was then. What I have been hearing lately as part of my research at APQC is that senior finance executives are deeply concerned about a dearth of people in the market who possess the so-called “soft skills.” Those include critical thinking, problem-solving, negotiation, communication, and collaboration. Apparently, finance professionals with soft skills in abundance can name their price.

Reregulation Gone Wild?

CFOs and treasurers are unhappy with an SEC proposed rule change that would require “quantitative and qualitative” disclosures about short-term borrowings in the Management’s Discussion and Analysis (MD&A) section of periodic financial statements. And that’s just for starters.

Everyone knows that the SEC is trying to close the door on the types of big bank shenanigans that sparked the financial crisis of 2008-09. Who can forget Lehman’s Repo 105 parlor games? But the effort is spilling over onto nonfinancial corporations in, perhaps, unintended ways. According to Michael Gallanis, who runs the corporate consulting practice at Treasury Strategies, Inc., “This is part of the financial fallout of the past 24 months. The SEC wants added transparency over how corporations manage their liquidity and their short-term borrowing practices.” On its face, that’s a noble intent: Give investors the information they need to evaluate how well a company is being managed. “But some treasurers think this SEC proposal is overkill. They worry that the SEC will impose a ‘one-size-fits-all’ disclosure requirement. And that could have the opposite effect of what is intended and needed.”

The proposal touches a number of areas. Let’s look at few of the most troublesome ones (condensed below in the form of questions that the SEC developed for feedback). The response shown under each question comes from the comment letter sent to the SEC by the Financial Reporting Committee of the Institute of Management Accountants (IMA):

2012 New Year Resolutions for CEOs and Executives

January 1st, New Year Day, is a chance for proposing changes. The tradition is to make resolutions such as to lose weight or exercise more. Typically they are personal ones made by the individuals, but I have a new twist by making a resolution for CEOs, heads of government agencies and executive teams of all organizations.

I propose these types of managers enlist in a yoga class. My reasoning is that they need to periodically detach themselves from the hustle and bustle of the flurry of daily distractions and have some solitude and be introspective. I was inspired by this idea by reading a lecture by William Deresiewicz that was delivered to the plebe class at the United States Military Academy at West Point in October, 2009.

Deresiewicz began his lecture by asking, “What does solitude have to do with leadership? Solitude means being alone, and leadership necessitates the presence of others – the people you’re leading. When we think about leadership in American history we are likely to think of Washington, at the head of an army, or Lincoln, at the head of a nation, or King, at the head of a movement – people with multitudes behind them, looking to them for direction. And when we think of solitude, we are apt to think of Thoreau, a man alone in the woods, keeping a journal and communing with nature in silence.”

A Poorly Managed Company’s Tour Guide

Publicly traded companies issue annual reports that increasingly look like magazines. Almost all organizations publish a brochure with glossy pictures that describe what their organizations do. In either case they are very traditional, and many look the same. What is needed is a new idea – a better way to communicate their branding and positioning message in a similar way that international countries’ government tourist agencies promote their nations to attract tourists.

In the article below I have written my first draft article of a “tour guide” for a poorly performing company that I will name as the Mesdup Corporation. (Get it? Like as messed up.) It may be a company you know. Mesdup is clueless as to what key performance indicators (KPI) to monitor as feedback for how it is performing. Their accountants are in the Dark Ages when it comes to accurately reporting and analyzing product, service-line, channel, and customer costs and profit margins. Their broadly-averaged cost allocations calculate flawed and misleading information. Mesdup has no idea how to transform their mountains of raw, transactional data into meaningful information for interpretation and analysis. And much of this input data is full of errors and located in many disparate data sources. Mesdup’s demand forecasts are totally unreliable and projected as if they are random. But, the good news for Mesdup is they have a good public relations and advertising firm that can make any bad organization look good. It is impressive what cosmetics can accomplish.

Here are some discussion notes to refer to develop the first draft of the “Tour Guide for Mesdup Corporation”:

B2B Electronic Invoicing Continues Growth Across the Globe

The days of paper invoices continue to decline, as electronic invoicing proliferates. In 2011, the use of e-invoicing jumped by 20 percent, according to an estimate from Basware and Billentis. One reason for the growth is legislation mandating or encouraging its use in several countries, including Finland and Mexico. In the U.S., the Department of the Treasury last year announced that it was “mandating that all Treasury Bureaus implement the Internet Payment Platform (IPP), an electronic invoice processing solution, by the end of fiscal year 2012. Additionally, in fiscal year 2013, Treasury will require that its commercial vendors submit their invoices using IPP.”

The Treasury says that adopting IPP across just that department will save $7 million annually. If IPP were adopted across the Federal government, the savings would hit $450 million annually, the U.S. Treasury estimated.

Treasurers Bullish on Money Market Funds

With most corporate investment policies centered on security and liquidity, it’s probably not surprising that bank deposits and money market funds form the backbone of many corporate cash management investments, as a new survey of 215 treasurers by SunGard indicates. In fact, bank deposits account for more than two-thirds of companies’ investments, while money market funds account for nearly half. Third in popularity, after bank deposits and money market funds, is another group of generally safe investments – government and treasury securities. About 29 percent of respondents include these in their portfolios.

The survey respondents come a mix of industries and from around the globe, although the biggest group – about 50 percent – are from the U.S. About 70 percent work at companies of $1 billion or more in revenue.

Variable NAV funds, as their name implies, have net asset values that fluctuate based on the underlying value of the securities, providing investors with greater price transparency. “Having more timely information lets investors make informed redemption decisions, which promotes gradual asset flows rather than sudden withdrawals,” according to this paper from Deutsche Bank.

Data Transparency Coalition Calls for Federal Data Reform

If you were one of the many taxpayers scrambling to meet the recent tax deadlines, the question of just how the government spends the money it takes in probably crossed your mind at some point. The goal of the recently launched Data Transparency Coalition is to get data on federal spending, as well as regulatory filings and legislative actions available online, in a standard format.

Even when the government does publish such data, it often lacks consistency and can’t be electronically read, says Hudson Hollister, the Coalition’s founder and executive director. As a result, efforts to search the data to identify spending patterns or instances of waste, fraud or abuse are more difficult than they need to be — if not pointless.

So far, the Coalition has picked up about a dozen corporate backers, including Microsoft, RR Donnelly and Teradata. Hollister previously served as counsel to the U.S. House Committee on Oversight and Government Reform. The Coalition’s board chair is Earl Devaney, who previously chaired the Recovery Board.

CFO Leadership with Business Analytics – Nature or Nurture?

At the 2011 conference of The Association for Operations Management (APICS) where I was a presenter I attended a provocative talk by Alan G. Dunn, President and founder of GDI Consulting and Training Company. He questioned if leaders are born or can be grown. It is the classic “nature versus nurture” debate. It got me to thinking about whether business analysts within an organization can be more than a support to others. Can they be leaders? I share some of Alan’s thoughts.

What distinguishes strong from weak leaders?

Having all the knowledge means nothing without the right types of people. One person can make a big difference. They can be someone who somehow gets it altogether and changes the fabric of an organization’s culture not through mandating change but by engaging and motivating others.

For some leaders irritating people is not only a sport but it is their personal entertainment. They are rarely successful. Dunn referenced studies that conclude that the three primary success factor for effective leaders is technical competence, critical thinking skills, and communication skills.

Paving the Last Mile of Finance

The last mile of finance is an idea that has been popularized by Gartner. It addresses the business processes at the end of the financial close. This includes helping the CFO communicate with publishers, the Securities and Exchange Commission, and board members on financial and operational results. Included are reconciliation, close, and disclosure applications.

Deloitte, too, picked up on the idea noting that companies face many challenges with the financial close and reporting process. For Deloitte the last mile covers the processes and activities in between the trial balance and a company’s 10K. In this last mile organizations can experience management reporting and governance issues—including financial and internal control failures—resulting not only in significant inefficiencies but also financial errors and internal control failures.

The solution, according to Deloitte, calls for a holistic approach, which entails developing a road map for improvement to address the process, the policy, the people, and the technology issues, and how they successfully work together to improve the efficiency, governance, and quality of your financial reporting and close. Technology plays a key role.

Good Reasons to Refresh Your Online Presence

At a recent briefing IBM raised the idea that in any number of ways the Internet, Web—online computing—badly needs refreshing. Just look at what you are doing with online. Does it seem stale?

Consider this: the online experience now encompasses mobile, cloud, big data, social networking, and gamification. You probably didn’t deal with any of that when you initially got online. Then consider the devices connecting today, 15 billion mobile devices alone expected by 2015, estimates Cisco, plus the usual array of laptops, netbooks, desktops, thin devices. And who is connecting: Hispanics spent 5.15 billion through mobile devices this past holiday shopping season, according to Zpryme, a research firm. Did you get much of that?

Here are two more reasons the CFO might consider: online retailers may have lost $44.6B in 2010 due to online customer experience problems (Harris Interactive) or another—disengaged workers cost U.S. businesses as much as $350 billion a year (Gallup Research). It makes sense at least to revitalize the online experience for customers, workers, and partners.

Refreshing your online experience starts with a fresh strategy. You need to revisit the basics: your objectives, your various audiences, what they do with you online now and what more they could do. The recent trend is to do as much as possible online and to do it through multiple channels, such as mobile devices, social media, and online application services. Think beyond customers and workers to partners, suppliers, and other stakeholders.

Sales Performance Management Market Heats Up

For many organizations sales performance management (SPM) means customer relationship management (CRM). Others simply ignore SPM, offering little in the way of sales productivity beyond basic contact management tools. Ventana Research, however, insists that SPM systems can help the organization understand how to get full value from the talent of its sales force. Used optimally, it adds, such a system can even deliver a competitive advantage.

Organizations need move beyond ad hoc tools and adopt real SPM, not CRM or sales force automation (SFA). Gartner analyst Patrick Stakenas notes that SPM, indeed, is breaking away from what has traditionally been considered CRM. There is no doubt, he declares, that having an SPM strategy and using supporting technologies can effectively and measurably improve sales revenue.

One sign that SPM as a catergory is picking up is IBM’s recent acquisition of Varicent Software, a leading SPM player. Varicent enables sales plan administrators and sales reps to conduct detailed ad hoc, self-service analysis without the need for IT assistance. It is not about sales force automation per se but about data analysis as a way to manage and improve sales performance.

Supercomputing Comes to Midsize and Non-Technical Enterprises

Supercomputing, with its ability to tackle the most complex problems and extremely large volumes of data fast, no longer is only for large organizations in scientific and technical fields. You don’t have to be unable to run a Monte Carlo simulation or two before you think a supercomputer might not be a bad thing for your organization too. The latest generation of high performance computing (HPC) systems put supercomputing capabilities into the hands of even midsize and non-technical organizations.
They can use HPC to solve the same complex, multi-dimensional problems that took way too long or were not even feasible with the usual corporate systems. The new generation of HPC can handle compute-intensive workloads as expected, but they also can handle big data processing fast.
And they do it in ways that don’t require big investments in more technology or the need to recruit a cadre of hardcore compute geeks. Where once supercomputing focused primarily on delivering megaflops (millions of floating point operations per second), now companies are looking to leverage affordable technical computing tools for complex problems that may be somewhat less complicated than, say, intergalactic navigation yet still deliver important business results .
Initially HPC or supercomputing was considered the realm of large government research being conducted by secretive agencies and esoteric think tanks. Today, HPC is poised to go mainstream.
Initially, automotive, aerospace, electronics, and petroleum companies were the primary HPC adopters, expecting it to deliver better product designs that result in higher quality, lower costs, and faster time to market. Now other industries are getting involved–financial services, media, telecommunication, and life sciences–by adopting HPC for modeling, simulations, and predictive analyses of various types.