Costs: beyond preventive power

Summary: The role of finance evolves beyond conserving resources. Now they have critical responsibilities for company performances.


Crashing Asian stock markets, rising oil prices and inflation, and a slowing of global economy, put costs foremost in people’s minds.

Conserving resources?

Organizationally, more than ever before Finance is the most important department.

I’d the impression that they considered their sole task to be conserving resources - wielding preventive power to hack down people’s budgetary requests and their creativity!

Perhaps finance people also need to better understand their role because no, their job isn’t only cutting costs, it seems.

The role evolves

As the world becomes increasingly complex the finance role is meant to evolve. Their task is less conserving resources and more ensuring that the system can perform, and long survive environmental challenges.

The job covers a wide range of activities from enterprise-wide initiatives to day-to-day business issues that need time, involvement and careful management.

Enhancing gains

Finance needs to fully understand each complicated process of the company’s business outlook, its competitive advantages, the returns on invested capital - money, as well as intellectual capital and commitment.

The first consideration is how much the company might gain from each of them. Second, how contributions of key process drivers may be enhanced, e.g., through sources of growth, better operations or changes in the business model.

Master information

Clearly, they can’t afford to be poor data processors or poor communicators.

Finance has to collect the data, master information that is available, value audit and help create a viable company strategy. That means they need to be far more visible than just the name on the door that people tiptoe past!

Various departmental heads, professional service providers, investors and customers, are stakeholders sharing markets or product lines – and all need financial services. But within the system and outside of it, differing needs, values, and perspectives exist.

Where company is going

They might recommend the cuts, downsizing or restructuring organizational form. But at the same time, they have to ensure the company’s not left poorer as a result. Their reassurances still investor panic.

The CFO have to keep close track of what’s happening in the company and where it’s headed. They’re the ones to break the news - especially when it’s bad!

Shareholders responsibility

Their focus, derived from the value audit, also speaks for the shareholders, to whom they are directly accountable.

Shareholders, this ‘sleeping giant’ of earlier times, have evolved too. Companies now have to contend with their savvy activism and growing expectations.

Leading consensus

Finance is like the company conscious, active in the decisional process facilitating group consensus to give shape to the company’s agenda.

They bring the objectivity to the table, counsel what can or can’t be done and at what expense – that is, lead the leaders, to achieve organizational goals.

The finance role has clearly moved beyond cutting costs at whim, toting the numbers, and closing the quarter on time. Now they have critical responsibilities for company performances.

Cont’d 2…coping with ambiguity