The finance department.
The mere mention of their name might be enough to elicit an audible groan from the other workers in your staffing organization, whether in the recruiting, operations or technology teams. But it shouldn’t.
The reality is that your finance team could be your ultimate untapped resource. Rather than the ‘no’ people that they’re so often portrayed to be, a good finance team will in fact be ready to offer support whenever and wherever it’s needed, backing good people and good ideas.
The best finance leaders are by no means ‘yes’ people. They will however be willing to figure out how to give a worthy idea enough of a runway for it to prove itself, and to ultimately become a success. It’s not about giving every idea $1 million – it’s about getting promising ideas to the next step, to see if they’re worthy of further investment.
Today we’ll take a closer look at the often neglected staffing finance team, and how the rest of an organization might better partner in order to articulate business cases, expedite positive change, justify business decisions, and articulate the ‘why’.
Netflix does a lot of things differently, particularly financially. As outlined in the (highly recommended) book No Rules Rules, this is a company in which any employee can approve any level of expenditure, as long as they are able to validate it in the context of what the business is driving towards.
This also is a rare company in which the employees are given financial results before anyone beyond its four walls. That may not sound particularly ground-breaking to those outside of finance, but it most certainly is.
The key to their success with this model is that it is built on unprecedented levels of trust and transparency. They ensure that employees have a clear understanding of what's in the company’s best interests, then give employees the freedom to act on that information.
Most people are more familiar with the other side of the coin: businesses that lack consistency, clarity, and trust, and have half a million dollars in rogue credit card spend because of it.
The first item on many a financial consultant’s checklist is rogue spending. Reigning it in is the simplest and often most effective way to get a business’s finances back on track, according to Tom Nehila, CFO of The Global Trust Project.
“Speaking on behalf of most CFOs, there are a couple of things that we hold near and dear in how to manage a business effectively. Number one, we hate surprises. Number two, we want processes in place in order to predict the future and allow positive things to happen.”
Nehila goes on to describe a staffing organization with 80 branches across the country. Each branch had the authority to buy whatever they believed to be important to their success; an entrepreneurial approach that seemed great at first glance, but that had one fatal flaw: it lacked economies of scale. Negotiating 80 individual contracts would never net as good a deal as negotiating a single, large contract.
“What should branch managers be held accountable for?” Nehila asked. He settled on two simple things: getting more business and recruiting more candidates to fill those roles. Nothing more, nothing less.
Purchasing was centralized, and enterprise contracts were negotiated with all major job boards and technology providers. This freed branches up to do what they did best. Meanwhile, an environment was created in which any individual could suggest ideas and highlight opportunities, to ensure they didn’t feel left out. The branches became idea factories, while the decision-making and follow-through were left with head office.
Similar to Netflix, the entrepreneurial spirit was retained, but a layer of rules, regulations, and safety was placed on top.
In staffing, we don’t like to say no to customers. Historically we've bent over backward to win and retain business. But should we? Unfortunately, many organizations work for their client without asking themselves whether the client works for them.
Nehila again provides an example: a recruiting firm had a client worth $25 million annually, and who they deemed perfectly profitable. The problem? The client was allowed to pay by credit card, but the credit card fees weren’t included in the profit and loss statement. When they eventually were, the fees wiped out half a million dollars in profit instantly, making the client a negative rather than a positive. The firm quickly withdrew the credit card payment option, risking the loss of a client, but safe in the knowledge that losing the client would’ve been a solid business decision.
While you may not operate in the millions, ask yourself: does a customer really justify the discount you’re giving them, or that regular on-site visit? Partner with your finance department to analyze ‘profitable’ accounts and ensure that they are indeed profitable.
As with client relationships, vendor relationships must also be mutually beneficial. It's not enough to understand how a vendor is performing at any given point in time, you need clear expectations for the future (that the vendor should aim to exceed.) It’s financially critical that you hold your vendors accountable.
With SaaS providers making trials so simple, it can also be tempting to test out every solution that tickles your fancy. But you should be wary of too many technology vendors for a number of reasons:
How do you know how much to invest in technology? Nehila responds to this question with a question of his own: how long is a piece of string?
“The answer will depend on how financially healthy the company is. There's a big difference between a company that is breakeven and one that is growing 10%, 20%, 30% a year. When I look at any investment, I visualize two buckets:
“In finance, bucket two is always prioritized over bucket one, because if I don’t protect the company now, there’ll be nothing to invest in tomorrow.”
In other words: secure, then invest. The ideal corporation is built in a way that ensures there are no financial surprises, delivers high levels of durability, and that is capable of carving out investment funds when and where needed. It’s risk versus reward.
“I’m the CFO, and I know that we’ll be short on our full-year forecast by $30 million. You come to me and say ‘can I make a $10 million investment in X? It will help me sign up 1000 additional clients, and will deliver $50 million in revenue by the end of the year’. My answer is ‘yes, if you’re prepared to be held accountable’. If you reply with ‘absolutely!’, and you back your claims up with numbers, I'll say ‘let's make it happen’.”
Finance isn’t full of ‘no’ people. It’s full of people who are simply looking for a good reason to say yes.
While it might feel like you spend your time battling your finance team, the truth is that you’re both on the same side: you’re both trying to make your company succeed.
By gaining a deeper understanding of the role of the finance team, and by choosing to partner with them not fight against them, you’ll be setting your organization up for success.
Check out episode 35 of the You Own the Experience Podcast to learn more.