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CEB Finance Leadership Council

Finance 2020: How the Best

Finance Teams Are Evolving

AGA – Accounting Principles

Presented By: Tim Raiswell – Principle Research Lead

INCREASED VALUE DEMAND FROM ALL SIDES

FAILING TO MEET THE DEMAND

THE JOURNEY

CONFUSION ABOUT ACCOUNTING’S VALUE MANDATE

DEFINING ACCOUNTING’S VALUE PROPOSITION

FIGHTING FOR TIME

WHY MORE TIME DOESN’T MEAN MORE VALUE

A ONE-IN-THREE SHOT

Finance 2020: Boosting Skill & Will

Finance CultureFinance Talent

• Identifying the skills and behaviors that matter

• Boosting recruitment effectiveness

• Engaging the next generation of employees

8© 2015 CEB. All rights reserved. FLC2545115SYN

FINANCE STAFF EXHIBIT FIVE TYPES OF COMPETENCIES

Five Groups of Finance Staff Competencies Sample Behaviors Exhibited

1 Builder Competencies

Sample Behaviors Exhibited

■ Creates vision and fosters buy-

in

■ Sets business-aligned goals for

the team

■ Reinforces efforts of team

members

■ Develops people and talent

pools

■ Challenges and reports

unethical behavior in others

2 Persuader Competencies


■ Articulates views clearly

■ Uses experience to develop

insight

■ Simplifies complex ideas

■ Adapts and tailors

communication style

■ Challenges business

assumptions

3 Strategist Competencies


■ Has strong understanding of

business operations

■ Discusses financial

performance in terms of key

value drivers of the business

■ Understands emerging

technology and its

applications

4 Learner Competencies


■ Seeks feedback for own

performance

■ Asks for help when

appropriate

■ Demonstrates openness to

new ideas

■ Willing to change opinion

5 Doer Competencies


■ Has strong functional expertise

■ Is able to break down problems

into manageable tasks

■ Takes initiative and

executes independently

■ Demonstrates

accountability

Core Guidance Competencies


UNICORNS ARE, INDEED, A MYTH

Finance Staff Proficient in the Three Critical Types of Analytic Competencies Percentage of Finance Staff

0%

30%

60%

??

53%

36%

10%

1%

n = 1,074 finance employees.

Source: CEB analysis.

Staff Excel at None of the Three

Competency Profiles

Staff Excel at Only One of the Three

Competency Profiles

Staff Excel at All Three Competency

Profiles

Staff Excel at All Three Competency

Profiles


Willing to Change Opinions

Learns from Experience

Reacts Promptly When Dealing with Staff

Performance Issues

Provides Constructive Feedback

Fosters Team Spirit

Develops People and Talent Pools

Discusses Financial Performance in Terms of

Key Business Drivers

Suggest Ideas to Improve ROI of Tech Investments

Challenges Assumptions and Pushes Thinking

Adapts Communications Style to Target Audience

Coaches Using Professional Advice

Writes Clearly and Concisely

Creates Shared Vision

Understands Business Operations

Functional Expertise

Seeks Feedback On Their Own Performance

Provides Unbiased Recommendations

Maintains Collaborative Relationships

Takes Initiative

Meets Deadlines

Effectively Prioritizes Tasks

Identifies Trends in Data to Generate Meaningful InsightsFlexible Thinking

Generates Multiple Options to Solve a Problem

Reports Unethical Behavior

FINANCE COMPETENCIES: HIRE, COACH, OR TEACH?

Improvement Potential Versus Current Proficiency of Key Finance CompetenciesIllustrative

Co

mp

ete

nc

y I

mp

rove

me

nt

Po

ten

tia

la

Staff Proficiency Levelb

These are the top priorities during hiring and interviewing. These competencies are innate and very difficult to develop.

Builder

Competencies

Persuader

Competencies

Strategist

Competencies

Learner

Competencies

Doer

Competencies

These are important but not top priorities during hiring and interviewing. These competencies should become the focus of coaching and networking interventions.

Don’t prioritize during hiring and interviewing. These competencies can be developed through training interventions.

Collaborates Effectively with Stakeholders

Adapts WorkingStyle to Cultural

Expectations

Displays Professional

Maturity

Displays Emotional Maturity

Shows Resilience and Persistence

Hard to Develop

Competencies

Innate

Competencies

and Attitudes

Easy to Train

Competencies

Knowledge-Based

Competencies


Note: Based on the FLC Finance Talent Test (FiTT) survey, which assessed the proficiency level and potential skill improvement of approximately

90 finance competencies of 1,884 finance staff employees across 53 global companies.a Degree of competency improvement observed in staff on a scale of 1 to 7 as reported by their direct managers.a Staff effectiveness on behaviors on a scale of 1 to 7 as reported by their direct managers.

1

2

3


EMERGING 2020 COMPETENCIES

Finance Competencies and Associated Behaviors That Will Matter More in the Future

1.Predictive Modeling■ Combines data sets from multiple sources to provide a cohesive picture of future trends

■ Leverages data mining techniques to forecast future trends and probabilities

■ Builds statistical models to predict future risks and opportunities

2. Technology Savvy ■ Keeps up-to date on Finance IT knowledge and emerging technologies

■ Assesses new technology solutions and purposes solutions that could radically improve financial analysis

■ Uses business intelligence applications for strategic and tactical decisions

■ Embraces new technologies quickly and applies new technology solutions to

everyday tasks

3. Advisor on Global

Financial Policies

■ Monitors the impact of changing IAS, IFRS, GAAP requirements

■ Models the impact of regulation as the business grows and changes in complexity

■ Proactively identifies and implements sound financial controls

■ Analyzes the impact of corporate governance requirements and makes recommendations to

management 4. Functional Broker

■ Collaborates cross-functionally to leverage data and complete analysis

■ Knows when and how to get things done both through formal channels and their informal network

■ Delivers business objectives by working through other functions as appropriate

5. Social Intelligence ■ Connects with others in a deep and direct way; stimulates reactions and

intelligent debate

■ Manages personal and functional impressions in the organization

■ Adapts appropriately based on social rules and norms6. Virtual Collaboration and

Cultural Awareness■ Ability to work productively, drive engagement, and demonstrate presence as a member of

a virtual team

■ Collaborates seamlessly with cross-cultural teams in different geographies

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REAL BEHAVIORAL INTERVIEWING

© 2015 CEB. All rights reserved. FLC2545115SYN

MILLENNIAL ENGAGEMENT

How can we develop and engage HIPOs

beyond traditional training?

Implement the 70:20:10 L&D Framework

Overview: Effective employee development is driven

70% by on-the-job learnings, 20% by mentoring, and

10% by formal training.

Finance Challenge ATB Solution

10% Formal Training (E-Learning Modules, Classroom Training)

20% Social Learning (Mentoring and Coaching)

70% Experiential Learning (On- the-

Job Experiences)

RotationShadowing

Others

New Roles and

Responsibilities

Action Learning

Groups

Source: 70:20:10, “The 70:20:10 Framework: What is it?”, https:/ /www.702010forum.com/about-702010-framework; ATB Financial; CEB analysis.

The 70:20:10 Learning and Development Framework

Types of Experiential Learning Opportunities


Criteria for Selecting ALG Projects

Issue aligns with CFO/CEO goals.

A realistic solution can be found.

Solution should not require heavy monetary or IT

investment.

Solution should increase one or more of the following:

Productivity

Efficiency

Cost reduction

Engagement

SELECT HIGH-VALUE PROJECTS TO DRIVE

ENGAGEMENT

Source: ATB Financial; CEB analysis.

ALG Strategic Business ChallengeIllustrative

Challenge: How do we attract new customers and increase market share?

Market Share

ALGMentors

Mid-Term

AssessmentFindings and Learnings

Jacob, Liam,

Emma, Olivia,

and William

■ CFO/

Divisional

Head:

■ ALG

Coach:

■ List initial

observations.

■ Highlight areas of

concern.

■ Key Findings and Recommendations: Suggest steps to overcome

problem or challenge, including data and analysis.

■ Learnings: Outline learnings from ALG experience.

[For internal assessment purpose only] Identify type of metric the

solution will impact: Productivity, Efficiency, Cost Reduction, Growth

Important Responsibility Engages HIPOs

Responsibility for an important priority drives commitment to deliver strong performance.

Tangible Results Raise Discretionary Effort

The potential for making direct, long-lasting impact on company performance motivates HIPOs to take the challenge seriously.


LONG-TERM IMPACT AND PERSONAL

DEVELOPMENT SUSTAINS ENGAGEMENT

ALG Findings and RecommendationsIllustrative

Key Personal Learnings from ALG ExerciseIllustrative

Diverse Experiences Build New Competencies and Enhance Development

Opportunity to diversify expertise, challenge individual learning, and build peer networks accelerates HIPOs’ development.

1.Higher Cross-

Functional Awareness

2. Develop New and

Unfamiliar Skills

3. Build Useful

Peer Network

■ Exposure to multiple

domains and key

stakeholders will

develop cross-

department familiarity.

■ Planning and strategy,

competitor analysis, and

marketing skills developed

a non-

Finance skill set.

■ Nurturing connections with

other top

performers will enhance

available workplace

support.

Each ALG member is expected to participate in the presentation, where senior leaders assess individual contributions.



Key Recommendations

Increase advertising on opening of new

accounts.

Simplify KYC process for new accounts.

Promote relationship manager support for

first 90 days.

Reward existing customers for referrals.

Create metrics to track conversion of

targeted customers and time to

operationalize account.

Long-Lasting Project Impact Sustains Engagement Levels

ALGs sustain high engagement levels by:

■ Offering a platform to gain visibility and build relationships with key senior leaders and

■ Providing HIPOs a chance to maintain their strong performance through their contribution to improving the company.


Employee Future Profile

For Internal Use Only

CREATE A “FUTURE RÉSUMÉ”

Future Résumé: Development Conversation GuideIllustrative

Key Discussion Points to Create a Future Career Plan

Where do I see myself five years from now? What did I do to

get to this position?

What support did I receive from my manager, team, and

senior leaders to reach this position?

Key Accomplishments

Accomplishments Position Status Completed/In Progress/ Pending

Preferred Assignments/Experiences

Organization/Function Position Assignments

Willingness to Relocate Within 12 Months

Yes/No Domestic/ International

Remarks

Name: Current Position:

Future Skills

Career discussions emphasize acquiring new skills and certifications, not just applying existing knowledge.

Future Mobility

Openness to relocate ensures that employees consider possible mobility situations associated with the aspirations.

Future Experience

Preferred future experiences aids employees to make developmental recommendations based on the end goal.

Education Year

Degree Major School/College/ University

Location Received Completed

Language Proficiency

Language Speak Read Write Remarks

What is the possibility of success or failure several years into this

job role?

What should I start doing, stop doing, and keep doing to achieve

this future state?

Source: Ford Motor Company; CEB analysis.


PLAN YOUR COACHING EFFORTS

Key Elements of an Effective Coaching Process

Know Your

Strengths

Plan for

Your Weak

Areas

Identify

Employees’

Specific

Weak Areas

Overcome

Coaching

Resistance

Roll Out a

Coaching

Plan

Incorporate

Coaching into

Daily

Workflows

1 2 3 4 5 6

Coach’s

Strength

Assessment

Template

Sample Issue

Analysis,

Coaching

Starter

Questions

Sample

Coaching Plan

Tips for

Successful

Peer-Based

Learning

Strategies for

Addressing

Rebellion

Coaching in

the Moment

Framework

How to Do It

Share peer

success stories to

enable direct

reports to learn

from others’

experiences.

How to Do It

Identify your top

strengths where

you are completely

or partially

comfortable at

coaching others.

How to Do It

Ask key

questions to

understand key

employee issues

and turn the

moment into a

coaching

opportunity.

How to Do It

Go beyond

general

development

areas to focus

on underlying

competency

weakness.

How to Do It

Tactfully

address

underlying

motivation for

objection using

proven

strategies.

How to Do It

Guide coaching

efforts to

employee

development

areas and the

metrics that track

coaching

progress.


Finance 2020: Boosting Skill & Will

Finance CultureFinance Talent

• Rethinking Accounting’s value proposition

• Finding value in existing workflows

• Building an innovative finance work environment

62

© 2014 CEB. All rights reserved. CTLR0438614SYN

WEAK VALUE CULTURE

23


DISCONNECT IN VALUE EXPECTATIONS

IDENTIFY KEY VALUE AREAS

DEFINING THE NEW LANDSCAPE


MORE VALUE FROM EXISTING PROCESSES

54


EXAMPLES OF VALUE-ADD ANALYSIS CONDUCTED DURING THE CLOSE

Case in Point:

Industry: Health Care

Revenue: $10–$15B

Opportunity: Payroll accountant suspects an anomaly in payroll expenses recorded for the period.

Action: The accountant reviews the total and accrued payroll expenses for previous years to confirm suspicion and then conducts driver

analysis to identify the payroll provider was double-charging them. The accountant escalates the issue to the payroll director.

Result: The company negotiated a new contract with the vendor that resulted in a 1% decrease in payroll expenses and stronger controls

on the part of the payroll vendor.

Area of Trapped Value

Incorrect or double billing by

vendor

Accounting Actions to Unlock Value

■ Conduct driver analysis to understand why expenses are higher or lower in a particular period.

■ Establish protocols for escalating material issues to accounting managers in real-time.


Case in Point:

Industry: Consumer Packaged Goods

Revenue: $10–$15B

Opportunity: Inventory accountant notices that inventory levels seem higher than usual.

Action: The accountant compares inventory levels across the past six periods to find that inventory levels have been consistently high.

Upon further evaluation of stock turn data, the accountant confirms the company was carrying excess inventory. Accountant makes a

recommendation to his manager to resell inventory bought from one of the suppliers at cost price.

Result: The company significantly reduced the amount of excess inventory write-off resulting in excess of US$100,000 in annual

savings.


Identification of excess inventory that

can be re-sold


■ Conduct trend analysis while reconciling inventory and include findings in the inventory report.

■ Review inventory turnover data monthly.


1.Excess Inventory Analysis

2. Expense Analysis

55


EXAMPLES OF VALUE-ADD ANALYSIS CONDUCTED DURING THE CLOSE

(CONTINUED)

3. Asset Performance Analysis

Case in Point:

Industry: Leisure

Revenue: $15–$20B

Opportunity: Staff accountant recording asset value data notices that the sales generated by the asset deployed for a full year in Asia

are low.

Action: Staff accountant conducts asset profitability analysis to confirm and flags this information to the operating unit.

Result: The company redeployed the asset for a half year in Asia and the other half in Australia as a result of their analysis, thus

witnessing a 25% increase in profitability of the asset.

Case in Point:

Industry: Information Technology

Revenue: $1–$5B

Opportunity: Staff accountant notices that a region’s cash balance after the month-end close is higher than usual as compared to the

last period.

Action: The accountant compares the cash balance to the working capital requirements and confirms that the company is carrying

excess cash at one of its locations. The accountant escalates the information to his/her manager, and they meet with Treasury staff to

determine the best method for deploying the excess cash.

Result: Treasury invested the excess cash and generated a material P&L impact for the region where the excess cash was held.


Improvement in asset profitability


Identification of excess cash for

investment


■ Conduct asset performance analysis on a regional level.

■ Meet with operations managers to discuss the impact of increased depreciation calculations.


■ Set up monthly meetings with Treasury to review cash balance levels.

4. Cash Flow Analysis



PROMOTING INNOVATIVE THINKING

MAKE IDEA GENERATION A ROUTINE

ACTIVITY

PROMOTE PEER COLLABORATION

75


CREATE AN AVENUE FOR IDEA IMPLEMENTATION

Accounting Innovation Day (AID) Event DescriptionIllustrative

Invest in one-off events for staff to

improve and execute their ideas.

■ AID Ground Rules:

1. Keep it moving—table any

exceptions to avoid getting

stuck in rabbit holes

2. Keep coming back to main

goals for the day—

“are we answering the

80%?”

3. Stay positive—be willing to

accept imperfect answers

that can be tested with time

4. Keep it simple

“Giving the participants a

full day away from their

daily work for

Accounting Innovation Day was no

problem for us. It was an investment we

were willing to make to drive

innovation, and because it was a

planned activity, their absence did not

keep the daily work from being done.”

Amy Abercrombie Senior

Group Manager

Financial Reporting

Target Corporation

Accounting Innovation Day Your chance to AID in delivering innovation overnight!

What?

Do you have a potentially great idea that you haven’t been

able to implement or vet out to see if it will be effective?

Why? Because it is time to transform our business!

Our collective effort to be innovative will play a critical part in

transforming the finance function into better business partners.

Accounting leadership highlights how

the Accounting Innovation Day aligns

with the department’s transformation

objectives.

Pre-Work for AID

Name/Team

Idea Description

Expected Outcome

Research/Analysis

Conclusion/Outcome

Next Steps

Completed Before AID

Completed After AID

Source: Target Corporation; CEB analysis.

Source: Target Corporation; CEB analysis.

1 Staff submit a brief description of their idea and its

expected outcome

2 Accounting leadership shortlists ideas for

inclusion in the AID

Idea Submission Template Criteria for Shortlisting Ideas

■ Level of Impact—What are the expected outcomes

from this idea? To what degree will implementing this

idea add value to the current process/service?

■ Scope of Impact—Who does this improvement

opportunity impact? (i.e., individual, team, department,

business)

■ Level of Guidance Required—What level of guidance

does this idea require to implement? Is leadership

approval needed?

■ Implementation—Does this idea require

additional/dedicated time to implement?


CELEBRATE SUCCESS, BIG AND SMALL

CEB Accounting & Reporting Leadership Council

© 2014 CEB. All rights reserved. CTLR0438614SYN www.executiveboard.com

INSTRUCTIONS

For each activity undertaken during the financial close and reporting process, please answer questions 1 through 4. The examples in italics were provided by other CEB Accounting and Reporting members.

Name:

Company:

TRAPPED VALUE ASSESSMENT—FINANCIAL CLOSE AND REPORTING

Process Step Activity

1. What business-relevant information should staff be looking for as they execute this activity?

2. Who will benefit from receiving this information?

3. What is the business impact of providing this information?

4. What needs to occur (e.g., new analysis, collaboration with other teams) for staff to consistently spot this information?

1. Pre-Close and Close

Reserves Adjustment Litigation reserves Legal, CFO Higher predictability and lower volatility More analytical views; challenging current model

Inventory Valuation Excess inventory Operations Reduce excess inventory write-off and generate dollar savings for the company

Stock turn data evaluation while calculating cost of ending inventory

Accruals Significant accrual changes, FX changes COO, Sales SVP Cost changes, impact of FX on sales customer patterns

Report writing, IT reporting

Estimates and Materiality Assessment

Over/under recording of key judgment items IT, Risk Management, CFO Minimize variability in results Trend analysis of past key judgment items

Closing Journal Entries Excessive cash kept at location Treasury Better cash utilization Trend and variance analysis on cash balance during the close

Account Reconciliations Rising T&E expenses Business leaders Improve business performance management Trend analysis of T&E costs while doing reconciliations and flagging unusually high costs for manager review

Identify Value Opportunities Embed Value-Add Work

CEB Accounting & Reporting Leadership Council

© 2014 CEB. All rights reserved. CTLR0438614SYN www.executiveboard.com

TRAPPED VALUE ASSESSMENT—FINANCIAL CLOSE AND REPORTING (CONTINUED)

Process Step Activity

1. What business-relevant information should staff be looking for as they execute this activity?

2. Who will benefit from receiving this information?

3. What is the business impact of providing this information?

4. What needs to occur (e.g., new analysis, collaboration with other teams) for staff to consistently spot this information?

2. Consolidation Intercompany Eliminations Abnormal/unexpected charges Operations Better forecast a country’s performance and avoid surprises

Quick review of prior intercompany transactions to ascertain if charges are in line with prior months

Foreign Currency Translation Clarify guidance of FX impacts; validate FX impact early

Corporate accounting, international accounting; BU VPs; Treasury

Enhance reporting and visibility into FX impacts; identify FX alternatives

Technical accounting taking the lead in reviewing FX policies; corporate accounting or international accounting creating specific FX reporting

3. Reporting Management Reports Unanticipated or unusual data Operations, FP&A Provide good baseline for further FP&A analysis

Real-time analysis; provide commentary in dashboard

Cash Flow and Other Financial Statements

Drivers of working capital at a disaggregated level

Operations Improved working capital management Root cause analysis with the operations teams

Disclosures and Footnotes Fair value classifications and changes in assets and liabilities; highlight risk observability and changes

Business leaders; finance leaders Risk mitigation, better decisions Creation of summary report during close with comments and explanations

INSTRUCTIONS

For each activity undertaken during the financial close and reporting process, please answer questions 1 through 4. The examples in italics were provided by other CEB Accounting and Reporting members.

Identify Value Opportunities Embed Value-Add Work

What are other accounting process steps/activities—inside or outside of the close—where your team could untrap value?

1. ______________________________

________________________________

2. ______________________________

________________________________

3. ______________________________

________________________________

4. ______________________________

________________________________

5. ______________________________

________________________________

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