The US Purchasing Managers Index, a leading indicator of business demand, is growing, while Canadian businesses see their near-term prospects as “robust”, according to the Bank of Canada.
This confidence is shared by the finance chiefs of North American firms, according to a new study conducted by The Economist Intelligence Unit and sponsored by SAP. In a global survey of over 800 CFOs and their direct reports, 79% of 200 respondents based in North America expect their company’s revenue to grow by 10% or more in fiscal year 2018/19. This trails their peers in Latin America and Asia-Pacific but handily outstretches EMEA. Across the sample, respondents are more likely to predict revenue growth in the coming year if they feel empowered to drive strategic decisions across business functions in their organisation. In North America, 83% of respondents feel so empowered.
How do senior finance leaders in the region collaborate across the business in order to drive strategic decisions and, in turn, propel growth? As the survey reveals, they do so by investing time in collaboration and having an open mind about who can contribute to key financial processes.
83% of respondents in North America feel empowered to drive strategic decisions across business functions
Holistic collaboration
North American finance executives spend more time with their peers in HR, legal and compliance, operations, and sales than those of any other region, and more time than average with IT and marketing too. This investment of time seems warranted, as the majority considers their collaboration with all departments to be effective or very effective.
The survey suggests they also have a more inclusive approach to collaboration. While respondents in EMEA, for comparison, typically only engage the obvious function when managing a particular kind of cost (eg, the marketing department for marketing costs), their North American counterparts look further afield.
When managing employee travel expenses, for example, most respondents globally engage with the HR department. But those in North America also involve colleagues in operations, marketing and IT at above-average rates. Likewise, when managing capital expenditure, more of them consult with the HR, sales, IT, operations and marketing functions than their peers elsewhere.
This approach to collaboration has distinct advantages, but also its own challenges.
It seems that not all of their colleagues appreciate the wide net they cast: North American respondents cite resistance from department heads as the top impediment to collaboration. This helps to explain the importance that North American finance executives place on communication skills and relationship management as skills for future finance executives, both of which they prize higher than their global peers.
Communication skills and attitude are key to breaking down resistance and getting greater co-operation from the wider business, says Lionel Finidori, CFO in the North America operations of Schneider Electric, a global energy management specialist.
“If you fall into this fallacy of saying no all the time, you’re not invited to the table. As a finance person, you have to be part of the team. You have to be on the field, playing your role as part of that team—not just playing the referee.” -Lionel Finidori, CFO North America operations. Schneider Electric
“Sometimes, as a finance person, we feel we have a very strong role of stewardship in the organisation and we can be tempted to score-keep or to have the attitude of saying, ‘No, you can’t do that. You can’t move into this strategy because the resource allocation is not there. You can’t do this deal, because there are too many risks’”.
That’s not a viable strategy in today’s business environment, he says. “If you fall into this fallacy of saying no all the time, you’re not invited to the table. As a finance person, you have to be part of the team and propose viable options. You have to be on the field, playing your role as a true business partner— not just playing the referee.”
However, while they may encounter more interpersonal resistance to collaboration, North American finance executives are much less likely to list identifying how to align strategic, financial and operational plans towards common objectives among the biggest challenges they face in their day-to-day activities (27% v 37% globally). This would suggest a link between their holistic approach to collaboration and their sense of empowerment to drive strategic decision-making.
Collaborating with AI
North American respondents are bullish on the potential for intelligent automation to support effective collaboration. When asked which emerging technologies will most enhance collaboration in future, their top answer is the use of artificial intelligence (AI) and predictive analytics to detect irregularities, followed by automation of day-to-day activities using AI and digital voice assistants.
However, they’re also aware of the need to manage the ensuing risks: 55% of respondents in the region say members of their teams are involved in the review of risks associated with automated and outsourced processes.
At Schneider Electric North America, Mr Finidori is keeping a close eye on automation’s potential—and its potential risks. “Yes, there are some areas where tasks that are today handled by people will soon be handled by machines. Some already are.
In terms of cash management and transactional accounting, for example, we see clear opportunities” he says. “But while I’m not sceptical about automation, it strikes me that in terms of the pace of change, we will need a very high degree of process maturity to make automation work.” In other words, he adds, many processes are either too complex, require too much oversight, or both, to be left effectively to machines.
Navigating the logical complexity of process automation while maintaining the human relationships that help them drive strategic decisions across the business will be a daunting prospect, even for the most confident of North American CFOs. Little wonder they identify critical thinking as the most important skill for a future finance executive.
