From counting figures to reconfiguring: the changing role of the government finance chief

By on 15/12/2016
Jon Thompson, former permanent secretary at the UK's Ministry of Defence and now the CEO and first permanent secretary at UK's HM Revenue & Customs

New research reveals how UK finance leaders are helping to plan and deliver major change projects, as Britain’s public bodies call on their skills to deliver the transformations demanded by austerity. Colin Marrs and Matt Ross report

In 2008, the UK Ministry of Defence’s then finance director was gently encouraged to move sideways into another role. Although he was reluctant to go, the civil service leadership had decreed that all departmental finance directors should be qualified accountants. And when, two years later, the incoming Coalition government announced that it had identified a £40bn “black hole” in the ministry’s financial planning, many took it as further evidence of the need to professionalise the civil service’s finance operations – finally ditching an attachment to ‘generalist’ leaders that had persisted since the earliest days of modern-era Whitehall.

Over the following years, the Ministry of Defence so changed its approach to financial planning that in 2012 its finance director – Jon Thompson, who’d worked his way up through local and central government finance roles to succeed his unfortunate predecessor – became its permanent secretary. The MoD’s finance function, which once fudged and muddled its way through the government’s most complex procurement portfolio, has been transformed over the last eight years.

Meanwhile, a parallel evolution has become evident across Whitehall; for since the funding squeeze arrived during the last two years of the Brown government – just as Thompson landed at the MoD – Whitehall’s senior leaders have increasingly asked their finance chiefs to help make key decisions on organisational change and business process reform. Whilst the civil service’s policymakers and generalists once reshaped public bodies around policy, personal and political imperatives, these days top officials are asking finance specialists to assist in reshaping their organisations – ensuring both that reforms are built on realistic assessments of organisational costs, and that new business models are likely to produce useful savings.

Investigating the changing roles of CFOs, accounting and consultancy firm EY has surveyed 19 senior public sector finance chiefs – asking their views on how their roles and functions are changing, and how they are likely to continue evolving over the coming years. And respondents were clear about their growing role in informing and deciding strategic change projects: almost 70% said that the time they spend providing analysis and insight to support senior leaders has expanded over the last five years. Jon Thompson himself argues that, in order to fit spending within the tight limits set by HM Treasury, senior finance professionals must step up and play a key part in high-level decision-making. “It is essential for CFOs to take a more strategic role,” he tells Global Government Forum. “The CFO and chief executive need to run things together.”

James Aspinall, finance director at the West Midlands’ Centro Passenger Transport Authority, comments that finance professionals are increasingly being drawn into decisions on how to deliver elected leaders’ priorities – ensuring that politicians understand the financial envelope and the implications of their decisions for organisational budgets. Those implications, he says, have not always been “obvious to politicians, who have traditionally held the view that it will always be possible to find money for a project. We have had to look hard at what we do – now I am outlining options on how policy initiatives can be delivered. I am not taking the decisions, but behind the scenes I am steering the direction more than previously.”

Making space for strategy

However, the survey revealed a degree of frustration among many CFOs, who worry that their ability to think and act more strategically is restricted by the demands of day-to-day operational duties. More than 60% said they are not currently spending enough time providing analysis and insight to support senior leaders – work that can, for example, include developing data analytics techniques and strategic risk assessments. Another 58% said they don’t have enough time to properly develop and define strategic decisions within their organisation.

Alastair Bridges, a former finance director at the Department for Environment, Food and Rural Affairs, gives voice to this wider frustration: “There is a desire among CFOs to move up the value chain,” he says. “There have been some big strides forwards in recent years, but inevitably you still spend a lot of time fire-fighting or making sure the basics are in place.”

To assist their work on organisational development and strategic decision-making, many CFOs are building their teams’ skills in emerging technologies: asked to name their top priority in developing their finance operations, nearly half of those surveyed named the potential of big data and analytics to transform forecasting, risk management and the understanding of value drivers. “Big data gives the fantastic ability to analyse whole systems of transactions rather than just parts of the system,” comments Thompson. “The CFO is an essential part of that: they have to get used to dealing with outputs as well as inputs, which means getting to grips with what is being produced and the performance of the organisation as a whole.”

Other digital technologies can enable CFOs to take a step back from day-to-day management, providing more space in their diary for strategic planning. For example, the ‘channel shift’ towards more customer self-service using digital platforms cuts the administrative burden on finance teams, freeing up staff to take on some of the management tasks that would previously have landed on the CFO’s desk.

New skills required

This does, of course, require CFOs to hand over some of their previous workload to colleagues; and survey respondents were clear that their teams should also play an active role in supporting strategic decision-making. So if CFOs are to take a greater leadership role, they need to develop their finance functions – building both their capabilities, and their links with colleagues and teams across the organisation. In the survey, 95% of CFOs said that improving business partnering between finance operations and other units and functions within the organisation is a critical or significant priority. And when asked to name their top strategic priority for their finance functions over the next five years, half cited the need to make significant changes to their teams’ skills. “One of the essentials is that the team around the CFO has the ability to do the essential business of transactional management and stewardship so that the CFO can stand back,” comments Thompson. “Pumping up the leadership capacity gives the CFO more headspace.”

CFOs are also keenly aware of the need to develop their own skills – particularly commercial skills, named as their top personal development priority by 58% of survey respondents. Martin Robertson, corporate director of resources at Walsall Housing Group, says: “My role is to keep people’s focus on the commercial realities of what they are doing. One of my contributions is to test proposals and to make sure they are really well thought-through.” This role, he explained, reaches well beyond traditional finance matters into business models, risk assessments and more: “Very often the role is to say: ‘This isn’t even a financial consideration, but you haven’t thought of it’.”

To take on these responsibilities, CFOs need a really broad understanding of their organisation’s operations – not least to make the most of the opportunities presented by digital technology. Craig Watkins, EY’s UK&I government and public sector director and the man behind the new research, says: “If someone says the organisation needs to adopt a ‘tower model’, you need to know what that means. This means that you can no longer just confine yourself to the topic of finance in its purest form.”

Another vital new skill – and one not always associated with the finance profession – is that of clear, open communication across the organisation and beyond. Robertson says: “I have worked with fellow directors, run roadshows, and talked to all our staff about the financial implications of government changes to regulations. Mobilising the business to bring about the changes was led mainly by the chief executive and myself.”

Internal development, external hires

Recruiting personnel with these new skills is increasingly difficult in this new landscape, which is emerging during a long period of public sector pay restraint. Almost three quarters of survey respondents agreed or strongly agreed that organisations face growing challenges in finding finance leaders who can thrive in this new environment. Aspinall says: “There is an inability for the public sector to offer private levels of pay – the pension is fantastic, but most people are looking to the here and now.”

In such a situation, developing internal skills is seen as a key tool to ensure the profession can thrive in its new roles. When asked to list the initiatives that can help achieve this aim, 58% of respondents said it’s critical that talent development is made a key performance indicator. At HMRC, says Thompson, “we are investing in providing professional qualifications to grow future leaders. We are not competitive in the open market – we can’t go out and buy someone for £700,000 like the private sector.”

Survey respondents also argued that CFOs should give more junior staff experience in helping to manage big programmes: 53% said that driving major strategic change projects, including mergers and acquisitions, provides experience which people require before they step up to top jobs. And such projects help to develop leadership and team-building skills, cited by 89% as crucial capabilities for up-and-coming finance staff.

In giving their staff more opportunities to acquire leadership experience, CFOs are helping to prepare the next generation of finance leaders. But such initiatives require close support from existing leaders: asked to name the important elements of staff development, 42% cited effective mentoring and coaching by senior finance staff, and 56% the provision of work-shadowing or other experiential opportunities.

Over the coming years, tight public finances will continue to dominate the context for public sector finance operations. And finance leaders, concludes Thompson, have a key role to play in reshaping their organisations to meet public policy goals within much smaller financial envelopes: “If someone says they want the same outputs for 30% less, then you have to have a big, radical conversation,” he says. “That feeds the transformation agenda, producing a more flexible way of doing business that will be cheaper in the long-run.”

Public sector finance professionals have come a long way in recent years – both in developing the skills and qualifications for their core jobs, and in expanding their roles to help plan and deliver strategic change across their organisations. But even as they take on these new leadership roles, they’ll need to keep a wary eye on the horizon – watching out for the next set of agendas and responsibilities coming down the tracks. “The role has changed considerably, and could very easily do so again,” says Watkins; over the years to come, “the CFO needs to remain dynamic in adopting new responses to the challenges they face.”

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See also:

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About Matt Ross

Matt is a journalist and editor specialising in public services, policymaking, government and management. He was the editor of trade title Civil Service World from 2008 to 2014, serving an audience of senior UK officials; and the features editor of weekly news magazine Regeneration & Renewal between 2002 and 2008, covering urban regeneration, economic growth and community development. He has also been a motoring and travel journalist, and now combines his role as editorial director of Global Government Forum with writing for other publications including The Guardian and Planning magazine.

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