Do finance need to start viewing Operations as their client?
This came up in conversation this week with a client, and I thought it would make for a good discussion here.
When it comes to running a successful business, strong teamwork and effective communication between departments are obviously a key requirement. One particular relationship that holds immense potential, but is often wasted, is that between the finance and operations departments. Finance has typically been seen as a cost control function and feels as though they are there to “keep the kids in check,” to supervise operations, making sure they don’t spend too much. However, considering the operations department as their valued customer can be a far more productive way to view the situation.
How? I hear you ask. Let’s have a look:
First of all, it enhances collaboration between the two departments by removing the “them Vs us” dynamic. That’s the first big win.
Off the back of that, you will get more “Value-Based Decision-Making” from the finance team:
When finance adopts a customer-centric mindset towards Ops, delivering value to operations becomes the primary focus. Rather than solely prioritising cost control, finance now aims to provide valuable financial insights and analysis to guide operations’ decision-making. By understanding the financial impact of operational choices, finance can help operations make decisions that maximise value while effectively managing costs. The important thing is that they are in that order; maximising value first, then ensuring costs are managed. This fosters balanced decision-making, considering both financial considerations and operational needs, not just simply looking at the world through a “controlling” lens.
A customer-centric approach from finance doesn’t compromise cost control; it strengthens it by understanding operational insights. Through working to serve ops, finance gains a deeper understanding of cost drivers, operational inefficiencies, and potential areas for improvement. With this knowledge, finance can identify cost-saving opportunities and help implement measures to optimise operational processes and enhance efficiency while maintaining financial discipline.
Here’s one simple example in action all over the world:
· A finance manager wants to understand some costs for a contracts site-based employees.
· Because the manager likes information in a certain way, they create a form for all 300 of the operations staff to fill in every day.
· The operations staff don’t log their information that way, so they spend 20 minutes every day transposing their information into the format the finance manager wants before spending 5 minutes filling in the form.
· That’s 300 staff, for 20 minutes, every day. Simply so the finance manager can avoid spending 1 hour transposing the information themselves.
If the finance manager’s objective was to improve operational efficiency, they would never even suggest such a thing.
So how do we encourage such a shift in worldview for the finance team?
It helps for this worldview to be encouraged from the top down, to set the tone right from the top. In addition to that, a good starting point would be:
Relevant key performance indicators (KPIs) that reflect shared goals. This forces finance to collaborate with operations to identify and track metrics that accurately measure operational efficiency and financial performance… together.