Henrik Poppe: When the Finance Department Becomes a Company's Secret Weapon

Finance departments need to adopt a more strategic approach to create maximum value for their companies and shareholders. Henrik Poppe, a partner with Bain’s Corporate Finance practice, shares several steps CFOs can take to transform the finance function.

Read the Bain Brief: When the Finance Department Becomes a Company's Secret Weapon

Read the transcript below.

HENRIK POPPE: What we see is that there's a shift from traditional finance to the finance of the future. Increasingly, we see that the finance of the future is not about reporting numbers, but it's about reporting the equity story and how the company is actually succeeding in their journey toward the strategic ambition.

It's not about reporting past results. It's about identifying value opportunities that the business ... can execute on.

It's not about searching for the top talent to get into the organization, but they actually attract and retain and develop the top talent that can go into leadership positions in the business.

It's not about sort of managing and getting something sensible out of the multiple databases that may exist in the company. It is about creating ... one single source of truth, and thereby being able to identify opportunities and help the business with insight and foresight in seeing value-creation opportunities for the business to be even more successful.

And the type of companies that are able to embrace this role for finance, we see are increasingly getting a real competitive advantage, and increasingly delivering real performance to their shareholders.

We increasingly see the CFO of the future, not as a finance professional, but as ... the copilot of the plane together with the CEO. That means that he or she needs to take the owner perspective, think about the value ... that is actually being created as a result of his or her decisions.

The CFO is not afraid of making the tough choices when it comes to allocation of resources. And that person is constantly following up to make sure that the resources are being employed in the right way on a constant basis, creating value for the company. That is what we see as the CFO of the future.

There are several steps that we think are important in order to take the finance function to the next level. Firstly, you have to be clear on what activities you should prioritize as a finance function in order to support the corporate strategy in the best way. And there are some activities that will be very important, where you need to be first class. But there are other activities where you actually can make significant savings, and just be good enough.

Based on that, you have to have a clear perspective on where you stand today. Which activities do you have potential efficiency gains in, and which activities do you need to invest in?

Based on that, you create a roadmap. And then you execute that roadmap together with the key constituencies in the organization.

Interestingly, experience-wise, we see that we can take out significant savings in the finance function from going through and looking at what activities matter vs. the ones that don't matter.

As an average, we take out between 10% to 40% of the cost base. We should then have the opportunity to reinvest in those activities that really matter.

And perhaps more importantly, most importantly, you see that you can deploy your scarcest resource—which, in almost any organization, is talent—into those activities that really matter to take the company to the next level.

Read the Bain Brief: When the Finance Department Becomes a Company's Secret Weapon