Redefining the Role of the Finance Leader
“I skate to where the puck is going, not where it has been.” — Wayne Gretzky
Innovation and finance. Those two words in the same sentence seem like an oxymoron. Or a pejorative term. Like creativity and accounting.
Innovation means doing something new that has not been done before. It involves taking risks.
Customer and employee expectations keep evolving. What was good enough 5 or 10 years ago is no longer acceptable. In all aspects of life, our choices are greater, better, and more expansive. Businesses need to keep innovating to be aligned with stakeholder expectations.
Innovation is the lifeblood of sustainable, long-term growth. Innovation results in new or previously untried ways to solve existing problems. Additionally, innovation is forward-looking, allowing us to develop frameworks to solve future problems.
The role of the finance leadership is to encourage, underwrite and measure innovation, which involves risk taking. This role is more important in start-ups and emerging growth companies. These businesses are founded to take on incumbents and change established workflows and processes.
The strategic function within the finance organization is chartered with laying out the constraints (financial or other resources, time etc.) within which to focus innovation so that it is most helpful to the organization.
Risk taking will sometimes result in failure. And thus embracing the possibility of failure is critical to fostering a culture of innovation. Sir Ken Robinson, in the most watched TED Talk ever makes this point saying, “If you’re not prepared to be wrong, you’ll never come up with anything original.”
Behaviors to Help Innovation Flourish
- Acknowledge that failure can occur. Create a culture where ‘risk taking’ is discussed openly and failure does not inhibit career progress.
- Encourage experimentation. Use that language internally. Create parameters to define a successful experiment.
- Welcome social risk taking. Create a culture of psychological safety, where asking questions, speaking up and pointing out potential flawed logic is accepted. Remind other executives that a strength of the finance team is incorporating the outsider’s perspective.
- Move forward even with limited information. Don’t demand that everything is known before making a decision. Just be aware that you are making decisions involving certain assumptions and unknowns, which you have articulated.
- Avoid short-term profit maximization (unless it is an emergency.) Optimize for customer and employee experience. If those two stakeholders are satisfied, the chances for long-term financial success are improved.
- Celebrate small changes that compound. Don’t seek out all or nothing improvements. Incremental improvements which are built upon consistently can lead to huge, positive change over time.
- Bias towards faster feedback loops. Break big projects into smaller parts where results can be seen more rapidly.
- Seek out and highlight gains even amidst failure. There are always opportunities for learning. As Thomas Edison said, “I have not failed. I’ve just found 10,000 ways that won’t work.”
An unstated assumption in the traditional workplace is that creativity and innovation are the purview of employees in the marketing, product, and engineering departments. Finance is supposed to sit on the opposite pole. Pointing out risks and suggesting the safest path forward. With the pace of change in the world, not actively seeking out innovation and taking risks is the greatest danger businesses face. An apt quote from management guru Peter Drucker is: “The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic.”