At Work -- Not At Work

Sept. 21, 1998

By the year 2005, people will work from home, with direct access to business systems and a whole array of data-mining tools. Revenues and order backlogs will be available on demand. Banks will have taken over most of a companys cash-management functions. But therell still be monthly financial reports to provide the permanent, comparative historical records that money-centered stock markets and the worldwide banking community will demand. And the presence of scrutinizing state, federal, and international tax auditors mean that companies are still giving taxes major attention.

This scenario, presented by the financial and cost management team at Price Waterhouse LLP (now PricewaterhouseCoopers LLP) in CFO: Architect of the Corporations Future (1997, John Wiley & Sons), is not as revolutionary as it may seem at first.

For example, with enterprise-wide data systems the finance folks already are able to reconcile inventory sitting in a plant with the inventory being carried on the companys general ledger, notes Donniel Schulman, the New York-based lead partner of Pricewaterhouse-Coopers (PwC) financial cost management practice in the Americas.

And "with technology today you dont need to have both the invoice and the loading-dock receipt in order to [determine] how much you should be paying your vendor for a delivery of parts," he adds.

What's more, current and prospective technology make it likely that soon the bean counters will be gone and sophisticated information systems will deliver actual costs to operating-level managers on a timely basis.

"What we [will] have done is shift the financial analysis, the decision-support capability, from the finance function to the actual line activity," says Schulman. Hes convinced that the finance organization as its been known historically -- and which he figures can consume as much as 2% of the companys revenues ($20 million in a $1 billion firm) -- "is absolutely limited and going away."

Meanwhile, company finance and accounting operations are struggling to keep up with the pace of business globalization, trying to deal with the reality that they must broaden their perspectives from, as Patrick J. McCormick puts it, that of a ZIP code to spanning the world.

"Finance and accounting, as the developer and first creator of business information in a company, have to transition from having pretty decent information [about a region such as the Northeast U.S.] to [having] global product and brand information," stresses the Philadelphia-based Arthur Andersen LLP consultant.

The experience of a pharmaceutical firm, an Andersen client whom McCormick does not name, provides an example of how costly and frustrating the process can be. Because the data were fundamental to its resource-allocation and value-creation efforts, the company invested $80 million in application software to capture the cash-contribution margins of the top 60 products in the top 15 countries in which the firm operated. When the chairman asked for the data four months later, they were unattainable. The system hadnt been built to deliver them, nor had people taken the time to think through the data requirements, McCormick relates.

In many other companies, however, advanced application software and other sophisticated information-system components are turning finance and accounting into highly efficient corporate strategic partners through a combination of centralization and decentralization.

In Europe, Fiat SpA, a large industrial group based in Turin, Italy, is a prime example of finance and accounting hybridization. So are Air France and KLM/Royal Dutch Airlines, two service providers that use a lot of manufactured goods, namely aircraft. "They have understood that maybe it is more cost-effective to have the central database on a big machine . . . [and] to give each division or department local processing capacity -- [with either] powerful PCs accessing the database or an Internet facility to extract information from the central database . . . [to be worked] on the local PC," says Klod Ghez, the Nanterre, France-based senior vice president and European general manager for Prestige Software International, a division of Computer Associates International Inc. Particularly in heavy industry, "the maintenance, the upgrades, and the complete support of a traditional [centralized] client/server [system] are almost impossible [to afford]," Ghez says.

Just as finance and accounting are being redefined, so is the role of the CFO. Traditionally a controller of the business and processor of such things as accounts payable, accounts receivable, and travel and entertainment expenses, "the CFO now becomes the business partner to provide guidance and support to the business units" for such activities as mergers and acquisitions, and go-to-market decisions to increase shareholder value, says PwCs Schulman.

Dennis D. Dammerman, General Electric Co.s senior vice president for finance and chief financial officer, is the CFO model people most often mention.

Solid, stable, the person credited with orchestrating GEs 1994 exit from the brokerage business, and a possible successor to legendary chairman and CEO John T. Welch Jr., Dammerman is a strategic player at GE.

So are Dean Hawkins, CFO at Germanys adidas-Salomon AG, and any of the divisional CFOs at Houston-based Enron Corp., says Andersens McCormick.

In firms outperforming their industries beyond the short term, "the CFO is in the middle of the game," he says. Example: Thomas J. Meredith, senior vice president and chief financial officer at Dell Computer Corp., Round Rock, Tex.

"The CFO needs to be a bookmaker and not a bookkeeper," McCormick states. "And in the leading companies that weve looked at, the CFO was sitting at the table, in many cases running the strategic development process, but [in any event] participating in thinking through the strategies and the alternatives of resource allocation, rather than valuing them after the fact."

The CFO of the new millennium must, among other things, think like a futurist, act like an architect, be the change integrator, and grow his or her value with corporate value, advised PwCs cost-management team in the book CFO.

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