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Partnering for performance.

How does a company's finance function thrive in an international economy? Northern Telecom has a plan, and it's rooted in two areas: partnering and people.

At Northern Telecom, we realize it's hard for a company to survive today relying only on the domestic market. To say competitive, you have to look to global markets. But exporting alone doesn't make a firm global; you need to operate globally. You have to understand the unique requirements for your products in foreign countries, and you typically need worldwide research and development, global manufacturing facilities, and local alliances.

How can the finance function help? Finance needs to be thought of as a partner within the business, and it needs people who can work unhampered by national borders. My simple definition of excellence for the finance function in a global economy is this: Each team member should do his or her job a little better each day. No dramatic change, no rocket science, just gradual, neverending, continuous improvement in all we do.

THE NEW FINANCE FUNCTION

The financial executive's traditional roles as custodian of assets and historical reporter are still essential to the corporation, but they rank low on the value-added scale because they don't help a company move forward. That's why today's executive must participate as a full business partner at the highest level of strategic and tactical decision-making and must provide timely and insightful information the company can use as a competitive weapon.

At Northern Telecom, we've put into writing the objective of our finance function: "To provide the highest-quality, proactive, innovative, cost-effective, timely, value-added services and support to the businesses and the corporation by being a full business partner."

In 1991, Northern Telecom's finance function played a vital role in every aspect of the company's major business opportunities. In the $2.6-billion acquisition of STC in the U.K., we were crucial in planning and executing the deal. We helped evaluate the "fit" of STC as an acquisition candidate. We raised money in tight credit markets, refinanced at more favorable terms, and then sold off nonstrategic units to help reduce the debt. We then supported the integration of the STC units into our global organization.

For Northern Telecom's 1992 joint venture with Motorola, we analyzed the financial implications of the alliance and then worked closely with Motorola's finance people to develop the new business arrangement. We partnered fully with line management. And we supplied the venture with finance personnel, including its CFO, to staff the start-up.

When Northern Telecom reorganized recently, the financial function worked closely with operating management to set up the reporting processes for the new organization, which moved us from a product-driven to a market-driven company using a matrix management approach. Now, we can offer the company a more in-depth look at such areas as markets and customers, manufacturing costs, and new product roll-outs. We also made important contributions to the reorganization process, because we understand the company's processes and systems and can identify where functional overlaps occur.

In our financial reporting, we increasingly provide trend analysis. We don't just compare this year's numbers with numbers from the same period last year and with numbers from the budget; we identify and highlight directional trends. Take SG&A (selling, general, and administrative) costs, for example. Showing the trend as a percentage of sales over time, month by month, gives management more meaningful data than just showing performance versus that of the prior year and the budget. Management may find, for instance, the rate of growth of SG&A expenses is exceeding the rate of sales growth and can act to slow the SG&A rate.

In 1992, we continue to partner with the business units within Northern Telecom in such areas as customer financing--in Mexico, China, and Poland, for instance--and in evaluating and prioritizing new business opportunities and investments in markets and products. Through our new quality program (more on that later), we're building systems and simplifying procedures to improve operational efficiency.

WAYS TO MOVE AHEAD

If you expect your global finance function to help you achieve your corporate financial goals, I suggest you increase the time your financial people spend on analysis and business counseling, or partnering, within the organization. To do this, however, you have to devise ways to improve your productivity so you can spend less time on financial reporting. Here's what our finance function has begun or plans to do, through our new "Excellence!" quality program, to free up time for partnering:

* Prioritize activities and keep the finance function focused on its objectives.

* Modernize our financial information system to deliver up-to-date information.

* Reduce our financial reporting cycle time. For example, we'll set a goal to provide a P&L statement much earlier in the closing cycle. That goal forces us to analyze our reporting process.

* Reduce the time we need to prepare our financial forecasts. We will establish a specific number of days we want to save.

* Develop measurements to gauge the success of our quality program. We'll use such objectives to help measure our progress. For example, objectives we're now considering include issuing our audit reports within one week of completing an audit; decreasing by 25 percent the number of days our receivables are outstanding; reducing by 75 percent the number of errors on journal entries; improving by 50 percent the accuracy of current-month cash forecasting; and continuously showing improvement on indices that quantify customer satisfaction with the finance function.

THE PEOPLE FACTOR

Because we believe people are the critical factor in our finance function's success, we've reorganized the team to focus on better people management and to motivate and empower each finance employee.

Here's how we organize the global finance function at Northern Telecom: The top management in finance forms the global finance function leadership team, or FFLT. The team includes the vice presidents-finance of the 10 market, product, and technological units and the nine leaders of the functions--accounting, audit, financial planning and analysis, human resources and quality, information systems, investor relations, real estate, tax, and treasury --as well as myself.

We meet each month to discuss finance issues and any problems that have come up since the last meeting. The first item on the agenda is always people development and other people issues. Then we cover business issues. We operate as a team, helping to solve each other's problems. I believe two or more people looking at a problem will come up with a better solution than just one person attacking it. The whole team, representing diverse backgrounds and disciplines, can come up with unique solutions.

At Northern Telecom, we ask all our employees to focus on six core values, to incorporate them into our everyday working lives. They are: excellence, teamwork, customers, commitment, innovation, and people. One major part of our quality program--and a way we reinforce our core values--is our CFO's Awards of Excellence. Northern Telecom's finance function annually presents these awards to outstanding people in the global finance function. We inaugurated the program this year, giving awards in eight categories.

The Customer Service Award recognizes the person who goes the extra mile to understand our customer's needs. This year's winner brought two finance executives from one of our largest customers, British Telecom, to North America for two weeks to show them our management accounting systems. He then assisted them in developing a finance systems strategy, incorporating some of Northern Telecom's ideas.

We give the Quality Award to the individual who makes a significant contribution to improving the quality of Northern Telecom's finance products and service. This year, we recognized a customer credit representative who, by ensuring high-quality billing, enabled his customers to pay promptly and exceeded his collection objectives.

This year, the Teamwork Award recognized a group of individuals from different organizations --and different countries--who worked together to develop the financial framework for the Motorola/Northern Telecom joint venture. It was a major strategic thrust for us.

The Innovation Award goes to the individual or team that introduces a new idea or method that improves the way we work. The winner this year identified and implemented an innovative approach to a proposed tax audit problem in the U.S. The new method provides the data we need without significantly tying up corporate or IRS resources.

With the Staff Support Award, we recognize an individual who, in the eyes of line management, has significantly improved the performance of the finance function. This year's winner developed a new global product profitability reporting system for her line management and spent many hours of personal time with units all over the world gathering data.

We give the People Development Award to the person with superior skills in personnel development through leadership, on-the-job development, and mentoring. This year's winner is a good communicator who, during a turbulent period, continued to develop and promote his staff. He made sure three of his team members had time to pass their final accounting exams.

The Manager of the Year Award goes to the manager who exceeds his or her key objectives, including goals to develop people and strengthen the business. In spite of a 90-percent staff turnover due to transfers and promotions, this year's winner still met his objectives, introduced several new reporting systems, and conducted a strategic analysis of a key business unit.

The Spirit of Northern Telecom Award, a special honor, recognizes someone who exemplifies the core values of our company. Without management knowing, this year's winner worked on his own time supporting another Northern Telecom entity that needed special help, while he continued to manage his own organization. He also coached an employee with a severe speech impediment to make that person an effective member of the team.

We give each award winner a trophy and a cash gift. This year, we received 79 nominations from around the world. We believe making such awards to our employees, and publicly recognizing them, motivates them to excel. And this is the primary responsibility of leadership.

A NETWORK TO KEEP US ON TRACK

We're very proud of our global people network at Northern Telecom. We use a series of cascading human resource planning committees, starting with the FFLT, to set overall people management policy and then work down the organization. We have four such committees--in Canada, the U.S., Europe, and the Asia/Pacific area--with subcommittees in each region. Our vice president of human resources for the finance function drives the whole network and reports directly to me.

When the human resource planning committees meet at all levels, their agendas typically cover such topics as these:

* Review and improve the movement of employees within finance.

* Identify a "short list" of candidates for open positions.

* Facilitate management development reviews.

* Coordinate university recruitment.

* Identify candidates for global assignments.

* Monitor and report on staff morale.

* Initiate and conduct training and leadership development programs.

We've also established a Finance Leadership Development Program to recruit students from college and then train the new hires. We target high-caliber students with MBAs in finance, undergraduates in accounting and commerce, chartered accountants in Canada, and certified public accountants in the U.S.

Under the program, we expose participants to many different functions within finance by moving them around. Job rotations typically last about one year and cover such areas as accounting and control, budgets and forecasting, cost analysis, and investment analysis--at both the corporate and operating levels. We set the objectives for each assignment up front and then review each trainee's progress at least semiannually. We encourage candidates to be innovative, to bring fresh ideas to their assignments.

Each year, participants in the program get together to share their experiences and develop their own network within the company. At the end of the program, each person should be prepared for a managerial assignment in finance.

We've been so successful with the Leadership Development Program in our department that Northern Telecom's operations, human resources, marketing, and information systems departments have started similar programs. We also plan to implement the program for our European operations soon and eventually in our Asia/Pacific facilities.

Finally, at Northern Telecom, we set a policy for how we should conduct the finance function: "Services and support are provided with the highest degree of integrity and commitment by a highly motivated, dedicated, well-trained, highly skilled, and professional team of finance employees, each of whom, in an environment of openness and trust, has fun and derives career fulfillment."

I stress the words commitment, professionalism, trust, career fulfillment, and fun. But the overriding theme is integrity. The finance function is the conscience of any corporation. My rule for ensuring we act with full integrity is this: For every decision you have to make, ask yourself, "Would I be proud to read in the local newspaper about what I've decided?" If you're not sure you would be, then the decision probably isn't the right one. That doesn't mean that someone won't have another opinion; it simply means you should be proud of your decision, even if others disagree.

I also believe strongly we must each have fun at our jobs, enjoy what we're doing. We spend too many hours on the job. To not have fun would be a personal tragedy.

[Mr. Mand is senior vice president-finance and CFO of Northern Telecom Limited in Mississauga, Ontario.]
COPYRIGHT 1992 Financial Executives International
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:Management Strategy; includes related article; Northern Telecom Inc.'s finance function
Author:Mand, Martin G.
Publication:Financial Executive
Date:Sep 1, 1992
Words:2210
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