The folks at Ernst & Young brought together a gang of executives from decidedly mediocre outfits like Fisher & Paykel, Coca Cola, and some pharms like Pfizer, then surveyed a bunch of other CFO’s and Supply Chain execs about their relationship and priorities, and published a report about the results called “Partnering for Performance - Part 1” the CFO and the Supply Chain”. It seems 79% of the supply chain folks reported that the CFO in their company does not play “an enabling, collaborative business partnering role”. If there is any big surprise in the report it would be the fact that 21% of the supply chain people actually do believe their CFO plays such a lofty role.
All in all, when you read deeper into the report, it is actually good news for the supply chain that most CFO’s keep their nose out of it. A chart deep in the report shows the disconnects in priority. Comparing the CFO’s perceptions of the issues in which collaboration would be helpful with supply chain folks’ perceptions shows the gaps: CFO’s think the need for cost cutting and growth are the best reasons for them to get involved – the supply chain execs not so much. The supply chain leaders, however, are almost twice as likely to see the need to improve quality and customer service as drivers of the need for accounting to help out - two areas in which accounting numbers are wholly inadequate.
The crux of the problem can be seen in the conclusion, in which the esteemed money folks lay out their “Ten steps for CFOs toward a business partnering relationship with the supply chain”. The first step is to start spending one day a week working on supply chain stuff. Then ...
Step 4: “Ensure business decisions are driven by a data based single version of the truth. Discourage multiple interpretations of master data by different functional areas. Position finance as the owners of the data.”
In that single statement the destructive role accounting too often plays in the business rings loud and clear. A data-based single version of the truth, no interpretation other than that of accounting, which is the owner of the data. You don’t often see such an off-the-charts level of arrogance and ignorance combined into a single statement.
It is no wonder 79% of the companies surveyed reported little accounting involvement in supply chain management – who would want to invite a CFO to the meeting when he is likely to show up with a set of allocations and accruals that partially describe some angles of the business and announce that the decisions must be based on his numbers, no one else’s spin on the numbers is legitimate, and no one else’s numbers can be used in the decision making. People like that aren’t invited to collaborate in the decision on what to have on the pizza for lunch, let alone make major decisions that affect people’s lives.
To fully appreciate just how dysfunctional so many companies with finance and accounting dominated headquarters are one has only to flip this report around. Can anyone imagine a report from a big-time operations outfit – the Boston Consulting Group, for instance – advocating for supply chain people to start spending one day a week in accounting, laying out all of the financial errors, problems and general mismanagement, demanding that from this day hence all financial decisions will be made based on data from the supply chain, and tolerating no alternate interpretations from the accounting people?
The assumption that financial people know enough about the supply chain to elevate cost cutting over quality and service and drive all of the decision making is patently absurd, but that is the assumption many folks make. It is incumbent on operations people at the sharp end of the value adding effort to learn the accounting rules and processes, as well as to learn, master and comply with corporate policies of all stripes, but the headquarters folks have no such need to master the first thing about how the company actually creates value for customers.
I would suggest there is really only one step for a CFO to take to contribute to the supply chain: Show up at every opportunity every time the supply chain is being discussed and listen with deep humility to what is being said; go out into the field and into the trenches often and spend time with the people on the front lines keeping your mouth shut and your ears open, accept everything you hear and see as fact that much more closely reflects reality than anything in the accounting system; and only when you are specifically asked for it, offer an opinion.