Strategic finance: an oxymoron?

Why is it that finance people are often overlooked when a leadership team gathers to talk strategy? In part, it’s because the term ‘finance’ for most people means systems for managing resources that keep organisations running. This is operational finance: necessary but not sufficient to ensure organisations thrive (or even survive). To provide more value, finance needs to think and act strategically. This is where the term ‘strategic finance’ comes in.

Strategic finance isn’t a term that is understood or generally agreed on.   Most definitions deal with internal finance issues.   Typically, they’re about things Chief Executives and other leaders have no interest in. 

So how does strategic finance get the attention of decision-makers?  If you want to be useful, be relevant.  If you want to be relevant, you need to know what really matters to stakeholders.   What motivates them? What are they focused on? What does success look like for them?  And what troubles them?  Deeply.

Strategic finance needs to:

• focus on solving problems – ones that are big enough to warrant the interest of decision-makers
• engage with leaders using their language – what is the issue, challenge, opportunity the agency faces?
• be an integrator – using the holistic, enterprise, ‘above the swim lanes’ perspective that finance has across the agency
• think about the long-term implications for overall performance
• focus on business outcomes – to mitigate the perception that whenever finance enters the conversation it’s always only about money.

Trying to define ‘strategic finance’ from a finance perspective misses the point.  In practice, there are few problems that are of real interest to decision-makers that are primarily about strategic financial management.   Most problems or issues require a mix of disciplines, where the strategic finance angle is a component rather than centre-stage.  Given this, what is needed is the ability to bring together different disciplines to solve important agency or sector challenges.  For finance to be strategic, it needs to engage seamlessly with other disciplines and perspectives.

Strategic finance only has meaning when it is solving challenges that really matter to key stakeholders.   Far from being an oxymoron, strategic finance is about making finance work for decision-makers (not the other way around).