By Jo Peters.
I work with lots of different UK local authorities and I can see that, as a local government finance leader, your inbox is relentless. Pressures are mounting from all sides. Balancing the budget is the top priority. The increasing number of councils that have succumbed to section 114 notices is a constant reminder of why this is. But your challenge is compounded by multiple factors. A few of the biggest headache inducers include continuous uncertainty over funding, changes to the rules which govern borrowing and investing, accounting, reporting and auditing, and the daily frustrations of interacting with creaky systems and often unreliable data quality.
At the same time, the world is changing. Beyond local government, the traditional role of finance managers as ‘masters of the numbers’ has begun to shift. The ONS projects that more than 50% of current finance jobs will be automated within 10 years. Better access to financial information across the organisation will result in less reliance on finance teams and on traditional budget and reporting cycles. Similarly, the growing awareness of environmental and social value will play an increasingly important role in how organisations, including local government, choose to invest and spend.
“When the rate of change inside an institution becomes slower than the rate of change outside, the end is in sight”
Jack Welch, former CEO of General Electric
I have spent the last few months immersed in thinking about the future of finance while studying at the Cambridge University Institute of Sustainable Leadership. Here there is a rapidly increasing shift to a more impactful approach to business, driven by regulation, shareholder and investor pressure, and the demands of civil society. It is projected that over the next 10 years regenerative business models will come to the fore, with organisations committed to the circular economy and applying full cost accounting to all business impact in the environmental, social, and economic spheres[1].
Where is local government on this change curve? For many, there is an awareness that things are changing, but preparing to respond is, unsurprisingly, lingering at the bottom of that very full in-tray. For others, the pressure is more real and new operating models and new ways of working across the organisation have necessitated finance leaders to consider their own return on investment as a finance function and put change into action. I predict that the same shift that is being seen in the corporate sector will need to happen in local government, but the challenges and pressure faced by finance leaders will make this a difficult shift in comparison to more agile organisations.
We think that having the next generation of finance leaders in place is a great way to start to put in place the adaptability, flexibility and resilience that will be needed to navigate this new world and it is something that is possible, despite other pressures. Are you hiring and developing this next generation of finance leaders in your organisation? What should you be looking for? Here are our top five to look out for:
Technical excellence – this is your backbone. Regardless of the digital advances, there will always be a need for technical expertise to understand the numbers, regulations, and tax issues and interpret this for the organisation. The nature of technical expertise will change as there is a shift to a wider definition of value incorporating environmental and social factors.
Commercial acumen – this isn’t about setting up a trading company, this is about understanding how value is created for the community (beyond finance and beyond organisational boundaries) and building this into decision making. For example, in Oldham an asset-based approach was taken to develop a Social Prescribing Innovation Partnership with a consortium of local organisations, investing in community resources and focusing on early intervention.[2]
Systems thinking – you will need an increasing ability to deal with complexity which can be led by diversity of thought and incremental approaches to managing risk. For example, in recognition that service teams are dealing with complex problems and moving targets, there needs to be flexibility and agility in how budgets are used to ensure resources (both financial and human) are directed to the right thing rather than the thing we planned to spend it on. This will require courage in a climate of financial constraint.
Curiosity, empathy, and an open mind – continuously learning, developing, and building relationships within and outside the organisation. Collaboration will be key to addressing the complex problems that we are facing locally, nationally, and globally. Partnership working has failed so often because of poor relationships, mismatched expectations, and imbalanced rewards. Having a team with the skills to engage and learn about others, find common ground with partners, and embrace complexity and change will enable leadership of successful system change[3].
Storytelling – providing engaging, valuable, and influential insight to support purposeful decision making. Turning strategies into stories will inspire and motivate change to such an extent that organisations such as Microsoft, Motorola, Procter & Gamble, NASA, and the World Bank are intentionally training leaders in the art of storytelling. People will always tell stories, this is about setting the narrative and replacing bad stories with good ones.
Do you agree? Does this match what you are looking for? How does your team stack up?
I think this is a conversation worth having and am keen to continue it with those who are grappling with the challenges and questions I started to wrestle with here. We can either do that in the comments below or over a coffee, I’m on joannepetersconsulting@gmail.com
[1] Grayson, D., Coulter, C. & Lee, M. (2018). All In: The Future of Business Leadership. Abingdon: Routledge
[2] https://www.councils.coop/wp-content/uploads/2019/06/Social-Prescribing-Oldham-Council-1.pdf
[3] McKinsey. (2019). Answering society’s call: A new leadership imperative. McKinsey Quarterly, November. https://www.mckinsey.com/business-functions/organization/our-insights/answering-societys-call-a-new-leadership-imperative#