Finance capability is inherently important to a sustainable organisation. That’s not just because it’s about effectively managing financial resources—making sound business investments falls under the umbrella of finance.
In this guide, we’ll talk about how to define comprehensive accounting and finance capabilities, strategies to build capability in your finance professionals, and how to imbue financial inclusion into all learning journeys, regardless of department.
What is finance capability?
Finance capability refers to the collective knowledge, skills, and behaviours of finance professionals that enable them to perform their roles effectively.
3 steps to define finance capabilities
Whether arranged in a finance capability model or framework, capabilities outline the essence of what the accounting and finance function does in an organisation. That gives you some clues on how to go about creating accounting and finance capabilities.
Step 1: Define the landscape
Start with:
- The organisation’s greater mission, purpose and values
- Finance’s role in that mission
- The value finance generates as a function, now and into the future.
By kicking off with a little business acumen, you set the scene for true alignment between finance capabilities and business strategy. That makes capability building easier down the line, which we’ll get to momentarily. For now, let’s define some finance capabilities.
Step 2: Define the purpose
The other side of the capability coin is its purpose. Each one should have a unique purpose in the grand finance scheme. There shouldn’t be overlap between finance capabilities.
For help here, consider:
- How a capability will help the business achieve its long-term goals.
- The market demand (if there is one) for the capability.
- If you have the necessary resources (including budget, people and equipment) to sustain it.
- If it competes with any existing capabilities (see above about uniqueness).
- The risks involved with building the capability.
Step 3: Define the outcome
This amounts to naming the capability by way of defining the outcome it is meant to have. And that’s tied to its purpose, which is why we name and describe capabilities last.
For example:
- Regulatory compliance
- Management accounting
- Financial strategic planning.
If you still need some inspiration when shaping capabilities, we’ve done a lot of the hard yards for you with a list of common finance capabilities here. And if you want some adjacent financial skills and abilities, we’ve also got management and leadership capability sets ready to copy for free.
We recommend changing any phrasing or language to suit the language of your organisation and its mission.
Strategies for building finance capability
All capability building processes generally require a number of core steps. Here, you’ll need to:
- Engage leadership
- Create co-ownership between HR and finance
- Assess capability gaps
- Assess capability maturity (yes, different to gaps)
- Build capability
- Track progress and make improvements.
Secure leadership buy-in
There’s one key role to start with, actually: Your CFO. McKinsey gives us three specific ways they’re central to building finance capability:
- Identifying the best use of financial resources for max value
- Increasing financial acumen at every job level
- Supporting talent development overall, given a cross-functional view of the business.
Your CFO is particularly key on that first one, since other leaders will want instant results from investments that actually accrue value over time. But you still have to show them that there’s value for them to gain from developing financial knowledge, skills and traits in their neck of the woods.
Buy-in is always a case of proving the current state of things isn’t working, and then comparing a terrible potential future (without action) with the haven capability building would create.
Lock in on the KPIs that matter in the finance department. At a high level, that’ll still be metrics like individual performance, engagement, and retention. But consider what else they may need across other functions:
- Financial literacy for empowered money management decisions
- Demand forecasting for resource allocation
- Cyber security for digital finance management tools.
The point is to make CFO a champion for financial capability throughout the organisation, by showing how you can build it with their help. Key point is that they aren’t leading the charge, nor are they scoping the entire project.
Co-ownership between HR and finance
On that last point, the lynchpin of the process is co-ownership between HR and the finance and accounting functions leaders. Finance capability is just one piece of the business puzzle.
Co-ownership bridges learning and performance, ensuring that:
- Learning and development accurately reflects performance needs.
- Capability building initiatives target the most impactful gaps or opportunities.
- There is constant alignment with the business strategy (and nothing is distorted through the lens of individual functions).
Part of this is parcelling who owns what. The CFO and finance leaders should provide the nuanced perspective on capability gaps and performance needs, while HR lean into providing the means for assessment and development. Win-win.
Understanding finance capability gaps
This is the first of a two-part approach to assessing capability. Here we’re figuring out what the physical distance is between current finance capabilities and the skills and knowledge needed in a specific role.
Capability assessments should always be linked to job roles, given you are assessing a finance professional’s ability to perform the role. There are a few ways you can then assess capability.
- Self-assessments, wherein employees are given a scorecard of capabilities to evaluate themselves on.
- Manager assessments involve the same scorecard and capabilities, but the employee’s performance is assessed from (you guessed it) the manager’s perspective.
- Subject matter expert assessments for those particularly niche capabilities.
The criteria for evaluation usually follows levels of competency, such as beginner, intermediate and advanced, or needs development, meets expectations and exceeds expectations.
All forms of assessment are generally best done together rather than separately. Centralising this information in a digital format makes it easier to analyse real-time capability gaps at the function level.
Assess finance capability maturity
Once the parameters are clear on capability gaps, you can take a closer look at what’s the most critical to work on.
In other words, you’re building a finance capability maturity model. The aim is to create a living finance capabilities map that shows the health of the finance function at any point in time.
The exact criterion for maturity is up to you. We’ve seen organisations use value to business, availability and level of competency all as measures of maturity. The point, though, is to understand where exactly any given capability sits on a scale of maturity.
That is:
- Initial
- Managed
- Defined
- Qualitatively managed
- Optimised.
When you know which capability gaps are most pertinent to develop, you can design the most effective methods for building finance capability.
Methods to build finance capability
We’re not going to introduce new ways of learning here. The beauty of capability building is that you can optimise existing training methods.
There’ll be two avenues for training here: Building technical and soft capabilities in your finance team.
Compliance training is probably the most obvious path here, but we recommend that the content isn’t solely Y/N quizzes. Rather, look at imparting knowledge on value add, business investments, and smart cost-cutting. That’ll be the intellectual capital that flows into how managers make business cases, structure their teams, and justify resource allocation down the line. Essentially: It’s not just about compliance, but business value.
Your finance team is also going to need to build soft skills as much as technical finance and accounting capabilities. In fact, given their reach across the organisation, they’ll likely need it more than most.
The best approach is to create a learning experience that combines theory and practice. Let’s say we have a finance officer who’s at a beginner level of competency for certain capability that is at risk in your team. The plan could be:
- The employee starts with a couple of individual courses that lay the groundwork of knowledge. The course content is evergreen, too, so that they can refer to it when needed.
- Once they’ve ticked off a few readings and videos, their manager gives them an on-the-job assignment. The point isn’t just to try out new skills, but to reinforce them as they should be used in the workplace.
- To further bridge the gap between learning and performance, borrow from step one. Enabling on-demand learning lessens time to proficiency by giving employees solutions to problems in the moment of need.
Creating plans to match job pathways is another trick to build capabilities that you’ll need in future. It also means you can develop specialist job roles (such as specific accounting roles) alongside org-wide financial capability.
Tracking progress
The last step in this process is finding a way to track progress and make improvements where needed.
You’ve actually got two methods in place already to help here: Capability gap analysis and maturity assessment. Treat them as constant companions to ensure that development plans are always properly aligned with business strategy. The continuous element is important to keep finance talent moving in your organisation, so that structurally you’re agile in the face of market changes.
If you’re facing down a complete finance transformation, adopting new digital technologies to automate burdensome manual tasks, then you’ll need a way to codify lessons learned.
A knowledge management system is a bit of a catch-all here. Not only can it prop up technology enablement of the finance department, but you can deliver, assess and determine the efficacy of learning through it. Let’s lay it out.
- You can conduct proactive needs analyses for all business units with relative ease. Digitised capability assessments mean you can see real-time competency.
- Online capability academies go beyond content libraries. They curate relevant content at scale and make it easy to match content to specific capabilities.
- The right system will give you a swathe of reporting data, such as completions, times to completion, and registers of interest or waiting lists, to determine learner engagement. That’s the qualitative data you can use to baseline learning effectiveness.
Take a performance learning management system (PLMS) for example. It’s a dynamic AI-powered tool designed to codify and operationalise the capabilities that drive organisational efficiency, linking L&D to business performance.
Key takeaways
If we borrow a line from the NSW Public Service Commission, finance capability is a business enabler. So, while you may have a collectively exhaustive set of capabilities for your finance organisation, it’s likely many more employees will need to build finance capability.
With that in mind, it’s best to take a methodical approach to building capability here.
- Start by engaging finance leadership to ensure you’re targeting the right performance pain points at a high level.
- Build co-ownership between finance and HR off the back of buy-in.
- Then move to assessing capability gaps in individuals to needle in on training needs.
- Evaluate finance capability maturity to understand true competency.
- Match training methods to role progression to develop the finance team, while weaving financial literacy into the activities other teams use (like building business cases).
- Keep track of progress so you’re always matching pace with internal needs.
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