The Role of Finance

Key Thoughts:-

Once in a while, an article that summarizes my thoughts. Here’s one I just read. The article mainly mentioned the CFO specifically, but I think no one person can do a job, it’s a whole team. So I believe it’s applicable to all of us.

Summary:-

The article opened with a declaration that Finance bring a unique view to the table – ‘a broad, objective perspective on costs, cash, and capital, with the long-term best interest of the organization in mind.’

However, near-term pressures to ‘reduce costs, better manage cash and working capital, and monitor capital expenditures’ cause some Finance function to shift focus.

Areas Finance should focus on includes:-

1. Information Management. Management is about making decision, and we can’t make decision if we have no information. Or if we have bad information, we make bad decision. The need for greater accuracy and control over the ‘development and use of information’

2. Enterprise Risk Management. Awareness of risk means that the risk management processes will require greater, broader, and more frequent effort.

3. Cash Management. A recent survey shows that the CFO’s agenda has shifted from ‘value preservation’ to ‘value creation’. Needs to be front and center in discussions of growth opportunities. The need to develop scenarios planning means we need competencies in cash forecasting.

4. COO’s area of responsibilities. The consolidation of COO role in some hospitals means more areas come under Finance, facilities management, human resources performance management, regulatory affairs, and general operations.

My Comments:

It’s heartening to note that at PAH, Finance is already doing a lot of the area listed, this serves as a reinforcement that we are on the right track. What we need is increase the effectiveness of what we are contributing.

Reference: Finance Needs to Sit At the Head Table, Edward J. Giniat. HFM, May 2009, pg 80-82.

Opportunities in the Downturn

Key Thought:

The author’s premise for this article is that ‘of the many opportunities that arise out of troubled times, the most valuable of all for many businesspeople are the opportunities for personal growth, particularly for developing as a leader.’

Summaries:

What does true leadership under unimaginable stress look like?

1. Be seen early and often. People want to be led.

2. Act fast. It’s amazing how people who would be at one another’s throats in good times will accept that in a crisis, decisions have to be made. leaders in a crisis must not lose their rare opportunity to act. Every instinct tells you to decide more slowly than usual, yet it’s vital to decide more quickly.

3. Show fearlessness. we want our leaders to show us that they’re not afraid. The effective leader announces trouble in unvarnished terms, then explains confidently how it will be defeated. “Show fearlessness, not be fearless” – you should be terrified in such situation, but it didn’t matter.

4. Tell a story that puts the crisis in context. There are two groups of people, those who see stressful events as bad – suffers more, those who see stressful events as normal – do better. The leader helps everyone to respond like the second group.

My Comments:

Opportunity like a crisis pushes leaders to become great from average. It’s up to us to step up and make the difference. In normal times, your superior is not interested in your failure, so we tend to be save. But a crisis offers that chance, it’s up to us to take the chance.

Reference: The Upside of the Downturn, by Geoff Colvin, Fortune Asian Edition, June 8, 2009, page 42-46.

East Versus West

Key Thought:

A very un-politically correct article on how research is showing that Asians thinks different from Westerners. The article profile Richard Nisbett, University of Michigan professor.

Summaries:

In one experiment, the Americans went ‘for the biggest, brightest moving object and focused on that and on its attributes’. The Japanese would describe the stream, the water, the rocks and shells…and then there were three big fish swimming off to the left.’

In another study, Nisbett discovered that East Asians have an easier time remembering objects when they are presented with the same background against which they were first seen. By contrast, context doesn’t seem to affect Western recognition of an object.

East Asians	Westerners
see things in context	focus on the point at hand
dependent	independent
holistic	analytic
collectivistic	individualistic

The article goes on to describe more difference. The stock market, Westerner’s preference for lawyers over engineers, Asians higher score in Math in Westerners (no, it’s not Asians are smarter), a lot of Asian would be concert pianists, but fewer opera-singers, and what it means for marketers of consumer goods.

My comments:

The differences are real, they might now always be for the better, but they matter. The final sentence sums up the article well - Nisbett believe that those who will be most successful in the 21st century are the ones who grasp what’s best about both worldviews. The Americans should temper their optimism, Asians their reluctance to take center stage.

Reference: East Versus West: A psychology professor dares to compare how Asians and Americans think, by Hana R. Alberts, Forbes Asia, May 11, 2009, pg 64-65.

Lesson from Delhi Metro

Key Thought:

Best practices can be found in the most unlikely places, because it’s not the place, people or culture that makes the difference, it’s the leader. Time and time again, I have seen this validated.

The article in question profile Delhi Metro’s MD Elattuvalapil Sreedharan. His claim to fame in the article - ‘finish building the initial $2.3 billion subway system in 2005 under budget and almost three years ahead of schedule.’

Summaries:

- weekly inspection of expansion, solve problems on the spot

- deeply spiritual man, meditate every day, does yoga and walks at least 45 minutes in the evening

- plaque in his office quotes from the Indian scripture Yog Vashist: “Work I do; not that ‘I’ do it.”

- More than 800,000 people use Delhi Metro each day, and it remains clean and punctual, with 99.9% of all trains running on time since it began operating (eat your heart out, KTM!)

- digital clocks that counts down to the days before the next line must be completed are found throughout Delhi Metro’s offices and construction sites

- it’s one of the few subway systems in the world that is operationally profitable without government subsidies

My Thoughts:

Just the above few points tickle the imagination. What’s going on here? We see intensity, passion, detailed minded, relentless focus on the goal, manage efficiently and effectively. It’s also balanced with personal development (spiritually). There’s no doubt a lot of the achievement is due to the leader himself. Look at it simplistically, it would seem it’s reachable for most people to achieve what he had achieved, it’s a matter of execution.

Reference: Delhi’s Subway Is Cheap—and Early, by Amy Yee, Forbes Asia, May 11, 2009, pg26-27.