HOW TO ALIGN FINANCIAL GOALS WITH BUSINESS STRATEGY

Few people know the demanding yet fascinating realm of corporate finance better than Tim Dunn, former head of the finance function for Nike Canada. In his current role as Director of Nike’s Finance Leadership Rotational Programme, he prepares the firm’s finance managers for more senior positions and more responsibility. 

His course “Financial management” at ELVTR, starting this spring, will help finance professionals broaden their management skills and master the art of aligning financial goals with business strategies.

In the following paragraphs, Tim offers his insights on the present and future of financial management, including the technology trends that shape the profession today. He also offers valuable lessons on how to deal with a crisis and explains what makes Nike’s approach to corporate leadership so effective. 

What skills do financial managers need to develop when they transition to a more senior role?

At Nike, my job is to help managers become directors. One key difference is that managers accomplish work assigned to them, while directors determine what work needs to get done, including who should do it. It’s a more strategic approach.

The best way to get promoted is to demonstrate that you can act at a level above your current position. And you can observe successful leaders as a guide, a role model. Practise how you can apply that type of leadership in your current job. 

True, there are technical skills needed to move up. And as financial professionals, we are always honing those skills, advancing them from being competent to really mastering them. For example, if you are in tax, that means you are refining your technical knowledge of tax.

But usually the thing that holds people back when they move up is not the technical skill set. That can be learned over time. It’s the leadership skills: soft skills, communication, thinking strategically and self-awareness. These skills are harder to develop on your own. Developing these require feedback from people around you.

And what do financial managers need to learn about the non-financial aspects of the firm?

At Nike, understanding everything about their world is essential if you're working with partners. For example, if you're dealing with somebody who's in design and innovation, designing shoes or apparel, you have to understand what they're doing and how that creates value.

People appreciate our brand for its innovation. We take something new and different and turn it into a product that performs better than its predecessor. If it's a shoe, it’s either lighter or has more traction. Or it has better compression, better absorption of weight when you are running. Perhaps it keeps you warmer. All these things help improve an athlete’s performance. So you have to understand the process of creating innovation and how that innovation translates into value.

Another example is in the marketing space, where we are one of the biggest brands in sport. We need to understand how putting our Swoosh {Nike’s logo} on the field authenticates our brand in the eyes of consumers, and how that creates value. Understanding how marketing people spend money to get that is important if you want to give them advice and help them understand how their spending is connected to the company’s results.

And that means you've got to build trust. You want them to be able to tell you things and ask questions. They need to understand that you won't always be the bad cop. If the finance person is always the bad cop, that's not great for working relationships. So it's very much about building a business partnership.

If you have learned finance strictly from the subject area or a textbook, you understand financial statements and analysis. But to work with other functions and exert cross-functional leadership, you have to understand where others are coming from and what their business is.

The last 15 years have been difficult for businesses due to a series of crises. How can a financial manager help a firm prepare for potential financial risks ahead?

There are two types of financial risks. There are normal challenges that companies should be anticipating and building some contingency for: a slowdown in the economy or a competitor’s new product doing really well, cutting your market share.

But there's a difference between these and the big crises. Nobody was prepared for the pandemic or the war in Ukraine. When those huge things happen, they are not anticipatable. This is where a Chief Financial Officer (CFO) needs to meet with the other leaders of the company and figure out how to deal with the problem. Calmly, intelligently and quickly.

There are always people in the organisation who will be shell-shocked. And, naturally their immediate response is fear, which may impact their ability to help the company out of the situation. So it's really important that the company’s leaders, including the CFO, step away for a moment and decide how they are going to get through this crisis together.

When the pandemic hit, our CEO was very vocal, visible and clear once we realised that this was going to last for a while. He explained that there were three stages to go through. The first stage was the one we were in at the time: things being shut down and business slowing down. 

So we had to focus on our online business and keep our distribution centres open. Then we talked about what would happen after that stage, the rebuilding phase and after that returning back to normal.

Communication was consistent. And other leaders, including our CFO, made sure that the rest of the organisation was on the same page. That made us feel we were going through this together. We knew this was the situation we were in and how we would navigate it. That kind of clarity is important when there's such a huge event with worldwide impact.

Are there any lessons finance managers can draw from the experience of the pandemic?

I think there are many lessons, but one important one for us was around cash. This was a crisis of cash, meaning that our finances were significantly impacted on the revenue side. You could manage some of your costs, but unless you were willing to let go of a significant amount of your staff, which didn’t happen at Nike, we would have a cash problem.

As a global business, we did not have a significant challenge in acquiring credit. We were able to secure three or four times the amount of credit that we ultimately needed. And we probably had enough credit to get through on our own.

So for somebody who is preparing for a tremendous challenge that impacts your business, the most important lesson is that you need to have enough credit to get you through the crisis.

Doesn't that mean that CFOs have more power in the boardroom, especially in terms of shaping corporate strategy?

If you're in the treasury function, then yes, all of a sudden you have a much bigger role. You're much more important to the ongoing operations when there's a crisis like that.

Even in the regular running of business, finance has an important function in terms of forecasting, building business partnerships and navigating through a more competitive environment.

In my +30 years of experience, competition never got easier. It has always got harder, but never suddenly. You always know what's coming, and you're waiting for it. Maybe it's bigger or smaller than you expected. But these are the natural things that all financial people need to be prepared for. Their job is to explain them to management, so that a decision can be made.

When it comes to ongoing business, it's important to acknowledge that there will always be some risk: competitive risk or foreign exchange risk. It's important to hedge those things or take initiatives to reduce the impact.

But ultimately, all leaders in a business need to agree that these things may affect the company. So it's about getting alignment on how the organisation navigates these challenges.

What technology trends affect corporate finance today and what do finance managers need to know about them?

Automation is a big trend. At Nike, we are currently trying to unlock this and make some progress. I don't think that AI is quite impactful yet. But it depends on what we mean by ‘AI’. Most of what we can do today is around automation and machine learning. And machine learning is not the same as AI to me.

Another technology trend in finance is transformation. It is a broad term describing how we are going to automate and leverage systems and tools to do more of the work for us. That includes enterprise-wide systems reducing the number of pieces of work we need to get done.

We are also thinking through processes end-to-end so that we can standardise and maximise their value. So instead of finance dealing with all the different things leaders across the firm want, we are doing the opposite. Finance goes to the organisation and explains what financial resources it will provide to all leaders. Therefore, leaders have to adjust their expectations a little bit.

This leads to another trend accelerated by the pandemic, which is centralisation. Organisations increasingly think about how to reduce the cost of their function and service by centralising activities, automating them and then using tools to make computers do more of the work and have less of the analysis getting done by Excel.

Overall, these trends combined are helping us make finance more efficient.

You have been with Nike for 16 years. What has this experience taught you about leadership?

I think Nike is a great example of a company that develops leaders and provides an encouraging environment for them to become more impactful. We talk about leadership a lot. We invest in people developing their leadership skills. And we have a leadership framework that's consistent across the organisation.

I've been inspired by many of the company’s leaders as I've moved through different roles.  There was a leader who used to say:

If you want to go fast, go alone. But if you want to go far, go together.

And I think that summarises the spirit of Nike leadership. So the feeling that we're all together on this journey is a real thing at Nike.

That's why when we try to create a more diverse and inclusive culture, it feels like this is something we can do relatively easily. Because we stick together when it comes to decision-making and receiving input on how the organisation is going to move forward. 

Sometimes it takes longer to make those decisions. That's because we spend more time sharing ideas with each other and getting alignment before moving forward.

What I've learned at Nike in terms of leadership is that how you do something is just as important as what you do. How you share and communicate with people is just as important as your business results.

This is something I've heard Phil Knight {Nike’s founder} say relatively recently. He said that Nike has more in common with a sports team than a business.

And I think that’s an analogy for how leadership works in sports. Sometimes you have a player who's leading the charge on the field, but there's also leadership on the sideline. There are also coaches. And there's also leadership in other aspects, and general management helps support the team’s overall success.

When dealing with younger employees, how do Nike leaders foster these values?

Nike leaders are very approachable. And this is based on my own experience at other companies. Early on in my career, when I used to speak to leaders several levels above me, they knew my name, which was impressive given the size of the organisation. When I spoke to them, they spoke to me with genuine interest. They gave me their time. They listened.

It's a simple thing, but there are probably many people who have had a bad experience with a leader who did not treat them as an equal. That's not very respectful. It's understandable if they're busy and stressed out. But having approachable leaders is a hallmark of how companies create openness and develop leadership.

Part of a financial manager’s role is helping the firm tap into capital markets. What is the key to good decision-making there?

The best way in which a financial manager can help the organisation is by focusing on productivity, essentially creating, maintaining and holding the value.

Financial managers who focus on that will help create financial results that are more attractive to any investor. And that’s how you solve your problems if you need capital.

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