The following is a guest post from Rahul Swali, chief financial officer; Dr. Emma Sarro, chief of research; and Dr. Laura Cassiday, chief of content at NeuroLeadership Institute. Opinions are the authors’ own.
“We don’t want to be an accounting-driven business. You stifle innovation by pushing numbers at us,” a senior engineering leader once told me. “Your budgets introduce unrealistic constraints, which result in sub-par products that don’t measure up to market expectations or competitive standards.”
As a finance executive, my responsibility was to help this engineering leader set his annual budget. After all, we were both accountable to upper management, the company’s investors and shareholders. Yet we were seeing the same problem from two completely different perspectives. From his perspective, innovation with speed demanded spending flexibility.
An absence of any budget would be preferred: If we didn’t develop a standout product on time, we had no chance against the encroaching competition. From my perspective, the freedom to potentially overspend on new product development came with tough decisions to either cut or minimize other development programs or reduce costs elsewhere. Innovation comes laden with failure and redirection, all adding financial risk.
“It’s your job to go to the CFO of our company and make a case for additional spending,” the engineering leader continued, pointing wryly at me.
“No, it’s our job to make the case,” I replied. While my response was reasonable, our conversation ended tensely. The engineering leader had no interest in sharing the accountability with me, having endured prior blowbacks from upper management when he’d requested additional spending. I left the conversation knowing that I would be on the receiving end of the buzzsaw from the news delivery that lay ahead.
Finance leaders often find themselves in similar impasses across various business domains: enterprise resource planning (ERP) system implementations that threaten to go over budget, sales targets falling short, cost overruns stemming from quality control system failures, unexpected warranty claims and the list goes on and on. Too often, finance leaders are left with delivering the news, and not the good kind of news, making them the easy objects of blame.
Finance leadership requires ownership of target delivery. In addition, finance leaders are accountable for strategic decision-making, strong capital allocation, risk mitigation, opportunity identification and clear communication of insights into current conditions. In reality, finance leaders own none of these priorities alone. Without shared accountability with their operational counterparts, the finance team is bound to remain a siloed news reporter. Finance teams must evolve from bean-counting and scorekeeping to bridging the silos that exist in the business. Finance leaders must be role models of shared accountability.
How can CFOs and finance leaders drive broader team accountability for financial targets, where all members share a set of expectations and are answerable for their common actions or decisions? It begins with an understanding of how our brain creates expectations, how it responds when expectations are unmet and ways to motivate ourselves and others to meet expectations.
The science of accountability
Accountability, whether it is individual or shared, is based on a set of expectations and whether they are met. Setting expectations is one of the ways our brains evolved to help us survive. Expectations allow us to anticipate and respond to future events, impacting the way we perceive the world around us, our emotional response, and our ability to make decisions. When there’s a mismatch between the outcome we expect and the one we actually get, our brain registers this as a reward prediction error.
Importantly, when expectations are not met, the brain undergoes several emotional and cognitive responses that can significantly impact performance and well-being. Changes in hormone release and brain system activation impact memory, decision making and emotional regulation. Especially when outcomes are worse than anticipated, expectations are quickly adjusted to avoid future disappointments. For trust and collaboration to flourish in the workplace, we need to create a culture where all individuals and teams strive to meet expectations of themselves.
However, when expectations are met or even surpassed, there’s no prediction error. Several positive outcomes occur, all in response to a release of dopamine. These include an array of positive emotions, like satisfaction, reinforcing the behaviors that led to the successful outcome, and a building of trust in those who helped meet the expectations.
A culture of shared accountability, where all members share a set of expectations and are answerable for their common actions or decisions, can be as simple as practicing a series of behaviors that ultimately manifest as organizational habits. These habits must be taught early in each finance team member’s leadership journey, so that as they grow in their careers, they become better operational partners.
1. Think ahead
A thriving environment of shared accountability requires us to think ahead by creating shared expectations. When we create a set of shared expectations with our operational partners, we align all our predictive models. We form a prospective memory — a planned set of future actions needed to reach our goals. Importantly, this prospective memory must be shared across all members, so clear communication and mutual understanding is a critical piece of this habit. We must lay out goals, roles, and outcomes to provide a common framework.
To invite cross-functional ownership of any budget, finance leaders must embrace aligning budget line-items with RACI matrices. These matrices clarify each team member’s role for the budget across four categories: who is Responsible, Accountable, Consulted, and Informed (RACI). Where there’s role clarity around a shared expectation, and team members clearly understand their obligations toward a goal, there’s a higher probability of successfully achieving financial goals.
Finance leaders also must acknowledge that our budgets require flexibility to absorb curveballs. Shared expectations must be accompanied by the promise to cross-functionally rally together when the unpredictable occurs. We must openly say, “It’s okay to change course … we’ve got this together.”
2. Own your commitments
Crucially, finance leaders must demonstrate we own our commitments to our operational partners. This goes beyond just doing what we say we’ll do. Of course, we must consistently follow through by meeting deadlines and delivering high quality financial reporting, but that is merely the baseline.
We must also understand how the brain sets and responds to expectations, and how to create the intrinsic motivational drive for team members to meet those expectations. Fostering intrinsic motivation across a team can begin by aligning on a common goal and creating clarity around how everyone’s role is critical for success. Motivation can also be boosted by sending social signals, such as those that build a sense of relatedness or fairness that all tasks are equally measured and valued.
Another way to boost intrinsic motivation is to elevate our operational partnerships with transparency. This means that we share the obstacles we’re encountering and seek help. Concurrently, we must offer our support to solve others’ challenges, acknowledge our mistakes, and apologize when necessary. We must listen attentively, ask thoughtful questions and contribute ideas. Transparency and deep listening build trust and show that we’re taking responsibility for our commitments. After all, mutual trust and care unlock mutual success.
3. Anchor on solutions
At the beginning of a financial year, you often hear finance leaders declare specific financial goals, such as, “We must grow profit by 10%.” Such goals are spoken loudly in meetings and plastered on office walls. However, cultivating a solution-oriented culture is a bigger imperative for finance leaders. Imagine beginning the year with a finance leader asking, “What is one thing we can do together right now to decrease our marketing event cost?” And then working together to solve that problem. Gradual, consistent improvements through collective involvement amass great financial rewards for many businesses.
Such improvements are foundational to achieving the larger goal of profit growth. This explains the popularity of kaizen, which is practiced by many companies, a Japanese business philosophy that emphasizes continuous improvement and involves all employees in the process. It’s a combination of philosophy and action plan that encourages employees to work together to make incremental improvements. Anchoring on what we, together, can solve serves as a powerful approach to aligning our operational partners with us in achieving superior financial results.
Anchoring on solutions means creating a mindset that encourages teams to lean toward solutions and away from blame. This requires an environment of psychological safety and a growth mindset. Psychological safety is needed so that when mistakes happen or expectations are unmet, individuals speak up about the error instead of hoping it won’t be noticed. A growth mindset, or the belief that mistakes are opportunities for improvement, is needed so that individuals are driven toward fixing errors as opposed to pointing fingers.
Shared accountability drives organizational success
Shared accountability flourishes when we commit to each other to strive for mutual success. This requires creating shared working habits where we can collaborate thoroughly and truthfully, where failure is safe but success is celebrated, and where solving problems together is both an intellectual and a material reward.
Financial prudence and operational efficiency are parallel goals best achieved through shared accountability and partnership. Finance teams have long moved away from the legacy of being sports reporters, simply keeping score. Yet, they often have a long way to go to become fully embedded operational problem solvers. Often the roadblock arises from not understanding how to drive shared accountability.
After I responded to the engineering leader with, “No, it’s our job to make the case,” I had to shift my act into high gear. I prepared multiple investment cases, with upside and downside risk scenarios. I sought consensus on the investment cases from the engineering leader and his team.
We thought ahead, owned our commitments, and anchored on solutions by working through what-if scenarios of trades we would make as a team if our request for additional spending was not granted. Once we all agreed that we had an investment case for the additional spending that we sought and believed in, we took our case to the CEO and CFO of our company. Our investment discussions weren’t easy, but we ultimately decided on the path forward together.
Organizational success is mutual success stemming from shared accountability. As finance leaders, it’s incumbent upon us to help create this shared accountability. We often pride ourselves in saying that we’re strong operational partners. The reality is that we still have a lot of lifting left to do to tip the scale from scorekeeping to helping score team goals
