CFO Hacks! One Neck to Choke

Today I’m going to continue on with our theme of work habits which can help you to stay on top of the financial, administrative and operational tasks which come with running a business.  In the first post, I talked about when, that is, scheduling the work. In the second post, I talked about how, that is, setting up processes to complete the work.

Now, let’s talk about who.  That is, by whom is the work to be done? Which person within your organization is responsible for ensuring that the work gets done according to schedule and in accordance with the set process?

The key to determining the who

ONE NECK TO CHOKE

I learned this phrase from a former manager who loved to use it, even if he didn’t always apply it effectively (more on that below). To be clear, he wasn’t advocating actual strangulation. Unless one is working for a military force or a criminal organization, violence has no place at the office. Rather, the idea is that you want to ensure that tasks and processes have clear owners, and that these owners are responsible for managing the process of getting the work done, even if they don’t do all the work themselves or are collecting inputs from various departments.

Adopting this method can provide multiple benefits.

  • Allows management to delegate tasks downward without losing control.
  • Reduction of chaos and creation of clear lines of responsibility.
  • Less time wasted trying to figure out who did what, why someone did something, etc. Maybe something was done incorrectly, but with one neck to choke, you know exactly whose neck to go to!
  • Allows for processes to be managed more efficiently, both because there are fewer people involved (see note on chaos, above) and because one person assigned the task can develop practices for managing the task more effectively than if the same task were broken up in a random fashion between 20 people, none of whom really see it as their responsibility.

If you are going to do it, do it right

Adopting the one neck to choke rule is not as simple as grabbing a random person from a random department and announcing to them: “Yael, you are now in charge of credit card reconciliations for our New York office! Congrats!”  The selection has to make sense.  Specifically:

  • the person needs to be sufficiently close to the process they are supposed to be in charge of;
  • the person needs to have adequate control over the process; and
  • the person needs to have adequate authority in their own right to ensure that processes are adhered to and/or management must establish and enforce rules to ensure that processes are adhered to.

Proximity may by physical (e.g. person is located in the same office), organizational (e.g. person is a member of the relevant team) or functional (e.g. person is a member of a relevant department).

Seeing this in action

Here are some real-life examples of how this might play out.

  • The VP R&D may be given a company credit card to be used for R&D charges, with the R&D team members required to send all department charge requests to them. The VP R&D will then be responsible for putting the charges through and sending the receipts to finance.
  • The HR Manager can be responsible for collecting payroll change data from employees and department heads and transferring the data to finance each month.
  • The NY branch office manager can be put in charge of going to the NY Managing Director each week, collecting their receipts, creating an expense report and sending everything to finance. (Physical violence might actually be required here).

In the first case, as the head of the R&D department, the VP R&D is well placed to be able to assess whether an expenditure is justified/ within budget, is senior enough  to approve the expenditure and also (presumably) responsible enough to keep track of receipts.  This allows R&D to enjoy the benefits of a faster purchasing process (thus minimizing work delays) while reducing the risk of unauthorized charges and minimizing the amount of time finance has to invest in chasing missing documentation for credit card charges.

In the second case, the HR Manager is in any event involved in HR processes such as hiring, firing, promotions, transfers, reviews, pay raises and the like.  They are already documenting changes, already making sure that all changes are properly approved and already updating internal records.  Making them the “address” for other related updates (e.g. employee personal status changes) and then having them collect all of the changes into a single file to send to finance just makes sense.  It also reduces the need to expose more people to sensitive payroll data and can provide as an additional level of internal control that only authorized changes are processed.

In the last case, while the office manager isn’t actually involved in the MD’s expenditures and doesn’t have the ability to approve or deny them, they are physically in the right place to actually chase after that disorganized loon that you have in charge of your NY office, and make them hand over their ^&@%#! expense receipts.

And in all cases, if something is missing, you have one starting point where to look for it.

The joys of authoritarian power

One thing to note here is that a bit of extra management authority can make up for a lack in proximity and control.  Going back to our original example, suppose that Yael is a part-time, low-level clerk in the Israeli home office.  She is tasked with ensuring that all credit card transactions are supported by receipts and explanations and that the credit card usage by the US team is compliant with company policy.  She isn’t near enough to the US office to physically collect receipts or to have a good feel for what the charges are or if they are reasonable and she isn’t senior enough to have control over the process or demand compliance. However, if the senior company management:

  • puts into place clear policies regarding credit card usage and reporting requirements (e.g. all receipts, complete with explanations, must be sent to Yael by the 10th of every month); and
  • ensures that these rules are both clearly communicated and strictly enforced (e.g. people who don’t comply will lose their company card),

this may be enough to allow Yael to get the job done. Note that, in this case, enforcement is everything.

The bottom line, is that the assignments have to make sense and be practical, enforceable and enforced.  Setting up an employee for failure is only good for guaranteeing failure.

Practical example

I used the above methods to impose some control over a company’s credit card program. The company has a corporate credit card it uses for certain office and IT purchases. In the past, anyone could get the credit card details.  Yossi from design would want to buy a font and would simply ask the head of R&D for the card number.  The net result?  Lots of unidentified transactions when the bookkeeper went to reconcile the cards at month end, plus repeated cases of people signing up for subscriptions and then forgetting to cancel them when they were no longer needed.  At first, I tried to set a rule that anyone who used the card had to send the receipt to finance.  It didn’t work—people forgot all the time and as we didn’t know who had made the charge to begin with, we ended up sending out mass mailings with lists of orphan charges every. single. month. Finally, I chose two necks to choke. Our HR manager and IT manager—who in any event make the most charges—were made the keepers of the credit card. Anyone who wanted to put through a charge (myself included) has to go to them. They are responsible for sending the receipts through to finance.  In addition, our bookkeeper reviews recurring charges periodically with the IT manager; he is responsible for confirming that the charges should, indeed, still be recurring. The number of unidentified and orphaned transactions has dropped significantly.

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