I personally believe that the Financial Directorate should be a partner to the business, its assistant and methodologist. The Financial Directorate at Corum Group operates in such a paradigm, supported by innovative practices for business process organisation. These are allocated by independent centres of financial responsibility within the company’s structure and the accepted system of matrix responsibility.
CFR: how it works
Let us begin with the structure. There are several centres of corporate financial responsibility (CFR) within our Company. They are:
- divisions (the Division of Underground Mining, the Division of Open-pit Mining, the Division of Infrastructural Projects),
- trade companies and representative offices (in Ukraine, Russia, Poland, Vietnam, India, China),
- Corporate Centre (in charge of the process methodology) and Corum Source (the structure where all service functions are centralised).
Each centre of financial responsibility has its own financial service (department, to be exact) with a model structure. Its major objective is to manage the processes of annual/quarterly/monthly planning and reporting. Each financial department includes:
- head of the department for financial management,
- manager in charge of the budgeting at CFR,
- liquidity manager in charge of planning current assets and cash flows,
- investment manager,
- specialist for production cost management, who introduces the measures aimed at optimising variable costs,
- in case there are plants subordinate to the CFR, its financial department includes the asset manager.
Each financial department is structurally subordinated to the director of the CFR and functionally – to the Financial Directorate.
This structure was applied by the company as a result of the introduction of the process management model, owing to which the company’s various functions (financial, HR, PR etc.) got involved in a wide range of processes by suggesting methods for their improvement and optimisation from the perspective of their own knowledge and experience. The process model enabled us to reduce the number of managerial levels from three to two. If before that each production facility used to have financial departments, which used to result in increased expenditures of time and human resources, then now their function is performed by the respective manager of the division’s financial department, while the facility and its top-management can entirely focus on production and concentrate their efforts on timely production output.
For the purpose of competent production planning and efficient logistics, Corum applies the matrix responsibility system. What are the advantages of the system? It is clear that the trading companies cannot sell products that were not manufactured (or not bought under distribution) and the divisions have no reason to manufacture equipment that cannot be sold. For the timely production of the required products and rational load of the consignment warehouses, we need a production programme. And for the trading company, when it concludes a contract, for it to have a clear understanding of how and when the order will be fulfilled, we need a well-thought-out sales plan. A wide circle of people are involved in the development of a sales plan, and the financial departments of the CFRs, as if rising over the process, assist to build it correctly in terms of methodology. They regulate the terms and the form of the information provision and assist the process members in reaching the consensus. In the process of the further analysis of discrepancies between the plan and its actual implementation, the financial departments point out the weak points in the planning process.
How does the mechanism of matrix responsibility function? Each trading company is responsible for the sale of the entire portfolio of products in its market, while the objective of the divisions is to sell its own group of equipment in all markets. So, there is an intersection of responsibilities here. In fact, this is cross-responsibility for a unified result.
At the lower level, matrix responsibility works as follows. Within each trade company, there is a key customer manager and a product marketing manager. If the former offers the entire range of the company’s products to customers, then the latter is in charge of the sale of certain equipment types. In the process of compiling the sales plan, both managers should reach a common vision of its filling, so that a correct production and sales schedule could be made later on. This vision suggests answers to the following questions: what product, to what customer, when and for what price do we sell. It is important that the company has not only to understand what it should manufacture and within what terms, but also should know where it should find funds for this production. Sales revenues should, at the respective time, ensure the financial support of new orders being fulfilled. So, we are back to the role of financial departments as methodologists of production, planning/distribution, buying and sales.
Therefore, the Financial Directorate takes an active role in the implementation of innovative practices of business process organisation, whereby its role within the group goes far beyond the long-standing standards.