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Oh god, no. Finance itself is the worst place to get anything done, since their view is almost always a reactive one. When accounting and controlling are done

Oh god, no. Finance itself is the worst place to get anything done, since their view is almost always a reactive one. When accounting and controlling are done setting up their cost centers, the most logical place from their view would be to fire all developers and double the sales team, as that's where the money is made. Risky and unproven new projects with unclear (but potentially massive) returns or indirect relations like production engineers increasing the productivity of application engineers through automation do simply not exist in that world. Finance is ultimately a completely soulless place that — just like technology-centered nerds — should defer to a CEO who puts all the pieces together into a coherent vision, ruthlessly chases product-market fit and a profit-first (but NOT profit-only or self-cannibalizing) approach and thus injects business sense into all players in their company. And that includes the finance department, of which I've certainly seen some of the most stupid ideas. Like software capitalization/activation that did made sense for converting opex to capex in the GAAP sheets, but in the end drove all the best engineers away because of all the mindless paperwork. Just one of many examples. Finance isn't any more intelligent than the other players in the company.

908B64B197 5y ago
> When accounting and controlling are done setting up their cost centers, the most logical place from their view would be to fire all developers and double the sales team, as that's where the money is made. That's great for long term shorts.
- endymi0n 5y ago
  Well it _is_ a common trick for "making the bride pretty" or for short-term incentivized CEOs: You know you've got a top notch DevSecOps team for example if everything is smooth, calm and boring — because most issues are automated away. That's exactly the point when you know you can safely fire that expensive team, because it'll usually take a few years until the automation surplus has been exhausted and then a few more until the starting chaos has propagated into actual outside-visible incidents. Makes for a great bottom-line at approximately the end of shares vesting. You didn't get that pro-tip from me.
hdvpp 5y ago
Manage cash flow in a unpredictable ever changing environment for a month and come back and tell us what you think a finance dept does cause from the comment its quite clear you really dont know.
- lifeisstillgood 5y ago
  Perhaps here would be a great place to let a few hundred developers know. It's worth differentiating between allocation and flow - a million dollar spend can be hard to allocate to Project X, Y or Z. But it is usually simple to see it got spent on Developers, Sales people, rent, hardware licenses etc. As the film says, if you go up high enough, there is only one man with one budget.
  - andrewlgood 5y ago
    And that man/woman is the CEO. Cash flow is the actual movement of money - paying payroll, paying vendors, receiving cash from clients (not just sending out the invoice). Lack of cash flow is what makes companies go bankrupt. Allocations are methods to attribute income and/or expenses to groups. It may be something simply such as dividing up an enterprise software license for email by the number of employees and allocating that expense to their department. It can be more difficult / squishy such as how to attribute brand marketing spend to various product lines. Generally, companies use allocations because they are trying to understand the profitability of something (a product, geography, client, etc). Your example of the million dollar spend is a good one. Very easy to see where the cash flow went (Developers, Sales people, rent, etc) but the important question to assist on future investment decisions is how much should be allocated to Project X vs Y vs Z. One would also need to understand how much cash was generated by Project X, Y, and Z so they can determine the ROI (Return On Investment) for each project. Knowing the ROI is important in making future investment decisions.
rootsudo 5y ago
I disagree, if you're able to understand and do a projection, forecast, risk analysis, sunk cost analysis you can easily get finance on your side. The issue is that IT/tech does not know business key words or excel spreadsheets, and finance does not know tech. Nowadays it's getting blurred with data scientsts and excel crunchers that can do a mean macro (and know more than Vlookup!) Finance people love automation. Finance people love excel. Finance people understand sunk cost fallacy. Finance people understand change. Finance people need help to embrace change, to guide decisions and make sure it's the right "tech" for the company. Many times the right tech is O365/Sharepoint/Flow automation, or nintex. Yeah, but it is not souless, it guides the entire company, it ist he company pursestrings. Get them on your side, understand how to read a P/L sheet, what FPA does and you'll not only earn respect, you'll have your name said at all the exec/leaderships meetings and you'll be loved. That's what I do in companies (consulting, self run) and w/o a good background in finance, and tech I wouldn't be where I am today (major in stats, tech was hobby, stats/math is everything etc.) So I fully disagree 100%. You had it so close with SAAS and capex vs opex, but you missed it. But yes it does move expenses around and opex is easier to navigage then a full sunk cost capex.
- erdos4d 5y ago
  I read this comment and I feel dumber.
- clncy 5y ago
  Spot in with the automation! Too often people rush to build a new system without thinking first about the systems and processes that already exist.
- planet-and-halo 5y ago
  This is something I've been interested in for a while. Do you think it's worth getting an MBA or some other financial degree if you're already in the workforce, or can you learn enough on the fly?
  - andrewlgood 5y ago
    I do not recommend getting an MBA or some other financial degree. Rootsudo's response is excellent. There are actually very few financial concepts involved in these types of analyses (e.g. discounted cash flows, IRR, and NPV). IMHO, the best thing you can do is work with someone in your FP&A (Financial Planning & Analysis) group discuss your investment idea and why you think it is a good idea. If they are a decent analyst, they will help build a model to describe financially your investment opportunity. This is what they live for.
avmich 5y ago
> And that includes the finance department, of which I've certainly seen some of the most stupid ideas. I've heard some tales about a town in Michigan - let's call it Flint - where water was distributed using some older provider, while some newer company existed which charged less. A newly hired CFO decided, logically, to save some funds by going to the cheaper one. CFO didn't know that pipes in the town were made in the old fashion (lead metal?) and the new company, which used iron pipes, used some chemicals in water which helped to keep pipes clean. This chemical wasn't used by the old water supplier. When flown through old pipes, the chemical caused dissolving the lead into water. By the time the population of Flint switched to bottled water for everything the CFO was long gone with earned bonus for saving money to town. I wonder what such stories, if true, teach us for the future. Just general mistrust towards financiers doesn't look quite right...
- clairity 5y ago
  > “Just general mistrust towards financiers doesn't look quite right...” financiers, including startup investors, focus on money above all else, and that alone justifies mistrust (aka skepticism). with that kind of focus, it’s inevitable that decisions are made selfishly and greedily. that doesn’t mean it’s a tool that can’t be wielded for generally positive outcomes, but that the deck is (intentionally) stacked against it. beyond that, the flint situation sounds like a real failure of leadership all around (at the very least, basic due diligence/risk analysis). that often happens when decisions are made far removed from the expertise needed to make them.
- thaumasiotes 5y ago
  > I wonder what such stories, if true, teach us for the future. That if you're looking to maintain [water] quality, you need to have monitoring in place. Switching to the new provider was a good idea, not a bad idea. There is no way to keep track of everything that might have happened in the past that might be affected by unspecified changes in the future, so there can't be an expectation of doing it either. But you can watch what kind of results you're getting.
  - whatshisface 5y ago
blihp 5y ago
Computers first came into many companies via the Finance department way back when because they recognized what computers could do as glorified calculators, spreadsheets and accounting systems.[1] IT departments were often an outgrowth of those early systems. The only 'trick' to dealing with finance people is being able to draw a direct line between a proposal and either increased revenue or decreased costs. For solutions that can do that, they are often your best champion short of having the CEO already on board. For solutions that require a leap of faith/vision/creativity, they're probably not the place to start. [1] Who do you think the numeric keypad on 'full size' keyboards popularized by the IBM PC were for? Accountants. Granted, word processing was the other early use case... that Finance signed the checks for. IBM understood their customer.
- cratermoon 5y ago
  > Computers first came into many companies via the Finance department way back when because they recognized what computers could do as glorified calculators, spreadsheets and accounting systems.[1] IT departments were often an outgrowth of those early systems And yet, somehow, IT departments ended up getting classified as cost centers by the finance department.
  - blihp 5y ago
    If they don't directly contribute to the bottom line, that's how they should be classified from an accounting perspective. There are at least a couple of ways IT departments could avoid that fate: having internal customers pay for their services independent of the cost or directly managing projects that otherwise contribute to the bottom line. It's rare, but it does happen.
andrewlgood 5y ago
Full disclosure, I am a CFO and have spent much of my career in Finance. I have never worked in a place where I or anyone else there thought Finance is "any more intelligent than the other players in the company." This article is disappointing in that it gives the impression that one department makes or breaks a company. To be clear, there are poorly run Finance organizations in the world and they can make the culture at a company less than fun. There are also poorly run IT organizations (to include product development) that can ruin a company culture. Even ones run by a CTO that reports to the CEO. I have also never seen a company where the CFO does not ultimately report to the CEO. I have seen companies where the CFO reports to a Chief Administrative Officer (CAO) who reports to the CEO. I completely agree that the CEO ultimately sets the vision of the company and hires the executive team to deliver on it. That being said, a CEO is not Superman/Superwoman. They need a team surrounding them to deliver what you expect. What the article could have emphasized is how software engineers can work with the Finance team to better describe investment opportunities like hiring production engineers to increase the productivity of application engineers. Yes, investment opportunities ultimately need to generate more cash returns than the investment. This may require serious thought around the benefits from increased software quality, faster cycle times, increased cybersecurity etc. Importantly the analyses do not have to be decimal level precise. But, if you cannot describe how your investment opportunity ultimately creates more cash flow than the investment required, your opportunity will likely not be funded.
- Fordec 5y ago
  I am at a point where I don't think there should be finance departments in tech companies. I also believe there shouldn't be siloed data departments for the record either. There should be teams, build around a cohesive product goal that solves customer needs. There should be someone who understands the money side of things embedded in that department doing analyses and making recommendations to the product manager, not direct to a CFO. Maybe half their job is regular market analysis work too if the role isn't that big. Those product managers should then have in their day to day functions a requirement to get that info to a CFO's hands (who is really just the executive teams internal finance person) to make their case for their product.
syshum 5y ago
CFO's makes the worst CEO's for a reason.... This has been true for all of time, if you work for a company that has a CEO that spent their entire career in Finance... RUN
wtvanhest 5y ago
I have worked in FP&A for the past 6 or so years after working in the investment world. For a short time (8 or so months) I supported a CIO and had to approve the NPV analysis of every tech project that the company did. The thing that most project managers / engineers don't see is that finance's real job is to simplify the story and fact check the assumptions so that execs can rely on the investment being reasonable. Execs don't care if the NPV is to the penny, they care that it makes logical sense and that business leaders (brand leaders, region leaders or whoever is SVPsh level) supports the project. More than 50% of my time was just talking to execs trying to lock down support for other people's projects so they could get them done. Often times when a project get rejected, its not because finance made the decision, its because tech didn't get the right business leaders on board before asking for a project investment. > Risky and unproven new projects with unclear (but potentially massive) returns or indirect relations like production engineers increasing the productivity of application engineers through automation do simply not exist in that world. If you do a lot of risky and unproven new projects with unclear (but potentially massive) returns, the business will go bankrupt and everyone will lose their jobs and equity. Incremental, but repeated small and correct bets usually are best for driving high returns on capital overtime. Sometimes when an intuitive exec sees an opportunity they need to take a shot on goal and risk some capital. In those cases, finance is kind of out of the picture as the exec needs to stand on their own. > And that includes the finance department, of which I've certainly seen some of the most stupid ideas. Like software capitalization/activation that did made sense for converting opex to capex in the GAAP sheets, but in the end drove all the best engineers away because of all the mindless paperwork. Just one of many examples. The opex to capex justification stuff comes from accounting, not finance. Its very painful, but the accounting teams must follow the law/gaap rules of accounting. > Finance isn't any more intelligent than the other players in the company. Absolutely correct. Just another cog in the corporate machine. If you find yourself frustrated with any cog (co-workers) its probably best to talk to them and figure out what you are missing. Most people are trying their hardest.
xiezhifeng 5y ago
Agree, so my best choice is start from value stream. Culture is not specific.
draw_down 5y ago
Grow up

908B64B197 5y ago

> When accounting and controlling are done setting up their cost centers, the most logical place from their view would be to fire all developers and double the sales team, as that's where the money is made. That's great for long term shorts.

endymi0n 5y ago
Well it _is_ a common trick for "making the bride pretty" or for short-term incentivized CEOs: You know you've got a top notch DevSecOps team for example if everything is smooth, calm and boring — because most issues are automated away. That's exactly the point when you know you can safely fire that expensive team, because it'll usually take a few years until the automation surplus has been exhausted and then a few more until the starting chaos has propagated into actual outside-visible incidents. Makes for a great bottom-line at approximately the end of shares vesting. You didn't get that pro-tip from me.

hdvpp 5y ago

Manage cash flow in a unpredictable ever changing environment for a month and come back and tell us what you think a finance dept does cause from the comment its quite clear you really dont know.

lifeisstillgood 5y ago
Perhaps here would be a great place to let a few hundred developers know. It's worth differentiating between allocation and flow - a million dollar spend can be hard to allocate to Project X, Y or Z. But it is usually simple to see it got spent on Developers, Sales people, rent, hardware licenses etc. As the film says, if you go up high enough, there is only one man with one budget.
- andrewlgood 5y ago
  And that man/woman is the CEO. Cash flow is the actual movement of money - paying payroll, paying vendors, receiving cash from clients (not just sending out the invoice). Lack of cash flow is what makes companies go bankrupt. Allocations are methods to attribute income and/or expenses to groups. It may be something simply such as dividing up an enterprise software license for email by the number of employees and allocating that expense to their department. It can be more difficult / squishy such as how to attribute brand marketing spend to various product lines. Generally, companies use allocations because they are trying to understand the profitability of something (a product, geography, client, etc). Your example of the million dollar spend is a good one. Very easy to see where the cash flow went (Developers, Sales people, rent, etc) but the important question to assist on future investment decisions is how much should be allocated to Project X vs Y vs Z. One would also need to understand how much cash was generated by Project X, Y, and Z so they can determine the ROI (Return On Investment) for each project. Knowing the ROI is important in making future investment decisions.

rootsudo 5y ago

I disagree, if you're able to understand and do a projection, forecast, risk analysis, sunk cost analysis you can easily get finance on your side. The issue is that IT/tech does not know business key words or excel spreadsheets, and finance does not know tech. Nowadays it's getting blurred with data scientsts and excel crunchers that can do a mean macro (and know more than Vlookup!) Finance people love automation. Finance people love excel. Finance people understand sunk cost fallacy. Finance people understand change. Finance people need help to embrace change, to guide decisions and make sure it's the right "tech" for the company. Many times the right tech is O365/Sharepoint/Flow automation, or nintex. Yeah, but it is not souless, it guides the entire company, it ist he company pursestrings. Get them on your side, understand how to read a P/L sheet, what FPA does and you'll not only earn respect, you'll have your name said at all the exec/leaderships meetings and you'll be loved. That's what I do in companies (consulting, self run) and w/o a good background in finance, and tech I wouldn't be where I am today (major in stats, tech was hobby, stats/math is everything etc.) So I fully disagree 100%. You had it so close with SAAS and capex vs opex, but you missed it. But yes it does move expenses around and opex is easier to navigage then a full sunk cost capex.

erdos4d 5y ago
I read this comment and I feel dumber.
clncy 5y ago
Spot in with the automation! Too often people rush to build a new system without thinking first about the systems and processes that already exist.
planet-and-halo 5y ago
This is something I've been interested in for a while. Do you think it's worth getting an MBA or some other financial degree if you're already in the workforce, or can you learn enough on the fly?
- andrewlgood 5y ago
  I do not recommend getting an MBA or some other financial degree. Rootsudo's response is excellent. There are actually very few financial concepts involved in these types of analyses (e.g. discounted cash flows, IRR, and NPV). IMHO, the best thing you can do is work with someone in your FP&A (Financial Planning & Analysis) group discuss your investment idea and why you think it is a good idea. If they are a decent analyst, they will help build a model to describe financially your investment opportunity. This is what they live for.

avmich 5y ago

> And that includes the finance department, of which I've certainly seen some of the most stupid ideas. I've heard some tales about a town in Michigan - let's call it Flint - where water was distributed using some older provider, while some newer company existed which charged less. A newly hired CFO decided, logically, to save some funds by going to the cheaper one. CFO didn't know that pipes in the town were made in the old fashion (lead metal?) and the new company, which used iron pipes, used some chemicals in water which helped to keep pipes clean. This chemical wasn't used by the old water supplier. When flown through old pipes, the chemical caused dissolving the lead into water. By the time the population of Flint switched to bottled water for everything the CFO was long gone with earned bonus for saving money to town. I wonder what such stories, if true, teach us for the future. Just general mistrust towards financiers doesn't look quite right...

clairity 5y ago
> “Just general mistrust towards financiers doesn't look quite right...” financiers, including startup investors, focus on money above all else, and that alone justifies mistrust (aka skepticism). with that kind of focus, it’s inevitable that decisions are made selfishly and greedily. that doesn’t mean it’s a tool that can’t be wielded for generally positive outcomes, but that the deck is (intentionally) stacked against it. beyond that, the flint situation sounds like a real failure of leadership all around (at the very least, basic due diligence/risk analysis). that often happens when decisions are made far removed from the expertise needed to make them.
thaumasiotes 5y ago
> I wonder what such stories, if true, teach us for the future. That if you're looking to maintain [water] quality, you need to have monitoring in place. Switching to the new provider was a good idea, not a bad idea. There is no way to keep track of everything that might have happened in the past that might be affected by unspecified changes in the future, so there can't be an expectation of doing it either. But you can watch what kind of results you're getting.
- whatshisface 5y ago

blihp 5y ago

Computers first came into many companies via the Finance department way back when because they recognized what computers could do as glorified calculators, spreadsheets and accounting systems.[1] IT departments were often an outgrowth of those early systems. The only 'trick' to dealing with finance people is being able to draw a direct line between a proposal and either increased revenue or decreased costs. For solutions that can do that, they are often your best champion short of having the CEO already on board. For solutions that require a leap of faith/vision/creativity, they're probably not the place to start. [1] Who do you think the numeric keypad on 'full size' keyboards popularized by the IBM PC were for? Accountants. Granted, word processing was the other early use case... that Finance signed the checks for. IBM understood their customer.

cratermoon 5y ago
> Computers first came into many companies via the Finance department way back when because they recognized what computers could do as glorified calculators, spreadsheets and accounting systems.[1] IT departments were often an outgrowth of those early systems And yet, somehow, IT departments ended up getting classified as cost centers by the finance department.
- blihp 5y ago
  If they don't directly contribute to the bottom line, that's how they should be classified from an accounting perspective. There are at least a couple of ways IT departments could avoid that fate: having internal customers pay for their services independent of the cost or directly managing projects that otherwise contribute to the bottom line. It's rare, but it does happen.

andrewlgood 5y ago

Full disclosure, I am a CFO and have spent much of my career in Finance. I have never worked in a place where I or anyone else there thought Finance is "any more intelligent than the other players in the company." This article is disappointing in that it gives the impression that one department makes or breaks a company. To be clear, there are poorly run Finance organizations in the world and they can make the culture at a company less than fun. There are also poorly run IT organizations (to include product development) that can ruin a company culture. Even ones run by a CTO that reports to the CEO. I have also never seen a company where the CFO does not ultimately report to the CEO. I have seen companies where the CFO reports to a Chief Administrative Officer (CAO) who reports to the CEO. I completely agree that the CEO ultimately sets the vision of the company and hires the executive team to deliver on it. That being said, a CEO is not Superman/Superwoman. They need a team surrounding them to deliver what you expect. What the article could have emphasized is how software engineers can work with the Finance team to better describe investment opportunities like hiring production engineers to increase the productivity of application engineers. Yes, investment opportunities ultimately need to generate more cash returns than the investment. This may require serious thought around the benefits from increased software quality, faster cycle times, increased cybersecurity etc. Importantly the analyses do not have to be decimal level precise. But, if you cannot describe how your investment opportunity ultimately creates more cash flow than the investment required, your opportunity will likely not be funded.

Fordec 5y ago
I am at a point where I don't think there should be finance departments in tech companies. I also believe there shouldn't be siloed data departments for the record either. There should be teams, build around a cohesive product goal that solves customer needs. There should be someone who understands the money side of things embedded in that department doing analyses and making recommendations to the product manager, not direct to a CFO. Maybe half their job is regular market analysis work too if the role isn't that big. Those product managers should then have in their day to day functions a requirement to get that info to a CFO's hands (who is really just the executive teams internal finance person) to make their case for their product.

syshum 5y ago

CFO's makes the worst CEO's for a reason.... This has been true for all of time, if you work for a company that has a CEO that spent their entire career in Finance... RUN

wtvanhest 5y ago

I have worked in FP&A for the past 6 or so years after working in the investment world. For a short time (8 or so months) I supported a CIO and had to approve the NPV analysis of every tech project that the company did. The thing that most project managers / engineers don't see is that finance's real job is to simplify the story and fact check the assumptions so that execs can rely on the investment being reasonable. Execs don't care if the NPV is to the penny, they care that it makes logical sense and that business leaders (brand leaders, region leaders or whoever is SVPsh level) supports the project. More than 50% of my time was just talking to execs trying to lock down support for other people's projects so they could get them done. Often times when a project get rejected, its not because finance made the decision, its because tech didn't get the right business leaders on board before asking for a project investment. > Risky and unproven new projects with unclear (but potentially massive) returns or indirect relations like production engineers increasing the productivity of application engineers through automation do simply not exist in that world. If you do a lot of risky and unproven new projects with unclear (but potentially massive) returns, the business will go bankrupt and everyone will lose their jobs and equity. Incremental, but repeated small and correct bets usually are best for driving high returns on capital overtime. Sometimes when an intuitive exec sees an opportunity they need to take a shot on goal and risk some capital. In those cases, finance is kind of out of the picture as the exec needs to stand on their own. > And that includes the finance department, of which I've certainly seen some of the most stupid ideas. Like software capitalization/activation that did made sense for converting opex to capex in the GAAP sheets, but in the end drove all the best engineers away because of all the mindless paperwork. Just one of many examples. The opex to capex justification stuff comes from accounting, not finance. Its very painful, but the accounting teams must follow the law/gaap rules of accounting. > Finance isn't any more intelligent than the other players in the company. Absolutely correct. Just another cog in the corporate machine. If you find yourself frustrated with any cog (co-workers) its probably best to talk to them and figure out what you are missing. Most people are trying their hardest.

xiezhifeng 5y ago

Agree, so my best choice is start from value stream. Culture is not specific.

draw_down 5y ago

Grow up