Finance Team of the Year - Aberdeen City Council
In November 2016, Aberdeen City Council announced the successful pricing of index linked bonds for an aggregate principal amount of £370 million that will help secure investment in the city to deliver its transformational capital and infrastructure programme. This is untrodden land for local authorities and is a true celebration of innovative solutions to the financial challenges local authorities face.
In the build up to its issue, Moody's Investors Service reported that Aberdeen City Council's "internal governance and scrutiny is strong, supported by recent assessments from the Accounts Commission." In addition Moody's noted that the "Council has demonstrated a solid financial record for the last 5 years maintaining a net surplus against budget for the last 5 years with previous forecasts on expected outturns being realistic."
CIPFA-Penna sponsored the Best Finance Team award at the recent PF Innovation awards and the worthy winner was Aberdeen City Council. This has been an incredible journey for the council and we wanted to know what drove the Finance Team to enter, and what they think is happening in the world of local government finance. We sat down with Richard Ellis, Interim Director of Corporate Governance, and Steve Whyte, Head of Finance to find out.
What did you hope to achieve by entering the awards?
There is a perception of Aberdeen and its geographical remoteness.. It is Scotland’s 3rd biggest city yet for many they do not know much about it. This has an impact on the authority when it comes to attracting investment and talent to the city. In entering the awards, they wanted to put Aberdeen on the map as a centre for innovation but also a great place to live and work.
At a time when public sector employees have to work incredibly hard and in challenging circumstances, I believe that we need to do more to celebrate the success within local government. Steven and Richard share this view and wanted to boost the levels of pride within the council and to show staff they truly are doing something amazing, ‘we are as good as others and those south of border’. In doing something so ground breaking and pioneering, the team should receive recognition.
Steve and Richard also want this to be the catalyst that leads to more innovation. They have shown that it is okay to think differently, to challenge perceptions and that the organisation will support you if you come up with a big idea. The whole process took 7 months but at all times Steve had the full support of the Council at each stage of the process.
‘No idea is a bad idea. You would have been laughed at 18 months ago if you said a LA would have a credit rating and issue £350m of bonds. Now we have done.’ Steven Whyte.
Staff have seen that they can take calculated risks, they can suggest ideas and already off the back of the bond the council is already working on its next big idea which is a policy panel which will support the credit rating process going forward.
The credibility and reputation of the finance team has also increased and the influence they hold across the organisation has increased with it. Politicians and officers talk differently to the team. They took a risk and were acutely aware that if they didn’t get the financial management right, if they didn’t get the credit rating right, then the council would suffer. Having delivered so successfully, the confidence of the team is sky high and gives them more space for greater innovation.
What are the key elements of a great finance team?
Finance teams are changing; there is less affordability for specialists in each area. Individuals and teams need a blended skills base and to know the intricate details of what the organisation does and how it operates. The finance team needs to be customer focussed, customers are internal and finance team needs to partner services to help them deliver and not just hold the purse strings. Customer focus is essential and not just setting the budget parameters. Finance teams need to ‘understand the objectives and help to build a solution’.
Finance teams need to be commercial. With dependency on RSG decreasing, you need to be more creative, move towards management accountancy and understanding the levers inside of a business. Being commercial is challenging the norms and redefining the confines of traditional roles. Finance teams look different today to last year and will look even more different in 5 years. Local Government will look different in 5 years and this will drive the need for professional disciplines to become blurred as people have broader skills bases. ‘People will need a swathe of skills that enables them to plug into the organisation where needed’.
The hard work doesn’t stop here. When asked about the key elements of a great finance team, both Steven and Richard agree that ‘change is business as usual’. You cannot sit still and be happy with just one good idea. Constant change and innovation is required to meet the challenges local authorities face. Financial assurance is first and foremost, budgets need to be balanced, and resources need to be deployed effectively and creatively.
In the future, finance teams will need to be more multi-skilled. Professionals will always be needed for certain tasks, but they will also need to know how the wider business operates and the wider corporate objectives. Crucially, Richard and Steven feel that thinking strategically shouldn’t be left to those at the top. It should happen at all levels and for people to then manage up. Those closest to the ground are more likely to have innovative solutions and foresight of the future.
As organisations become more commercial, they need to understand the levers, how to operate a P&L account and truly understand that cost is vital in driving maximum profitability. This needs to be balanced with an economists view. If £1 is spent by the council, what is the economic benefit to the city? If you spend £1, how do you get £1.10 back? If you want to build a school, how do you generate the income to build it?
The making of a modern Finance Director
Richard believes that Steve is the most creative and innovative finance director he has seen. He believes that an FD is there not only for assurance and to safeguard the finances, but also to explore different ways of doing things whilst managing risk and governance. First and foremost though, an FD is there to own the numbers; the budget and the financial position.
Different organisations will need slightly different skills, but strategic oversight is always needed. Someone that can challenge how services are delivered and expect to be challenged. Knowing the business enables a finance director to partner fellow directors and challenge them constructively in order to meet the strategic plan.
Commerciality is a key skill set for a modern FD, but both Steven and Richard stress the need for risk management. In anything you do, you need to assess your risk exposure and understand how to mitigate against it. If you want to do something innovative and risky, residents shouldn’t notice any difference in day to day services. Preserving front line services is key.
An FD should be an inspirational leader, someone that can influence the organisation and enable it to look at problems differently.
Richard’s impact as an interim
Richard has been in Aberdeen as interim Director of Corporate Governance for 18 months and his impact on Steve and the organisation has been felt. In Steve’s mind, the bond wouldn’t have happened without Richard. Richard helped him to run with the concept, asses the risks and then to deploy the right resources at the right time. Richard has highlighted the importance of leaders who can be great enablers, pull teams together quickly and mentor people through a process.
What advice would you give to others entering this competition next year?
Richard Ellis – ‘Ultimately finance is manging risk and stewarding the finances. Be bold, be brave, focus on management of risk. Don’t be afraid to look at different sectors and solutions.’
Steve Whyte – ‘Try something, be brave enough to tell someone you have tried something even if it doesn’t work. That says more about an organisation than anything.’
‘Foster a culture of innovation. You’ve got to skate to fall’ every time something doesn’t work, take the learnings. Share the 10 ways that it didn’t work rather than just talk about the way it does work.’
Get in touch with the CIPFA-Penna team here.