Over the last 20 years or so, a steady revolution has been taking place in the employment market, which has led to fewer firms employing full-time specialists to lead their business support roles. IT, HR, facilities, business development, accounting, procurement and so on, have gradually been outsourced and/or engaged on a part-time basis and there is no sign that this trend is going to reduce soon.
The logic is as follows. You need someone for their high-level expertise and abilities and you need them for their strategic input and ability to develop the business. That piece is invaluable, so without considering the options, firms employ someone full-time at director level whilst forgetting that there will be times when you don’t need that level of skill and expertise. So, you are buying someone’s time when you don’t need it.
Firms don’t need that strategic input and skillset on a permanent basis, day in, day out. Perhaps that higher-level expertise is rather required just a day a week or a couple of days a month. However, they have employed the people full-time, so what are they asked to do, (or what do you let them do, if you don’t direct them closely)? Typically, we ask that person to undertake more routine tasks and therefore we are now asking them to undertake tasks that do not need a highly paid director-level appointment. They can – and should – be fulfilled by cheaper, manager-level or supervisor-level staff.
Firms are therefore asking expensive people to do the work of a cheaper staff member. How does that make sense and shouldn’t the firm target the work required by having the right level of person doing it?
It’s the same argument for having the right person doing the legal work. No well-run and efficient firm would expect a straightforward residential conveyance or compromise agreement or personal injury claim to be undertaken at partner level. So, why would you have an IT director manning the helpdesk, the facilities director loading the photocopier or an HR director loading data for new starters? It does not make business sense.
The question you might then ask is, “Well, what should they do?” That question shows that you are still thinking of employing them full-time. You need not. You only need to employ them for the time you need their higher-level skills and expertise. The rest of the time, they can work elsewhere or not at all, if that’s what they choose: but at least you are only paying for the bits of their skills and expertise that you need and only when you need them.
This model is already quite well established in Human Resources, where part-time HR managers and directors are engaged by law firms. There are many external HR consultants offering their services and the number of days work is tailored to what the firm needs. The outsourced model exists in facilities, with many firms in multi-occupancy buildings, sharing common areas, coffee bars and restaurants. It is only when you want to renegotiate the lease or licence – or heaven forbid – have a serious issue with the building that you liaise with the director-level staff.
IT outsourcing is now common, with hardware off-site and backed up at one or more further sites. Software is updated remotely and managed by the outsourcing business: similarly, with telephones. Much of the routine work does not require director-level input. You need a director to think about what you need and to obtain it, to manage the project and ensure the outsourcing firm is abiding by its Service Level Agreements.
Businesses supplying part-time HR, IT, marketing and similar business support functions have grown over the last 20 years as firms see the sense in tailoring what they pay to what they need.
How does this apply to finance?
There are now several firms providing part-time FDs, as well as those providing financial controllers; and others providing a full accounting service, including specialists for law firms, such as The Cashroom that operate a fully outsourced accounting service, including client accounting. By saving on the salaries, plus on-costs, of your finance team and substituting that cost with an outsourced part-time finance director and outsourced finance team, costs can be tailored to match the demands placed upon the firm. You don’t have the difficulties of having an employee-employer relationship. You can have greater flexibility if you need it: but equally, just as with an employed person, if you find that the finance director continues to contribute, you can keep using them on a part-time basis for as long as you both find the relationship works.
More recently, this slow revolution has morphed into an increased use of virtual finance directors. While more and more firms are seeing the advantages of part-time directors, more and more are realising that the finance director need not be on-site all the time, need not have a firm’s laptop, desk space and such like. Firms have taken them on for the advice they offer, not the coffee they drink at meetings. Much of what they do can be done remotely and the massive increase in the use of remote working during the Covid-19 lockdown has demonstrated that it works well. The technology is available, such that the finance director has access to the data for the firm and can often put in more time than normal into their day’s work. There is less commuting, and the access is 24/7.
Models for using a virtual finance director (and other virtual directors) include a retainer for a few days per month or as little as a day per quarter. Sometimes the part-time and/or virtual director will eventually be replaced by a full-time staff member, which is fine, as long as there is a full-time role for that director. What you don’t want to do is return to the inefficient situation most firms are currently in by not having enough “FD work” to do. Occasionally, virtual and part-time finance directors are retained to assist or advise the new full-time director: and that works well, especially where they can continue to act in a similar role to a non-exec director – a sort of independent advisor.
If this has been food for thought and you want to talk this through with anyone, please feel free to give us a call, as we have fully qualified part-time finance directors, highly experienced in the legal profession and ready to help any business that wants to cut its cloth according to its needs.
Richard Wyatt FCA