Why transforming tax departments requires transformative leaders

Bob Nardelli and participating executives shared lessons learned in a disruptive era during an EY Center for Executive Leadership roundtable.

In brief

• Each quarter a former Fortune 500 C-suite leader joins a cohort of chief tax officers to share lessons learned and insights into having the greatest impact.
• Nardelli, a former CEO of top consumer brands, stressed the human elements of transformation: teaming, motivating and building relationships.
• Data, processes, people, culture, organization and change management unite in a successful transformation, and participating leaders offered their tips.
  

From shifting regulation to increasing globalization and accelerating technology, a world of disruption has upended the day-to-day norms of tax leaders, requiring different skills and mindsets. Bob Nardelli, the onetime CEO of The Home Depot and Chrysler, has had a front-row seat to these changes for the past 50 years, within a number of roles, giving him insight into what executives should be doing today and what they should expect tomorrow.

He shared his views in a virtual Q&A session through the EY Center for Executive Leadership, where he serves as a strategic advisor. Unsurprisingly, all the participants in the discussion — who hold the head of tax position, such as chief tax officer or vice president of tax — said their departments were currently undergoing transformations and confronting challenges such as how to balance their time and fit square pegs into round holes.

Here are key highlights from the discussion around how tax leaders gain authority, fulfill responsibility and enforce accountability in a disruptive era.

1. ‘Start from a place of how something could be possible, instead of why it cannot’

It’s imperative to build relationships within the C-suite and beyond, particularly with the CFO and leaders of business units, positioning yourself as a partner focused on removing barriers instead of putting up new ones. Tax must be involved in all aspects of the business. The most successful chief tax officers are those who can simplify complex tax matters into a succinct message for non-tax leaders. As you build those relationships, you will gain influence with the business.

Insights from the roundtable

Each quarter a cohort of Chief Tax Officers from some of the world’s biggest brands across industries come together to share their experiences, challenges and leading practices. This quarter the topic was leading transformation and change management.

Among chief tax officers, the need to digitize their functions is typically a strategic imperative. If only turning this transformation into reality was as simple as installing software — instead, it can be a challenge encompassing data, processes, people, culture, organization and change management. Here are their thoughts on driving change.

Pulling in diverse perspectives for success in tax departments

Automation is a driving force behind transformation in tax functions, to orient professionals away from rote work and more toward value-added areas. That pivot, though, was proving to be a challenge for some participating tax leaders, who also cited process, data and talent issues, as well as the transition away from their legacy enterprise resource planning (ERP) platforms.

For stronger planning, dialogue with diverse perspectives is a must. Companies represented during the meeting said that they had established staff feedback groups — where the key job of the leader is to encourage each member to speak up. Another leader created a monthly small-group roundtable, with a different mix of attendees each month in order to ignite creative ideas.

Others, in discussion with their CFOs, have been filling skills gaps within their departments, such as by building tax technology groups. “We have four people now to get the group focused on automation,” a tax leader said, and they are helping to present roadmaps to the CFO. Other tax leaders said they were hiring as well, with some resources within the department and some dedicated to other groups.

Rallying tax leadership behind a vision

“It is important to have an awareness as to where each person is in the change management journey, and that can change and revert throughout the process,” one leader has found. Their suggestions:

• Step back and define next steps collectively. Everyone must understand what’s needed and decide how to get there. Rather than a top-down approach, let some team members or other teams discuss practical steps that have worked.
• Offer proof — even if it’s just one small thing, it can be really impactful for getting people on board.
• Approach holdouts on an individual basis and educate them on the “why.” Get them to think about their team members, not just their personal feelings.

Thanking people for furthering the effort

Two important facets of any transformation — contributions and alignment — can be cultivated through rewards programs. Gift cards and cash bonuses are welcomed, of course, but public recognition and everyday gestures can go a long way.

One company had recently debuted a digital recognition page where people could post public notes to recognize each other. “I’m seeing things that I would not normally be aware of,” the tax leader said. “I can add my own comments or recognition, and that visibility across the team creates a lot of positive momentum.”

Another has an award program that selects people for more challenging projects as a reward for strong performance in the past. This program has been especially useful with junior staff — they tend to get really excited about these opportunities and feel motivated to keep contributing.

Transformations are a journey, so it’s almost inevitable to encounter bumps along the way from current state to the future. A lot of people must make that journey with you. Hear them out, rally them around the plan and recognize what they’ve achieved — and begin delivering on the function’s potential in a disruptive era.