These days there is an increasing number of articles, reports, podcasts, vblogs, eBooks etc. being churned out on the evolving role of the CFO. Though these publications and postings are worded differently, they all share one common message – Today’s and future CFO should be less of a number cruncher and more of a strategic advisor. In other words, spend more time partnering the with business helping create, preserve and sustain value.
One of the forces behind this call for change in the CFOs role is the onslaught of new technologies on the market. These new tools are helping finance chiefs to automate and streamline certain areas of their work, in turn improving the amount of time spent partnering with the business versus closing the books.
However, Are CFOs contributing enough around the strategy discussion table to merit the strategic advisor badge? Are they helping their companies execute effectively? Execution is the key factor of success yet statistics reveal that between 70%-90% of companies are failing to execute their strategy. How then is this possible if the CEO and the Board have smart, intelligent CFOs in their corner to advise them on strategic issues of the business? Have CFOs just become glorified accountants (since the majority of them are CPA, CMA, CA, ACCA, or CIMA designated) who lack a deeper understanding of the business and its value drivers?
I believe no matter how much we scream and shout about this new evolving, expansive and collaborative role of the CFO, if the results continue unconvincing then we should get off our high horses. We cannot afford to remain on this path of sameness, repeatedly claim that finance teams have a bird’s eye view of the organization and are better placed to influence results yet strategic failures continue to soar.
In today’s information age, it is much easier for finance executives to succumb to the misguided belief that the keys to strategic success is investing in more data and new technology. On the contrary, people drive strategic success. I am not against data and analytics. However, how you apply both to your business will determine whether you will succeed or not.
Unfortunately, many finance teams are still suffering from information overload and struggling to make sense of the data they are presented with. Rather than spend a greater proportion of their time increasing business acumen and providing meaningful analysis for their businesses, more time is being spent on gathering, cleansing and aggregating data from multiple sources. As a result, effective finance business partnering is faltering.
If the CFO is to meaningfully contribute around the strategy discussion table (s)he needs to improve finance’s approach to performance analysis. A bottom-up approach to data analytics will not help you reap the fruits you want. This is where most CFOs are getting it wrong. They embark on a data collection agenda without first identifying and defining the problem to be solved. Data management and analytics efforts should be tied back to strategy and the key drivers of the business.
Start by asking the right key performance questions. For example; Which components of our strategic decision making are currently not being supported by digital technologies? What is the worst that can happen to us should we fail to embrace data analytics? What is the best way to align internal and external data sources to strengthen analytics and insights? Which business functions or areas would benefit from digital technologies and newer analytical capabilities to support strategic decision making?
Asking more of these questions will help you recognize areas of the business that are problematic which in turn helps you to focus your analysis in these areas, identify critical drivers of value and provide fresh insights that support strategic decision making. The organization is then able to develop new capabilities and competences needed in relation to changing circumstances, environmental factors and trends and ultimately execute its strategy effectively.
What decision makers want from finance are real-time, reliable and actionable insights that help them make better decisions. In fact, valuable strategic decision support goes beyond calculating the profit and loss and then presenting the financial statements to C-Suite members and the board. The CFO has to be able to tell the full story behind the numbers, know how the organization arrived at those results and provide actionable recommendations from the analysis of the results.
The expectation now is for the CFO to wear many hats. IT, Procurement, Investor Relations, Risk Management, HR, Sustainability are now under the purview of the CFO in many organizations. However, I don’t think a CFO can be an expert in all of these areas at once. This therefore requires her/him to be surrounded by a great team since s(he) is only as good as the team that is behind him.
If the team performs well, the CFO performs well too. But for the team to perform well, training and development is important. Although the CFO remains accountable for overall performance of the function, when the finance team is talented and skilled (s)he will be confident enough to delegate certain tasks, free up enough time to partner with the business and contribute positively towards the achievement of strategic objectives.
Going forward, understanding the business across all lines, not just the financial aspects, and getting a holistic view of organizational performance will help CFOs play a crucial role in strategic decision support, close the gap between strategy formulation and execution and influence strategic performance.