2018 Key Findings from the CFOs’ Pathway to Growth Study

Introduction

Recently, Tatum partnered with The CFO Leadership Council on the CFOs’ Pathway to Growth Study to identify what is top of mind for leading CFOs in 2018 — and beyond.

The results were fascinating and often surprising. For instance, while most CFOs said they were
confident in the economy and believed their companies would achieve their financial objectives
in 2018, that optimism was undercut by a persistent awareness of risks.

These risk-related concerns came out in questions like:

• What good is a good economy if the opportunities it affords are missed?
• What will happen if our expected tax savings don’t result in delivery of expected ROI?
• Will my business capitalize on recent IT investments without the skilled talent needed?

To answer these questions and more, let’s turn to some of our findings from the study and see what best-in-class CFOs are doing to thrive now — and to position their companies for the future.

Show Me the Money (and What You’re Going to Do With It)

The Tax Cuts and Jobs Act (TCJA), which cut corporate tax rates from 35 to 21 percent, appears to have energized CFOs. In our survey, most CFOs (61 percent) said the savings would have a positive influence on their business. They expressed far less certainty, however, around where to reinvest this windfall.

Two of the most obvious options — paying out this money in the form of bonuses and wages to employees, or using it for stock buybacks — come with clear risks, as well as potential benefits. For instance, when several large corporations recently boasted of using TCJA monies for one time bonuses or wage increases to current employees, they landed in the headlines — and their brands suffered reputational damage. Meanwhile, stock buybacks — to the tune of $178 billion by American companies in the first fiscal quarter— have set new records.

In the short term, perhaps solutions like these will pay off for corporations in the form of higher stock prices and happier employees. But what’s the big picture? Will these measures deliver long term savings or returns? What will the profitability of these companies look like, say, 18 to 24 months from now?

Clearly, there’s a lot on the line and a number of different factors to consider. That’s why successful CFOs are moving carefully and closely analyzing where potential savings will be put to best use.

The Shortage of Skilled Talent Remains a Top Concern

The survey revealed some surprising contradictions in the current talent landscape. On the one hand,the majority of CFOs said that a lack of qualified talent is their biggest constraint on growth. On the other, only half said that they planned to invest in more new hires this year than in previous years.

Given one of the tightest labor markets in recent history — and a 1.8 percent unemployment rate within the finance and accounting sector — it’s hardly surprising that so many CFOs believe that a talent shortage is checking their growth. Indeed, they have probably seen and experienced this firsthand. However, if only half of respondents planned to increase hiring, it stands to reason that insufficient investment and resources are being allocated where they really count.

Based on the survey, the important talent-related questions that best-in-class CFOs need to be able to answer include:

• Do you have clarity and insight into why valuable talent is turning over in the first place?
• Have you made the business case or clearly demonstrated the value of hiring talent with the skills needed to fully realize the greatest ROI from automation and data?
• What is the relative value of upskilling or reskilling existing talent to fill these requirements in the short and long run?
• Would investing tax reform savings into talent initiatives help ensure you have the skills needed for future IT deployments?

Bear in mind that the ripple effects of a talent shortage can be far reaching — for instance, by negatively impacting other business investments. And, at the end of the day, successful capital investments require strategic investments in human capital.

Capital Investing vs. Building Cash Liquidity

Nearly half of CFOs in the study said they planned to make higher levels of capital investments compared to previous years, naming it a priority over building cash liquidity levels. Specifically, the most important investments cited by CFOs were technology and operational enhancement, with data analytics (61 percent), customer relationship management (53 percent) and financial management systems (47 percent) as the top priorities.

Of course, delivering on capital investments depends on a number of factors, including a strategy for evaluating and managing investment plans and having the right, skilled talent in place to deploy, execute and leverage those investments.

What’s more, many of the finance-specific challenges identified by CFOs relate to data analysis. For example, respondents identified the following as the most significant skill-based challenges facing the finance function:

• Sufficient forecasting, planning and analysis skills (48 percent)
• Sufficient skills to handle the automation of routine accounting and finance activities (48 percent)
• Sufficient analytical skills to support the use of new technology (32 percent)

These results send a clear message for finance leaders that their value is no longer tied to reporting, as it was in the past, but rather to being forward looking and creating value.

CFOs who can effectively leverage and analyze data — not simply compile it — are better able to model and benchmark information and generate new insights that will improve executive
decision-making. They will also be more capable of assessing investment risks through predictive analytics. Moreover, data analysis is also closely tied to CRM systems, which are CFOs’ second investment priority, as well as their top strategic initiative — expanding marketing efforts and improving sales force effectiveness. The common thread is data. Data enables companies to leverage business intelligence, uncover strategies to grow profits, increase efficiencies and better serve customers. However, CFOs who don’t have the right team in place to turn this information into usable insights and strategies will simply swim — and likely drown — in data.

Partner with the C-Suite to Meet the Demands of Disruption

Across the board, CFOs recognize that, in order to reach their ultimate career goals, they need to do more than just maintain the status quo but actually increase the scope of their responsibilities.

Yet, according to our study, CFOs don’t feel overwhelmingly positive about their roles in driving strategy as true business partners to the CEO and other members of the C-suite. In fact, only half of CFOs said their roles involved a close partnership with the CEO. What about working as a team to develop and shape future strategies, or openly facilitating the decision-making process in which leaders participate? Here, CFOs were split as well.

The truth is, however, that CEOs want and need CFOs to be true business partners. And at top-performing companies, CFOs have been serving as true business partners for decades. So how do you get there? We’ll see in the next section.

How to Partner with the C-Suite More Effectively

CFOs who want to become true partners to the C-suite should ask themselves the following questions:

• Have you learned the language and business of IT? Are you using strategic thinking with data as your foundation? Are you a leader at digital transformation?

• Do you understand the areas of your business where technology can create a competitive advantage and drive shareholder value? Are you partnering with the CIO to identify IT investments that will lead to tangible, measurable outcomes?

• Are you expanding your scope of responsibilities to oversee non-financial data — like talent management, brand perception or customer service — that contributes to profitability?

• Do you have the “right people in the right seats,” or are the wrong people in positions that can cost you time, productivity and credibility? Do you have a high-performing team behind you?

Answering “no” to any of these is a clear indicator that you have your work cut out for you. After all, the pace of change today is lightning fast. And CFOs who choose to focus on how their business has historically worked, where revenue sources traditionally were or what skills the workforce has traditionally had will likely find themselves pushed aside — before their companies get left behind.

Want additional intelligence from the CFOs’ Pathway to Growth Study? We’ll be publishing more findings and empowering you with insights you need to fuel your personal growth an professional success in the months ahead. Stay tuned.

 

About the Survey

The CFOs’ Pathway to Growth Study is a joint partnership between Tatum, a leader in C-suite interim leadership, consulting and search services, and the CFO Leadership Council, a professional association that helps drive the success of senior financial executives and the people and companies they lead. The study was conducted online between February and March 2018. It included more than 300 CFOs — drawn from Tatum’s client base as well as CFO Leadership Council members — representing a wide range of geographic locations across the country.

 

About the CFO Leadership Council

The CFO Leadership Council is a professional association whose mission is to empower senior financial executives to realize success in their careers, as well as for the people and companies they lead.

CFO Leadership Council members realize this success through the collaborative and energetic community they foster, which helps them build a professional network of their peers and involves them in engaging discussions, both in-person and online, that deliver pragmatic and tangible insights on business and leadership issues. To learn more, visit www.cfolc.com @CFOLeader

 

About Tatum, a Randstad company

A well-established and trusted executive consulting services firm, Tatum helps companies confront challenges arising at any stage of the business life cycle. We frequently serve as trusted advisers to the office of the CFO or CIO and address complex issues not easily solved from within the organization. We provide senior-level interim and project consultants in addition to highly regarded executive search services. Tatum is an operating company of Randstad.

 

 

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