The scope of CFOs’ role has changed dramatically in recent years. Gone is the old model of the siloed organization, in which CFOs were tasked with number-crunching, spreadsheets and regularly scheduled reporting on financial performance. In its place is the contemporary version of the CFO: a forward-looking enterprise leader, driver of strategy and essential business partner to the CEO and other members of the C-suite.
But, of course, living up to such a dynamic vision brings with it new demands. For starters, CFOs must successfully build and maintain business partnerships across the organization and between functional areas. No longer are they able to restrict their focus to financial metrics like net revenue and working capital; today, they’re often held responsible for non-financial metrics, too, ranging from talent management to brand perception. These are only a few of the ingredients of enterprise profitability that CFOs today are increasingly tasked with measuring, growing the value of and investing in.
If so much of the perceived value that CFOs now contribute to organizations is related to strategic planning, what are some best practices savvy CFOs can implement to succeed? Tatum has three tips to help CFOs thrive.
own the conversation around digital transformation
In far too many organizations, the domain of the CFO remains on the periphery of digital-transformation efforts, even though they own and manage much of the relevant business information that feeds such initiatives. But there’s a clear mandate for them to take the lead: today’s CEOs and boards say they want CFOs and the finance function to provide real-time, data-enabled decision support. And, in our most recent survey of finance executives, CFOs themselves say they want to spend more time on digital initiatives and the application of digital technologies to finance tasks.
In strategic planning sessions, work closely with other functional leaders to identify priorities and figure out what is feasible over the near- and long-term. From your standpoint as the strategic leader of the finance function, there are at least three areas you should focus on:
- automation and robotics, which can increase efficiency across finance operations
- data visualization, which enables stakeholders to access financial information, and improve performance in real time
- state-of-the-art analytics, which can sift through of vast amounts of data to pinpoint unforeseen opportunities to drive businesses to growth
These three areas hold tremendous growth potential for many organizations. However, with so few proven business cases around digitization in finance out there, bear in mind that you’ll need to plan and move carefully — and strategically mobilize your C-suite allies — if you want to get the budget to execute on your digital transformation goals.
focus on strategy to create value
Today, the CFO is increasingly viewed as a strategic partner accountable for creating value across the enterprise. Indeed, research shows that a full two-thirds of senior executives believe that CFOs are best able to support their organizations when they are actively contributing to strategy. Forecasting trends, developing strategic initiatives, managing relationships with key partners — these are all areas where CFOs should be partnering with other members of the C-suite and providing input.
And the good news is that, according to the 2018 CFOs’ Pathway to Growth Study, a survey of more than 300 CFOs conducted by Tatum in partnership with the CFO Leadership Council, many CFOs are already on the right path. In fact, half of all respondents said that they work in close partnership with their CEOs, openly facilitate decision-making processes and contribute to the development of strategy.
CFOs who aren’t quite there yet with their organizations are likely dedicating far too much time to purely operational functions like accounting and collections. In that case, try to take a structured approach to building the capabilities of the finance function. Where are your weaknesses? What processes or procedures consistently eat up your time? Are there capabilities or workflows where automation could make an impact?
Answering questions like these in collaboration with other senior leaders should help set the stage for transformation — and enable you to more effectively serve as a strategic partner down the line.
be realistic about future talent needs
The 2018 CFOs’ Pathway to Growth Study also revealed some notable shortcomings around planning for future talent needs. In fact, many CFOs admitted not only to having looming talent gaps at their organizations — but also conceded that they didn’t necessarily have plans in place or available budget to address them. Does that sound like your organization? If so, that’s a huge problem. At the same time, it’s an opportunity to establish yourself as a forward-thinking leader. By engaging in strategic conversations about talent with other members of the C-suite, you can help chart the future of the organization.
What are the skill areas you should be looking for? According to the study, the skills most in demand right now among forward-looking CFOs are:
- analytical aptitude and the ability to use new technologies
- experience automating core accounting finance activities
- expertise in forecasting, planning and analysis
But bear in mind that the U.S. labor market today is tighter than ever, with the unemployment rate for some finance roles, like finance managers, currently at less than one percent. So sourcing and hiring candidates who meet the needs of your organization is likely going to take time, which is why many companies turn to strategic partners like Tatum to solve their short- and long-term executive hiring needs.
Finally, given that backdrop, what’s perhaps less surprising is the number of organizations without succession plans in place for the role of CFO. Only 34 percent of CFOs have clearly defined succession plans in place, and a full 81 percent reported not having internal successors with the skill or training to replace them, according to one study. This lack of preparedness is an issue that companies must address, because vacancies at the top can be costly, critically impair the short-term operational effectiveness of the business — and have far-reaching consequences.
key takeaways
Enterprises today are changing rapidly, and the role of the CFO must keep pace by shifting emphasis away from day-to-day operational responsibilities and toward a greater focus on strategic initiatives. Making that change may seem daunting for some, but by owning the conversation around digital transformation, honing in on strategy as a source of value and realistically appraising talent needs — both current and future — CFOs will be well-positioned to continue driving enterprise strategy going forward.
Click here to find out how partnering with Tatum can not only help bolster the CFO function at your organization, but power the growth — and digital transformation — of your business.