CFO 2.0

The remit of a chief financial officer (CFO) has evolved significantly over the course of the last decade. The role of ensuring expert and efficient financial husbandry has increasingly expanded to include strategic business leadership, effective challenge, and driving change and performance.

Significant advances in technology and access to data provide an opportunity to increase the impact a CFO can have on a business dramatically. Identifying the CFOs who possess the mindset, competence and inclination to capitalise on this opportunity will be a game-changer for businesses.

A high-performing CFO will identify and articulate key performance indicators and provide quality management information, not only to support, but to drive decision-making. They need to be in and out of the details, balancing precision of data with bigger-picture considerations.

The growing number of roles reporting to the CFO, such as procurement, property and IT, reflect their central role in business transformation, acting as a change agent and driving value that improves performance across the organisation.

In a study by Accenture, 81 per cent of CFOs said they see identifying and targeting areas of new value across the business as one of their main responsibilities and 77 per cent said it is within their purview to drive business-wide operational transformation.

This shift has partly been driven by technology. Powerful automation and analytics tools can enable significant efficiencies, and the CFO should be in the driving seat. However, two thirds of CFOs in the 2019 Deloitte CFO Survey, admitted they are only “a little” or “not at all” prepared for implementing artificial intelligence. And in a study by KPMG and Forbes, one in three chief executives said they worry their CFO isn’t prepared for the challenges ahead.

“Given the increasingly central role that CFOs will be expected to play in partnering predictively with the business, a CFO’s capacity to leverage data to draw out commercial and strategic insights is critical,” says Nick Gribbon, who heads the financial officers practice at leading human capital advisory firm Blackwood Group.

Being able to find people that possess the inquisitive mindset, strategic capability and commercial acumen needed to leverage, deploy and interrogate data effectively is at the top of our clients’ agenda

“Functional competence, of course, remains essential. However, technological orientation and a deeply analytical mindset are increasingly sought after by both private equity and plc. Furthermore, at a point in time when businesses are continually adapting to the environments within which they operate to gain strategic advantage, the ability to manage complexity, deal with ambiguity and take decisions at pace are essential in a CFO.

“The CFO will need to be even more forward thinking and pre-emptive to feedback to the board what they see through the numbers. It’s a fundamental mindset shift. The capabilities that are inevitably going to be there in successful CFOs are way beyond the parameters that have historically sat around the finance function.”

While a CFO’s ability to support other C-suite functions is not new, enhanced technologies and access to data and analytics now afford CFOs the ability to take business partnership to an entirely new level. Strategic advantage can be gained, risk mitigated and cost extracted. Key commercial decisions, whether contract negotiations, digital marketing and spend or supply chain efficiencies, can be informed on a real-time basis by the effective application of data and analytics. In this respect, the finance function is increasingly playing a more central role across all functions of a business.

Data enables CFOs to become more forward looking, examining trends and information to predict future challenges or opportunities in the business, as well as providing a longer-term outlook on the company’s health. Big data, almost instantly available, can result in crucial insights into the way customers are buying or supply chains are performing.

The agile CFO can play an important role in optimising working capital and financing across the business, directing expenditure and limiting lost days, to the material benefit of the bottom line.

Successful companies, private, plc or subject to the growing prevalence of private equity investment, will have demanding boards eager to respond at pace to the messages of accurate information and forecasts.

“We do a lot of work with private equity and they see huge value in CFOs who can see the bigger picture and possess strategic attributes over and above the traditional bean-counter-type profile,” says Simon Norris, consultant in Blackwood Group’s financial officers practice.

“The ability of a CFO to have a broad commercial and strategic impact is facilitated by the amount of data flowing through a business. Today’s CFO now has far more levers to pull that can have a significant impact on value throughout the organisation”

Blackwood Group works with plc boards, chief executives, chairs and private equity investors to identify CFOs with the skillset necessary to play this expanded, value-oriented role. Central to this process is understanding the specific strategic direction and business challenges of a company: what defines its success and the success of its people, what values and culture underpin its operations, and how it interacts with its customers and competitive landscape.

A successful CFO will thus require not only the right experience, but the right blend of behavioural competencies to excel in the role envisaged. This is about evaluating potential as much as recognising performance to date. The ongoing need to refresh the talent ecosystem will make Blackwood’s competency-based interviewing techniques and psychometric assessment practice increasingly important as businesses continue to evolve.

“The historic rear-view-mirror reputation that CFOs had has changed a lot, but being able to find people that possess the inquisitive mindset, strategic capability and commercial acumen needed to leverage, deploy and interrogate data effectively is at the top of our clients’ agenda,” says Mr Gribbon.

“The competitive threat that a business will face by not preparing itself for these kinds of opportunities is not to be underestimated. We are advising our clients to be ambitious in their hiring strategies and to use a change in leadership of the finance function as an opportunity to be bold.

“In adopting this approach, the chances of hiring a CFO who contributes meaningfully to the improvement of the business across all measures will be significantly enhanced. Don’t adopt this approach and you run the risk of falling behind the curve in terms of performance and value creation.”

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