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Today, businesses realize the necessity of having a CFO who can drive digital transformation and spearhead smarter decision-making. Significant events, such as the COVID-19 pandemic, are leaving their mark on the business world, accelerating this push for change while rapidly evolving the CFO’s role.
In this blog, we explore the topic of the modern CFO further, summarizing chapters from Raconteur’s recent report, The Pioneering CFO: Spearheading Smarter Decision-making, to highlight five ways CFOs can be real drivers for transformation in their organization.
Over the past 15 years, there has been a significant evolution of the traditional CFO role. Moving past the stereotyped ‘bean counter,’ the CFO today is a strategic, cross-functional business leader who actively transforms decision-making processes across the whole organization. Both the financial crisis in 2008 and the recent COVID-19 pandemic have accelerated the expectation of the CFO role.
However, where several CFOs have met this newfound challenge within the C-Suite, not all finance professionals have kept up with the change. The modern Office of Finance needs to be pivotal in providing a real-time view of how the business is performing and where it is heading. The right technology and processes are vital to enabling CFOs to provide the insight needed to truly transform organizational decision-making.
More than ever, boardrooms are understanding the need for digital transformation efforts. Recent global events have provided the tipping point for businesses and finance leaders to approach this need with more momentum, with senior executives shifting their focus from ‘gut instinct’ decisions to ones guided by data.
Data must be the organization’s lifeblood, driving everything from a decision-making perspective to the boardroom. Basing decisions on historical, backward-looking information has little value when not supported by what is happening in the here and now. However, if data cannot be understood and articulated to senior levels, this initiative is much harder (if not impossible) to drive. Data must be digestible to embed it in company culture and the boardroom successfully.
Thankfully, with the right digital platforms in place, data is more accessible than ever before. User interfaces constantly improve to help finance professionals use data to speed up decision-making, moving away from infrequent analysis to real-time tracking and correction.
COVID-19 has shone a light on the need for real-time data. While a change in industry and business is expected and usually somewhat predictable, business leaders have noticed an acceleration in the pace of change (led by the pandemic’s disruption). Operational and marketing factors cannot alter over time in the same way with disrupted supply chains, office working has been turned on its head, and business models changed almost overnight. Change must instead be enacted at a much faster rate.
The key to this is accessible, shared data across the business. Its utility is to add a level of robustness to decision-making processes and highlight new market opportunities for companies to seize. Decision-makers require vital information as quickly as possible to make informed decisions at a rate that underpins business longevity.
In this way, Financial Planning & Analysis (FP&A) is extended beyond finance and into the wider business. Implementing scenario modeling ensures the Office of Finance can plan for both a best- and worst-case scenario to build in business resilience and enable companies to seize new opportunities in hyper-competitive and highly disrupted markets.
Workforce planning might be the domain of the HR department, but with staff being up to 70% of a company’s costs, CFOs are increasingly asked to take the lead in this area to ensure that decisions on headcount consider both strategic and financial goals.
Staff are a company’s most valuable resource; without them, the business cannot operate. But where is the line drawn between finance and HR? At what point does the value of the workforce, from a purely fiscal viewpoint, shift to that of operations, company culture, and employee development led by HR?
Understandably, the C-Suite must work together and align to the same corporate goals. This exact notion also stands for the workforce. Both the CFO and CHRO are focused on creating team structures that grow with the company. However, there is a clear distinction between the two jobs. On the one hand, the CFO looks to ensure that decisions on headcount consider both strategic and financial goals, which aspects require investment, and understand the impact on operating expenses and margins and organizational structure. This is even more important in times of change when business needs to understand the impact of every decision on ROI of every aspect of what they do. The CHRO, on the other hand, has more of an involvement in advising on the skills mix of the team and elements like career pathways and succession planning.
Growing volumes of data and technological improvements allow organizations to use statistical techniques such as data mining, predictive modeling, and machine learning to forecast events and gain a competitive edge. The expectation of the modern CFO is to be a strategic thinker who can drive value creation throughout a business, best achieved by leading with these data and technological tools.
As noted earlier, the COVID-19 pandemic has been a significant factor in pushing modern CFOs into more strategic roles, particularly around risk management and growth planning, for their companies. CFOs must embrace predictive techniques that improve decision-making in many areas of the organization to fulfill these newfound job expectations. They cannot rely on the past and present to provide insight into what has happened or is happening. Instead, they must adopt a more proactive approach by providing accurate information about what will happen in the future and how the organization can set their strategy to take advantage (or prepare).
The modern CFO has steadily evolved from ‘keeper of numbers’ to critical business partner within the C-Suite. However, not all finance professionals have moved in time to keep ahead of the curve and be the spearhead in guiding smarter decision-making for their organization.
Download the full report, produced in collaboration with Raconteur, to discover how CFOs and the Office of Finance can initiate a digital transformation journey to lead organization-wide decision-making processes.
To succeed as a more strategic business-partner, CFOs must lead the organization-wide transformation of decision-making processes.