Finance executive roles are becoming increasingly important to the enterprise. In a 2015 survey of global CEOs by KPMG, 63% of CEOs said the CFO’s role will increase in significance over the next three years. The bad news? Thirty percent of those CEOs say their CFOs don’t understand or assist them enough with the challenges they face.
Gone are the days of the CFO as Controller in Chief or corporate cop. That’s not to say that CFOs will lose responsibility for maintaining controls or managing risk and regulatory compliance, but solid financial skills are just table stakes today. CEOs want true business partners.
The truth is, for decades, the best CFOs have been true business partners. What’s different now is that because of the convergence of several factors—such as the emergence of big data and analytics as a transformative force, and the ever-increasing pace of change—all CFOs must now meet that higher bar.
Here’s the lowdown on what it takes to be the best.
The best CFOs use advanced technology to give them real-time insights into their business at all times. They also venture outside their offices and into the enterprise, connecting the dots between processes, products, sales, and marketing. They have insight into their competitors and pay attention to their partners, suppliers, and—especially—customers. Top-performing CFOs have an instinct for going out and talking to the people who buy their products and services.
The job no longer revolves around arranging outdated financial statements to produce a treasure map that leads to understanding the performance during the last quarter. Rather than simply reporting on financial performance, the best finance executives translate business strategy into finance strategies. “It’s the person who can synergize strategy and finance who will have an impact,” said Jack McCullough, founder of the CFO Leadership Council and the MIT Sloan CFO Summit.
With their growing role in shaping corporate strategy and direction, finance chiefs must understand the organization’s portfolio of businesses and the operation of every function. The best CFOs master operational KPIs, not just financial metrics, to ensure that every department and the company as a whole understands what drives performance. “The best finance people are those who can slot into the business—not disrupt it,” said Mary Driscoll, senior research fellow for financial management at APQC, a global leader in business benchmarking and best practices. “They bring insights into problems. And, except in special situations, the budget shortfall isn’t their first topic when they walk into a meeting.”
Historically, CFOs have tended to shine in times of trouble, when companies need to cut costs, improve efficiencies, and conserve cash. When companies are in growth mode, CFOs have sometimes been seen as the “No” of the organization—too prone to vetoing promising new ventures. The best finance leaders strike a balance, bringing a more disciplined approach to pursuing innovation and working to ensure that the company takes on the right mix of risks. “A great CFO can sort through new opportunities as they emerge—walk in the shoes of the people asking for capital,” said Driscoll. “He or she asks the right questions: ‘What are the risks in your strategy? What are the must-win battles?’ and applies critical thinking to strategic risk.”
In the KPMG survey, CEOs reserved their harshest CFO criticism for the people skills of their finance chiefs. Almost all (97%) said attracting and retaining top-notch finance talent is critical, yet only 33% gave their CFOs a passing grade in talent management.
Talent development is particularly crucial in the finance department, because as CFOs’ responsibilities increase, so do those of their top deputies. CFOs need a deep bench of talent at every level in their departments. Talented finance staff can add more value to the business than traditional finance staff, but finance talent is in high demand. Tools like coaching, assignment rotations, and on-the-job training are key to attracting and retaining them. Companies with a history of strong financial leadership learned this lesson long ago. At GE, for example, longtime CFO (now CEO) Keith Sherin devoted one full day a week to development of his finance team.
In a marketplace with intense global competition and increasingly active shareholders, the CFO must be as adept as the CEO at communicating the company’s vision and performance. The best finance leaders use the numbers to tell a clear and coherent story. They are adept at simplifying—reducing the clutter so that shareholders have a clear view into the company’s vision, goals, and progress, while employees understand exactly how they contribute to achieving corporate goals. By enabling all constituencies to focus on the KPIs that are most important for their purposes, top CFOs keep everyone aligned and marching in the same direction.
Big data has enormous potential to give companies the real-time critical information they need—if they don’t drown in it first. The best finance leaders have been quick to embrace that potential. By simplifying and interpreting the data, and ultimately, by overseeing the conversion of data into real insights, they play a unique and crucial role in driving strategy across the entire enterprise.