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February 25, 2020

A Whole New World for Contemporary CFOs

Contemporary CFO

In 1992, Disney released the animated hit, Aladdin, and with it, the Grammy Award winning song, A Whole New World. Fast forward to 2019, and Disney released a live action version of Aladdin, featuring Will Smith, as part of their latest effort to transform these lovable fictional cartoon characters into relatable people. While we won’t take you on a magic carpet ride, we hope to share some of our observations around the evolution we are seeing with the CFO role.

To perhaps state the obvious, the CFO role is far more complex than ever. Whereas the role has historically been looked upon to manage the finances of a business, organizations are asking for more from the role. And more importantly, the changing needs of organizations has opened up new opportunities for CFOs to embrace this whole new world.  Let’s look at five key changes to the role.

Go Long

CFOs have long been asked to manage the finances, protect the assets of the company and maintain compliance with all financial rules and regulations. While short term management of finances remains mission critical, CFOs are increasingly being asked to focus more on driving long-term value. Doing so requires establishing KPIs (key performance indicators) that will drive growth within the business. In many organizations, those metrics and processes are being identified by the CFO, as are the technologies used to streamline and measure the successes. 

Become a Storyteller

Going beyond the numbers, CFOs are also increasingly being asked to be storytellers.  Storytellers, you ask?  Yes, storytellers. CFOs are being looked to as strategic members of the C-suite, moving beyond the traditional and ongoing functions of providing financial insights and compliance. Contemporary CFOs are offering up other data driven insights to better inform decisions and drive growth efforts.  With that comes the need to convey findings through compelling stories – stories about what you’ve uncovered, the substantiating “evidence,” and how you recommend your organization act on the information. The narrative you weave together can provide a powerful forward-looking story for your company, as well as a clear vision for its employees.

Embrace Technology

Technology needs are pervasive. HR is looking at talent management software. Marketing is looking to implement a new marketing automation platform. The COO wants to ensure the right ERP (enterprise resource planning) solution is in place. And, the CEO wants to have a source of truth for all client information (CRM system) in place. Every department in your organization could make the case for investments in new technology, and in a sense, they might all be right. Whether all of these investments result in net gains or benefits to the organization is another story. Filtering through the myriad requests you can receive within your company, prioritizing them from an investment perspective, and ranking the investments based on the perceived long-term value to the organization can be a dizzying, yet vital function for CFOs. 

CFOs do not need to be technology experts, but they need to recognize the tools and processes that could materially help the organization from the “nice-to-have,” to the “necessary,” and the “forward-thinking” investments.

One of the best approaches you can employ with new technology is a pilot program. Greenlight new technologies in small scale test populations to see if the performance measures up with expectations. Small investments in new approaches allows you to stay innovative while also managing the risk of making significant investment in something that doesn’t work for your organization.

Engage in Other Facets of the Business

CFOs are being asked to get involved, and in some cases, resolve matters outside the finance function. Today, many CFOs play a direct role in other parts of the organization, such as marketing, IT, and HR, among others, as these functions both require financial investments in people, processes and systems. While some CFOs have one or more of these functions reporting through them, many work closely with the leads for these functional areas of the business. For instance, CFOs often form partnerships with the HR leader to address the talent equation – making sure the organization has the budget for this critical function, ensuring it has the right personnel in place with appropriate incentives to retain them as well as the foresight to ensure headcount aligns with the strategy of the company to meet future needs.

CFOs should keep an open mind at the strategy-setting table while also holding onto the skepticism that your organization needs you to use to keep the organization’s budget on track. Be sure to understand what might fall into the “keeping the status quo” column versus what could propel the organization to a better position in its marketplace. If the answer is unclear from the message presented, do what you can to give yourself a more comprehensive look at the issue or topic, by doing some external research or checking in with peer groups.

Even then, if the new proposal is an idea that your leadership team feels passionate about but you have some reservations, try to keep the conversation going with the other stakeholders. Pivot the conversation to “how” the organization would implement the proposal. The exercise should help weed out the ideas that would take more resources than your organization can spare during a particular budget cycle. It may also provide the other members of your team with more insight into your decision-making process.

Manage Risk

Internal controls and protocols help the organization manage the known risks, but leadership teams always need to keep eyes on the horizon when it comes to the issues or topics that could disrupt operations down the road. CFOs need to understand their organization’s risk profile and the shifts in the broader landscape that may necessitate further investments in technologies or processes. You never want to be a position where the organization put off an investment that could have prevented a significant noncompliance fine or business issue because that investment wasn’t a convenient line item at the time the budget was being finalized.

Consider new laws or privacy regulations being implemented in California and Europe.  If processes or information security personnel aren't ready to help manage data and reporting requirements, your organization is at a compliance risk.

Severe weather events and global health issues like the coronavirus may also need to be on the CFOs radar, to ensure your organization has sufficient padding to manage any unexpected disruption in operations due to unforeseen external events.

Stay Innovative

As Aladdin acknowledges in the closing stanza of A Whole New World, sometimes you come too far to go back to how things were before.

Business needs and the operating environment around us change and will continue to put pressure on the role of the CFO to evolve. While the traditional functions of the CFO role continue to be needed, the shift to putting more strategic responsibility in the hands of the CFO appear here to stay. We encourage your organization to embrace these changes and join us in “this whole new world,” in which we live.  For more information, please contact us.

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