It has been said that success is where preparation and opportunity meet. Never has there been a more opportune time for chief financial officers (CFOs) to have an impact, with chief executives increasingly looking to them to help shape business direction and strategy.
Once considered a numbers-only role, the CFO is now balancing traditional responsibilities with growing demand for data-driven analysis and insights that support growth and strategy.
Driving this change is an increasingly competitive and rapidly changing business environment, where most industries are being disrupted by new technologies, increased regulation, globalisation, and new, fast-growth markets and business models.
Dr Ilya Strebulaev, professor of finance at Stanford University in the United States, saw how much the CFO role was changing eight years ago and started the Emerging CFO: Strategic Financial Leadership Program that teaches current and future CFOs skills needed to be successful today and in the future, some of which weren’t traditionally deemed important.
“CFOs were either accountants or grew up through the finance office and there really wasn’t a need to have strategic or business vision,” says Professor Strebulaev. This worked well for a long time, but has now disintegrated in the current business environment. CFOs need to be able to understand business strategy and have the skills to communicate it with other people.”
So what are the most important skills, capabilities and attributes required of the CFO of the future?
EXPERIENCE
While a foundation in finance is important, CFOs will need broader business knowledge and operational experience as they take on a more strategic role.
Those on the CFO career track who have held roles in critical business functions outside the finance organisation, such as operations, marketing and sales, will have stronger insights into the business and customers, an advantage when it comes to driving strategy and growth decisions.
Chief executives are looking to CFOs and finance teams to deliver analytics and insights that support strategy and decision-making
In a study titled Developing the CFO of the Future by the Rotman School of Management at the University of Toronto and Odgers Berndtson, future CFOs were advised to diversify their experience. According to the report: “Given the breadth and complexity of the CFO portfolio, finance executives must be exposed to as many parts of the business as possible. Companies need CFOs who have taken a ‘corkscrew’ approach to their careers rather than follow a straight line.”
FOCUS
Performance data is becoming increasingly important to business success and helping companies identify new market opportunities, improve customer experiences, drive business planning, and support change and innovation. Chief executives are looking to CFOs and finance teams to deliver analytics and insights that support strategy and decision-making.
CFOs and finance teams will need to understand how to harness data, beyond just the financial numbers, to tell a business story that explains context and reasons why, and answers “what if” questions.
Technology will play an important role in the ability to make data timely, accessible and relevant to partners across the business. New financial management systems leveraging the cloud, in-memory databases, visualisation and mobile are enabling the CFO and finance organisations to move beyond just analysing historical financial data to accessing real-time insights about business performance.
PARTNERSHIP
Building a strong relationship with the chief information officer (CIO) will also be critical for the future CFO. Professor Strebulaev emphasises the importance of the CFO-CIO partnership in creating a more data-driven organisation, but says it will require learning how to understand each other better.
Working more closely together, they can also evaluate what technologies and financial systems are required to support CFOs and their teams’ expanded responsibilities.
“CFOs need to partner closely with CIOs on this data-driven revolution and help them understand what kind of data they need,” Professor Strebulaev says. “The challenge in the past has been that they often speak different languages, so improving that communication channel will be important.”
COMMUNICATION
A big part of the future CFO role will be not only delivering data and information, but communicating what that data means to multiple stakeholders, many of whom don’t have finance backgrounds. Future finance leaders should seek out opportunities in their organisations to work with different stakeholders and improve their communication skills.
This point is underscored in the Future Pathways to Finance Leadership report, which notes that future finance leaders will need to talk the same language across a wide range of traditional finance and non-traditional finance relationships.
This is new territory for many CFOs, who have typically worked behind the scenes in the past. “One of the biggest challenges I’ve seen CFOs deal with is communication skills. CFOs increasingly have to present data to people with non-financial backgrounds and many weren’t trained how to do this,” says Professor Strebulaev.
ADAPTABILITY
CFOs are working in a time of unparalleled business change and disruption. The CFO of the future and finance teams will need to adapt quickly to change, whether it’s supporting their company’s ability to move into a new market, adapt to new regulations or create a new business model.
Chief executives are also looking to CFOs to help drive innovation and transformation within their organisations. According to KPMG’s The View from the Top report, one out of three chief executives say experience with transformation is one of the most important attributes for a CFO.
As one of the leading supporters of innovation in their organisations, CFOs need to understand how disruption can impact business models, and be able to assess risk and financial results to determine where to put investment dollars in innovation.
For many CFOs this may be a very different way of thinking. “Innovation means you have to take some well-calculated risks and that is challenging for CFOs who are typically more risk averse,” says Professor Strebulaev.
The importance and breadth of the CFO’s role continues to grow, shaping a future CFO who looks very different from that of the past. CFOs will need a wide range of skills and capabilities to prepare for the opportunities and challenges ahead.
Take the initiative within your company to gain broader experience, understand the value of data insights and the technologies required for it, develop closer relationships with technology and business stakeholders, hone communication skills, and be prepared to help the organisation drive innovation and adapt to constant change. As William G. Pollard said: “Those who initiate change will have a better opportunity to manage the change that is inevitable.”
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