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A change in talent: transformation of the CFO

The CFO’s role has been evolving for decades, but right now it is in the middle of its most radical change ever

CFOs have always been central to any business. As the person in the middle of the organization, with a deep understanding of the economics of the company’s business model, they have had a unique view across all of its working parts. That came with some influence, but it has never quite been as strong and deep as it is now. This is not just transforming the role, but also the type of talent that will succeed in the future.

It is a transformation that has other broader changes in its roots, especially digital transformation.

McKinsey’s global survey has shown how, in recent years, the CFO’s responsibilities have grown in a few important areas—particularly in digital. ‘Between 2016 and 2021, the share of finance leaders who say that they are responsible for their companies’ digital activities has more than tripled. Investor relations has also grown dramatically as an area of focus for CFOs. Nearly two-thirds of finance leaders say that they are responsible for these activities, up from 44 percent in 2016.’

But looking at the finance function itself, “if we believe that 80% of it could be digitized in some way, CFOs have to ask the question, ‘what’s left?’”, observes Athena Reilly, Managing Director, Accenture Enterprise Data & Analytics Strategy in a recent report. “They have to reinvent themselves.”

Adding value

Many companies are keen to implement initiatives that cut across business functions and the CFO is strategically well-placed to lead such efforts. They are likely to be involved at the beginning, working with the rest of the business on objectives, as well as at the end, to judge on whether the targets were hit. This is the way the finance function of the future will really add value, rather than in the middle.

“Quite simply, the days of hiring CFOs to tend to the finances alone are well gone”, says Manuela Klos.

Another example of change is that today’s finance director is also expected to be an ethical standard-bearer for the organisation. They need to be that somebody you can really trust to cut through all the bias: the honest broker in decision-making.

This status and knowledge of the financial priorities of the organisation gives CFOs a meaningful role to play in their companies’ ESG programmes. Investor interest in these issues has soared during the pandemic and as the climate crisis grows in demand for action.

With CFOs involved there can be a greater alignment between these ESG programmes and the company’s strategic and financial objectives.

Digital, digital, digital

As digital transformation accelerates, the modern chief financial officer needs to wear yet another hat. That means understanding how to get the maximum from that digital investment, harness Big Data, and respond and adapt quickly to disruption.

Automation of mundane tasks, richer and more timely datasets, access to sophisticated analytic models and deployment of advanced visualization tools can all combine to make finance take a bow and gain stature as the department that adds the most value.

AI, for example, will provide CFOs with an entire new set of tools, making them one of the most powerful ‘information managers’ in the company with a decisive contribution to steering the corporation.

“But the most significant challenge in recruiting the right CFO is finding people who really understand how to collect and use data”, states Michael Proft.

And it doesn’t stop there, they must be digital storytellers able to persuade and communicate with the rest of the enterprise to drive the right conclusions and actions out of data-driven insights.

Covid effect?

The results of the 19th Deloitte CFO Survey give reason to be optimistic, because from the point of view of the finance managers, the losses in sales suffered by their companies could in most cases soon be compensated for again. In addition, a strong increase in growth is expected. But that does not mean that after the crisis there will simply be a return to pre-crisis mode. The pandemic is causing lasting changes both in the economy in general and in the structure of the finance function itself.

What was the effect of the pandemic on the CFO and their role?

Yes, as survey results show, whilst in the throes of the pandemic, the CFO’s focus did shift toward crisis management and away from longer-term responsibilities such as strategic leadership, organizational change, and finance capabilities.

But this has not derailed the underlying rapid evolution of the role, since the longer-term implications of many critical business trends—digital, transformation, and ESG among them, are still demanding attention.

As business seeks to ‘build back better’, some might say it has elevated the importance of the CFO in determining how businesses adapt to significant changes in how work gets done—particularly in places where digital and finance intersect.

Bridging the gap

Today’s CFO has clearly moved from being ‘the numbers person’. And as their role expands, they must now be able to bridge the gap between strategy, execution and finding new sources of value for the organization. How do you prepare financial leadership talent to fit this new model? There are three areas of possible focus:

Strong leadership and business acumen: This can be developed through an MBA or leadership development program, but early involvement in the company’s decision-making process will help.

Broad and diverse experience: Finance leaders need exposure to different parts of the business. Leading change management initiatives or working in other functional areas can provide a rich development experience.

Effective stakeholder engagement: This comes from exposure to the board and its committees, investors, analysts and the media. Finance executives need to ask for these opportunities so they can hone their communication and political skill.

If you want to discuss these issues and how they affect your talent and leadership planning, or perhaps want advice on your own career trajectory, please get in touch.

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