Great things are expected of today’s CFO. In fact, such is the anticipation that the web is in full swing debating the topic – with views ranging from expert opinion to uninformed speculation!
Who is this ‘new CFO’, and what is he or she supposed to be doing differently?
I meet with a lot of CFOs, and am starting to see these changing priorities reflected on the ground. So, cutting through the hyperbole, here is my take on finance transformation in 2015.
Some new skillsets of the new CFO
The new breed of CFO is a step beyond just being the highest accountant in the business. These are some of the areas where they are expected to shine:
Enhanced commercial literacy – they are able to report and present results in a more accessible and focused way. They are also educators, helping other board members develop their financial skills.
Profitability – they are able to play a more proactive and strategic role in identifying and optimising profitable areas of the business.
Rightsizing and prioritisation – they are able to envision the optimum size and shape of the organisation and where and how to invest in certain service and product areas.
New and emerging markets – they have a sound understanding of the potential opportunities and risks in these areas, and the business planning and commercial implications that come with this .
Acquisition strategy – they have an increasingly sharp eye for the potential value and practical challenges of acquisitions in the context of all of the above.
So, what’s driving this change?
It’s the economic recovery along with a few other disruptors…
The main point here is that we (seem to be) coming to the end of a long period of austerity in the major developed economies and big business is starting to take a less cautious, defensive approach to its operations. In short, it’s time to look at how to drive growth, not just cut costs.
During this period, it’s also worth remembering that some disruptive technologies have entered the mass adoption stage and consumers are now behaving in fundamentally different ways. This is impacting on all kinds of industries and business processes. So there’s another reason to take a fresh look at the way you do business.
This dynamic and exciting new world calls for a different kind of financial organisation and a different kind of finance specialist. Enter the ‘new breed of CFO’ armed with all of the above skillsets.
The same fundamental priorities
For all the excitement, it’s worth pointing out that the ‘new breed of CFO’ still has to base their work on some rather more traditional, but absolutely critical foundations. Point is the CFO’s traditional role as the chief accounting officer remains and the buck still stops with them, when it comes to making sure the numbers add up. The considerable work of reporting and forecasting to the business and its shareholders must continue to be accurate and timely. Their understanding and management of financial risk must also be as robust as ever. And the need for simplicity and cost effectiveness in finance operations will not go away.
This stuff may be less worthy of internet comment but the world certainly hears about it when things go wrong.
A new relationship with outsourcing?
We are arguably reaching a tipping point in priorities from cost reduction to growth, but any CFO still needs to manage the fundamentals.
The ‘new CFO’s I meet are often as interested in the flexibility and scalability of an outsourcing model as much as its potential for cost efficiency. They come across as well-rounded entrepreneurs who are looking to build a slightly different finance back office that is both fit for purpose and fleet of foot. The fact that we are able to help them compare their approach with global best practice and contribute sector and international expertise makes even more sense to them.
In my next post I will add more on how new outsourcing and insourcing models are responding to these challenges.