A CFO’s Vision for 2020: Unleashing the Real Potential
Dr. Murtaza Abbas Mooman | April 25, 2014 |
The role of chief financial officers (CFOs) as business leaders needs to be rewritten in the context of constantly evolving business environments, which demand continuous adjustments and adaptations in the way organizations are managed. For CFOs and finance leaders, I see a new frontier that is not a set of promises but a set of challenges with related opportunities. We will need to play a more diverse role, one of increasing authority and responsibilities in the remodeled business world.
Traditionally, CFOs have been considered primarily responsible for the accuracy of financial information, as well as fiscal discipline, analytical support, sound governance, financial planning, record retention, cost controlling, and infrastructure, including real estate upkeep and optimization. All of these roles are primarily inherited from the past. However, we are now being asked to shoulder much greater responsibility—and for that, we need to work beyond traditional parameters and take on a role that is more proactive towards sustainable value creation.
Increasing expectations of stakeholders—including, but not limited to, directors, shareholders, and regulatory bodies—render it inevitable that CFOs will need to invest considerable time in managing and prioritizing their activities in accordance with their individual impact on the organization. Therefore, it is the symmetry and reliability of information available to all stakeholders, achieved through integrated reporting, that will be indicative of the CFOs’ presence in developing strategy and stakeholder management. In a nutshell, the required paradigm shift is from a traditional custodian of value and keeper of records to anticipator of the future, and enabler of possibilities into realities for the organization; at the same time as maintaining a balance and taking into account reasonable stakeholder expectations.
CFOs need to emerge from the mindset of only raising red flags to collectively identifying, understanding, and providing alternatives to business problems. They will have to go beyond delivering numbers to delivering insights that facilitate key decisions from the board. Accordingly, CFOs have to position themselves as primary drivers of corporate strategy along with CEOs and play a vital role in ensuring value creation over time. It would not be wrong to say that a CFO with strategically aligned capabilities can bring the revolutionary changes needed for organizational growth. To meet such expectations, CFOs have to operate as strategists rather than as tacticians to ensure the financial health and sustainability of their organizations and, most importantly, to ensure that the shareholders’ expectations are met or exceeded.
To achieve this greater responsibility, a radical mindset change is needed to a forward-looking focus. The traditional myth that CFOs are showstoppers has to be done away with, which will require continuous and meticulous effort from individuals and the accountancy profession. CFOs have to grasp every opportunity to step out of their comfort zone and expose themselves to situations and challenges that will help them fit in a strategic leadership role. This does not mean taking over the entire responsibility of the CEO but is rather an integral part of the management leadership.
To handle the expanded role, CFOs have to consider how to best divest and outsource routine and transaction processes, for example, by a captive shared-service model for the back office and transaction-intensive functions. The advantages and risks of outsourcing need to be carefully considered. In my experience, shared services have resulted in reduced costs, standardization, and real improvements in business processes, which enable greater focus on strategy and driving sustainable business value. This leads to improved efficiency and better results, and will also give CFOs air to breathe—equating more time for strategy and execution, the two key activities upon which the CFO is ultimately judged.
CFOs do not have to control everything—they should be prepared to let go. They need to participate in setting direction and creating a learning and competitive environment that is based on trust, thereby instilling a sense of urgency, responsibility, and accountability within the organization to ensure that people are doing the right things in the most efficient way and that they share the same vision. This is the real shift of communication: it is not telling people more loudly but convincing people why something matters and then asking the very best of them.
So what does it take to enhance our expanded role? Foremost, CFOs must garner the patience and flexibility to consider others’ viewpoint—without feeling intimidated. They will have to shun “predetermined strategies” and must be ready to change tactics. Comprehending the situational sensitivity, CFOs must set aside egos and even be willing to form alliances with former adversaries—just not at the cost of giving up core values. All this complex relationship management can be handled with one simple action: CFOs step up and take the responsibility in tough situations, allowing them to listen and be heard by others, which is not be possible without keeping different perspectives in mind.
Traditionally, CFOs had a mainly cash flow-centric perspective in managing customers, suppliers, and competitors of their organization. But as strategists, it is impossible for them to make sound decisions without understanding the role and interest of these stakeholders. Stakeholder engagement requires strong communication and interpersonal skills and an intuition for situational sensitivity, which might be highly political with complex and conflicting interests.
They must lead the way in generating sustainable economic value, rather than simply maximizing revenues and minimizing costs, and simplify the complex financial world into organizable ideas and understandable concepts so that the steps in sustainable value creation are understood.
In the coming years, we will witness dramatic changes in skills, expertise, and competency required of CFOs. CFOs wear more hats today than ever before and often operate with vastly fewer and scarce resources. Being effective in this challenging environment means recognizing what roles are expected of CFOs and approaching each with a clear focus. Finance professionals who aspire for the CFO role should learn their business inside and out and be open to exploring related opportunities beyond finance and governance. They must be passionate about their role and have a willingness to follow through—acknowledging the fact that passion and perseverance are vital to reaching leadership positions.