Changing Expectations for CFOs

The role of the CFO is evolving and everyone is taking notice. In the last few months, McKinsey, Harvard Business Review, Deloitte, and Accenture have all published articles on the changing expectations for CFOs. With advancements in technology like blockchain, machine learning, and big data, CFOs understand they need to change in order to deliver growth in the coming years.

According to the McKinsey study, only 13% of CFOs they talked to believe their finance teams are using automation and AI. And, in the past year nearly two-thirds of respondents said they have digitized less than 25% of the finance function in the past year. Of those that have invested, the return has been modest, with only 5% citing a substantial return.

The study finds that sorting through all of the technology options is one of the primary roadblocks to making more progress. Combined with resistance to change (operating in traditional siloed roles) and lack of digital skill sets, it’s obvious that transformation requires executive buy in and leadership.

Although progress is slower than anticipated, the move to technology for finance is happening. According to the study, “40 percent of finance activities (such as cash disbursement, revenue management, and general accounting) can be fully automated, and another 17 percent can be mostly automated.”

The report goes on to state, “The capabilities required to be a highly effective finance professional are changing. Traditional quantitative competencies will always matter, of course, but we believe finance professionals will also need to raise their game in the following qualitative areas as well: Shaping the economic value-creation agenda and overseeing financial performance, organizational health, and managing stakeholders and processes outside of a formal hierarchy.”

According to the HBR webinar with Deloitte, “ CFOs are now expected to play four diverse and challenging roles. Two traditional roles are steward and operator. Stewards protect and preserve the organization’s critical assets and ensure accurate reporting. Operators fulfill the finance function’s core responsibilities efficiently and effectively. But it is increasingly important that CFOs play two additional roles: strategist and catalyst. Strategists provide financial leadership in determining the organization’s overall direction. Catalysts instill a financial approach and mindset throughout the organization while creating a risk-intelligent culture.”

Steven Ehrenhalt, Principal, US & Global Finance Transformation leader, Deloitte, writes in a recent piece, “For CFOs, it’s crucial to think through, step-by-step, how “digital transformation” will unfold—in regard to their companies and their own roles—and how finance can support the digital model that results from the convergence of these megatrends. They should also consider how they can digitize the finance function by implementing cutting-edge technologies (such as blockchain) to decrease costs and increase insights.”

The article goes on to say, “They (CFOs) might also reconsider their own roles. They’ll need to hone their leadership skills, adjusting to managing a diverse group of employees in different geographies. They still have to find ways to keep the current business growing—even as they are leading the charge to reinvent it. The managerial challenges of enabling digital transformation can be invigorating, as CFOs apply their new skills—ranging from technical knowledge to strategic thinking—to move beyond serving as the company’s devoted tracker of numbers. In the process, they are becoming the catalysts and strategists that their future finance function demands.”

Accenture’s CFO reimagined takes a look at the “evolved CFO” as well as the development of future finance talent, among other topics. The report notes that,”the finance department’s to-do list is shifting, and so is the role of the CFO. Automation and digital transformation continue to progress, reducing costs, improving productivity and allowing employees to leverage critical and creative thinking.”

The report notes the evolution of the finance function is characterized by three main themes:

  • Digitizing finance and harnessing the power of data: CFOs continue to automate routine accounting, control and compliance tasks. They are increasing their focus on value creation as digital technology empowers them to shape strategy. As a result, they can increasingly be relied upon for higher-level thinking, answering new questions in new ways and bringing the C-suite together to act on insights gleaned from data analysis.
  • Leading digitalization efforts: CFOs play a critical role in the digitalization of their enterprises, with most starting in their own departments. In a virtuous circle, the data capabilities CFOs develop can help them make decisions about investing in digital and technology across the enterprise based on economic value, which in turn empowers them to generate and combine even more useful data.
  • Developing future finance talent: CFOs need to shift their hiring and talent development criteria so the next generation of finance leaders—who will more than likely follow different career paths than previous generations—can flourish in this expanded role. Knowing how to collaborate and innovate are requisite traits of the new CFO. Meanwhile, current CFO and senior-level finance professionals are gaining expertise at a faster rate than the overall function, creating a skills gap that must be addressed.

With technology continuing to evolve, CFOs must speed up their evolution to keep pace in both skills and knowledge for not just themselves, but their teams as well. Gone are the days of detail oriented, linear thinking, numbers people. Today’s finance executives must demonstrate they are agile, lateral thinkers, able to visualize data, open to collaboration with other department heads, and able to train the next generation of leaders.

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