From Steve Player, North America Program Director for the Beyond Budgeting Round Table (BBRT)
It is an exciting time to be a CFO. It can also be quite challenging as the breadth of the role continues to expand. The world is moving faster. While improving costs and productivity will always be required, today’s CFO is often called on to drive strategy, manage information, and identify acquisition targets while protecting against the threats from hostile suitors. And all this must be done while continuing to smoothly run the traditional finance processes. How can CFOs meet the challenges of today while preparing for the challenges of tomorrow?
During the next ten weeks, I will be examining what CFOs and their finance teams are doing to make sure that both the finance function and their entire organization is “future ready.”
Achieving this requires a different approach from CFOs. They will certainly need to continue to leverage new technology to increase efficiency and effectiveness. The goal is to increase speed and empower their business to make better decisions. Key planks of their action plans include the following:
- Realizing that you cannot shrink your finance team to greatness. Finance processes must be transformed to deliver truly outstanding performance. They have developed a clear vision of how finance can help strategically. This often includes eliminating traditional budgeting practices based on assumptions that are out-of-date even before the budget is printed and approved. These are being replaced by next generation planning systems that provide continuous rolling forecasts, scenario planning capability, and ways to manage risks by rapidly modeling the potential impacts of key changes.
- Recognizing that the scope of the CFO job can be as broad as they show they can successfully handle. The prior debates about CFO/ CIO rivalries have largely been resolved with CIOs often reporting to CFOs. The modern CFO has also been called the Chief Profitability Officer, Chief Strategy Office, and Chief Innovation Officer. She or he plays a key role leading innovation initiatives.
- Focusing on training for higher office without making your CEO nervous. It is hard to successfully train for a higher office without making the king nervous. This is where truly understanding the organization’s product and customer profitability is critical.
- Still effectively completing the basics well. To shine at new tasks, you need to also make sure that your prime responsibilities continue to shine as well. The good news is that new technologies also help speed up even traditional functions such as closing and consolidations.
- Creatively finding time and resources to pursue improvements while keeping everything running. This likely means finding things to stop doing.
In my forecast improvement roadmap training, I describe your organization as a ship on the ocean. Your current organizational ship is composed of a cumulative cost structure and a cumulative ability to generate revenues. (Hopefully you generate more revenues than costs. Otherwise you have a leaky ship that needs to be fixed quickly!) These structures are all based on all the decisions you have made in the past about:
- what products and services to offer,
- what people were hired,
- what locations you would use,
- which process you would use,
- which customers you have attracted, etc.
Your strategic plan defines what your organization wants to become in three to five years. In essence, it describes the features of your future ship. The key tasks left is to define and execute all the initiatives, programs, and projects to convert your current ship into the strategic vision. Hopefully, your vision describes a ship that is future ready to deal with a changing, constantly evolving world.
Next week, I will look back at past efforts to transform finance to see the key results. I’ll also look ahead at the approaches and tools that are creating a better outlook for success. This begins by examining the robust planning tools currently available.