When the Chief Finance Officer has something to say, they can be guaranteed to have their audience in rapture. Why? Well according to Deloitte, the CFO is fast becoming, ‘the go-to person to translate global ambitions into practical reality’. But this was not always the case. Find out what researchers have found most prevalent about the rapid rise of the CFO in the C-suite.
What’s behind this trend?
Globalisation
Evidence supports the fact that swift changes that have consumed the role of the CFO in recent years. According to McKinsey & Company, between their 2016 and 2018 McKinsey Global Survey, CFO respondents said that ‘the number of functions reporting to them has risen from ‘four to more than six’.
Yet, this can be explained partly by globalisation and the dexterity of their skill set. Globalisation and the complexities that it entails for business today have meant that CFOs have had to keep up with rapid changes. CFOs, according to experts, are particularly adept at navigating and leading growth in new markets, ‘given their abilities to manage risk, provide objective counsel, and bring analytical rigor to strategic choices’.
Breaking down the new role of the CFO:
Deloitte in their Q4 2018 edition of Global CFO Signals have reported that increasingly downward trends in the quarter have incited uncertainty and ambiguity in the office of the CFO. Less optimism about the future of the business environment in 2019 means more agility is necessary moving forward into the 2019 business year. Two key strategies CFOs need to adopt include the following:
1: Support a Company-wide Transformation
Organisations worldwide are faced with a complex mire of trade conflicts, political upheavals and digital disruption. They are now looking to the CFO to see how to navigate these innumerable challenges and opportunities. CFOs deliver consistent support at C-suite level in a range of distinct tasks for their organisation, particularly those who are surveying global expansion. They consider legal frameworks for expansion, lead compliance with local regulation and adjust pricing, product strategy and supply chain- all necessary strokes to smooth out the path for the rest of the C-suite to do their job.
In 2019, surveys highlight that 77% of CEOs have cited focusing on, ‘operational efficiencies’ within their organisation in the next 12 months to drive revenue growth. CFOs are a crucial part of this effort. McKinsey & Company define the three most important activities to aid this transformation as: shaping the economic value-creation agenda, overseeing financial performance and organizational health and thirdly, managing stakeholders and processes outside of a formal hierarchy.
The CFO will need to spend more time developing and executing these activities. The use of technology can help these executives to use their time more productively. Trends note that 40% of finance activities can be fully automated with another 17% of these able to be partially automated. CFOs will be better equipped to support the CEO and their teams with the right focus and tools to support them.
2: Retain and support multigenerational talent
34% of CEOs surveyed in PWC’s 22nd Annual Global CEO Survey have listed ‘availability of key skills’ as a top three threat to business, rising two points from 2018’s survey equivalent. This is telling. Top talent and ensuring its retention are key issues for the entire organisation, but the same is particularly true for the Chief Financial Officer. In Central Europe, 90% of CFOs anticipate that the cost of their workforce will increase in 2019. But why is this so essential to the changing role of the CFO?
Ram Charan, Dominic Barton and Dennis Carey, authors of ‘Talent Wins’ have argued that for organisations seeking and sourcing top talent, the CEO, CFO and CHRO are the three key figures to ensure a ‘talent-driven’ organisation. AON CEO, Greg Case agrees, arguing that “People allocation is as powerful as financial allocation”. The CFO will understand key financial drivers more inherently during this process and will lend crucial support to both HR and the CEO thus reinforcing their changing role and its important, throughout the organisation.
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