Digital technologies are reshaping businesses: breaking down traditional departmental and functional barriers and eradicating the associated information silos; facilitating new business models and disrupting established ones; creating a world of new challenges and opportunities. But rising to the former and exploiting the latter is about more than access to the latest and greatest technologies (though this is important); it’s also about people and processes; and this is reflected in the changing expectations of the finance function and the CFO.
“We’re entering the age of the Renaissance CFO. They are being challenged to step out of their traditional role and take on a bigger role,” says Morris Treadway, KPMG global head of financial management. In KPMG’s 2015 report The View from the Top many CEOs revealed that they think their CFOs want to step up into the top slot – in most cases, by moving to another company rather than stepping directly into their shoes. However, before this can happen, CEOs think CFOs need to broaden their focus and overcome their lack of experience outside finance.
It may be a happy coincidence for ambitious CFOs (and those who aspire to one day step into their shoes, in the same way as CFOs aspire to step up into the CEO role) that collaborating more with those outside the finance function can simultaneously be good for your career and good for the business – operationally, tactically and strategically. The tricky part, may be figuring out which of your C-suite colleagues you most need to cosy up to if you want to make the best of this happy coincidence.
Julie Teigland, CFO program leader at EY in EMEA suggests the CIO. “In today’s digital economy, the financial well-being of an enterprise is dependent on the health of the CFO-CIO relationship. To succeed, organisations must make bold technology investment decisions that are driven by corporate strategy, while managing a range of severe risks, such as cybersecurity and data privacy concerns.” EY research indicates that many CFOs know they lack the information technology (IT) knowledge to recognise what a mature cybersecurity capability looks like.
Around 44% of CFOs cite this lack of understanding as one of their top three barriers to better cybersecurity. This can make it difficult to work more closely with the CIO and prevent CFOs from investing in the initiatives which will best support the business operationally, tactically and strategically. Some of the responsibility for these communication problems clearly rest with the CIO; their tendency to discuss cybersecurity issues in technical jargon, rather than business language, can also block fast decision-making and action.
“This mission-critical convergence of technology, investment strategy and risk has elevated the CFO-CIO relationship to new levels of importance,” says Teigland. Although CFOs may be struggling with cybersecurity (and who isn’t), Raphael Bres, GM of financial management applications at FinancialForce.com sees them taking a much more active role in the front office, with customer relationships. “We are seeing the CFO and CIO partnering to support the needs of the business, from marketing and sales through to ongoing support,” he says.
This extended and outward-looking focus on relationships between organisations and their customers is also increasing the importance of the relationship between marketing and finance. “The CMO needs the support of the CFO more than ever,” says Bres. “With the right tools in place the CFO can help the CMO to understand how to optimise budget, by providing visibility into the profitability of campaigns, events, regions and so on, and providing data-driven insight into what’s working in marketing and what isn’t,” he adds.
As well as cosying up with the CMO and the CIO, CFOs may need to work on building closer relationships with others in the C-suite – particularly if the finance function and the rest of the organisation is to survive (and exploit) some of the emerging megatrends in both technology and demographics. Carole Sawdye, CFO of PwC US says: “It is critical that CFOs collaborate with human capital organisations and IT,” she says, adding: “The cost of highly skilled labour will soon outpace revenues unless business models shift.”
In Breaking away: How leading finance functions are redefining excellence, PwC outlines the looming threat of demographic megatrends such as aging populations, loss of key skills and millennial demands for emotional connection and work flexibility. Sawdye suggests businesses use technology to provide the mobility and flexibility millennials crave and to empower the changing labour force. “Organisations must endeavour to retain women in the workforce, as well as to retain older workers beyond the traditional age of retirement,” she says.
PwC research found that top performing finance functions are more likely to prioritise people management, business partnering, and generating a return on IT investment. They tend to be more cost-efficient than their peers: they spend more time on analysis than on data gathering and use IT to streamline and speed up tasks – using their time and a more knowledge-based approach to provide sharper insights. Sawdye says: “CFOs need to push their C-suite colleagues by helping them see the financial impact of accelerating demographic and technology trends.”
According to KPMGs View from the Top report, all of this is a golden opportunity for CFOs to help CEOs with the issues that keep them up at night – if CFOs can broaden their horizons and build the relationships they need to close the gap between the CEO expectations and the reality on the ground. “This means turning numbers into actionable intelligence and showcasing strong leadership qualities, collaborating with operations and thinking and acting globally,” says Treadway. It looks as if CFOs are going to need more than one new best friend.