Chief financial officers have more to do with leadership than ever before, says David Chancellor of Tyzack. One of the advantages of being an executive search consultant is that we get an early insight into developing trends in the C-Suite. From regular meetings with CEOs, HR Directors, CFOs and others from a broad range of companies, we are able to discern subtle shifts in the market place that affect the way companies operate and position themselves for the future.
Possibly the most high-impact change over the last 20 years has been in the role of the Chief Financial Officer. Few in the C-Suite would argue that no position has changed more than that of the CFO. Traditionally regarded as conservative, number-crunching guardians of the corporate coffers, the position of Chief Financial Officer today bears little resemblance to that of the Finance Director even 10 years ago. And the changes continue.
In addition to their responsibility for the financial health of the organisation, the CFO is increasingly being expected to play a greater role in other areas of the business, particularly Human Resources and IT
It could be said that one of the biggest drivers of change started in the 1980s when the global marketplace experienced an unprecedented period of M & A activity. This led to demands being placed on CFOs to provide critical support to their Chief Executive Officers and the Board when making high-impact decisions aimed at improving corporate value.
Whilst this period was an important development for CFOs, in subsequent years the CFO skill set has extended well beyond technical number crunching, changing from an operational one to a position that is now heavily strategic and with a strong leadership orientation. Today’s CFOs are expected to play a key role in strategy development and implementation, working closely with their CEOs to creatively develop growth opportunities for the future.
In addition to their responsibility for the financial health of the organisation, the CFO is increasingly being expected to play a greater role in other areas of the business, particularly Human Resources and IT. In many large organisations, the IT/Finance alliance is fully established with the Chief Technology Officer often reporting directly to the CFO. Traditionally, IT was used by the finance department to gather important data, from which they would produce a range of reports. Business technology was regarded as operational, a back-office function that was a necessity just like office furniture. Today IT is no longer viewed simply as a means to gather information but a key ally for the CFO to access critical areas of the business, analysing Key Performance Indicators (KPIs) and engaging in more strategic functions.
It is these strategic functions of business technology that have had the greatest impact on the CFO’s position. As Marketing and Sales executives began to grasp the scope and power of the Internet, along with a newfound ability to reach customers 24/7, business technology changed from being purely tactical to being both tactical and strategic. Through the development of disruptive business models, companies began to reach previously unviable markets and customers profitably.
Yet whilst this strategic change had a positive financial impact on the organisation it created a quandary for the CFO. Chief Executive Officers expect their CFOs to examine in detail the financial impact of the organisation’s objectives and strategies while they’re still in the planning stages, not after the event. Evaluating the ROI of technology applications such as data collection, data analysis and data storage is reasonably straight-forward, but what about the calculation of the ROI of technology such as social media?
Digital technology is utilised by virtually all departments within an organisation. HR uses social media for recruitment and communication purposes, marketing, sales and public relations use social media platforms for reaching and retaining customers, monitoring campaigns and auditing competitor activity, and legal, R&D, procurement and logistics all have their uses for social media. It is almost impossible to effectively use conventional methods of ROI for social media because multiple data points frequently occur. Particularly in the sales, marketing and PR setting, metrics such as retweets, likes, follows, comments, shares, website visits, and others will all have an impact on the effectiveness of the digital technology both in the short- and long-term.
Much has been written on this subject and experts now conclude that financial measures currently used may not capture the long-term benefits of investments in digital technology. As a consequence we are seeing the “new breed” of CFO adopting additional non-financial measures as indicators of the future financial performance of digital technologies.
Although the challenges may seem daunting, the opportunities far outweigh them. Today’s CFOs need to add ‘creativity’ and ‘vision’ to their strategic skills and complement these with their formal training and experience in hardcore accounting, financial reporting and risk-management. Breaking away from the traditional CFO mould will, doubtless, reap great rewards.