Our recent CFO round table at Mayfair in London revealed some valuable insights into the role and evolution of the finance function. The event was conceived as a forum for discussing challenges and sharing information – something that many finance professionals welcomed because they feel they often don’t have this opportunity in their daily work.
One of the big themes on the agenda was what finance will look like in the future. There was agreement around the table that many roles that involve checking, controlling and managing systems won’t be needed because they can be performed by technology. (The insurer Aviva has already reacted to developments like this, by offering to retrain staff for a new role if their current job is under threat from automation.)
Finance transformation: from steward to catalyst
Finance is actually going through similar changes to what the IT function of a business has experienced. Now that it’s possible to outsource the running of technology, IT teams have lost custody of the servers but they have gained the role of managing relationships with service providers, and from an internal perspective, they now educate and enhance operations about what’s achievable with technology.
Undoubtedly certain finance functions may be delivered externally, but there will always be a need for senior finance personnel to guide the business and be a partner in showing them what’s possible from a financial perspective in a way that enhances the business.
I think that’s a really powerful message, and it’s something finance people can look forward to: they shouldn’t be doing machine work, and this shift can spark their creative side. Most businesses are moving from fixed costs to variable costs, and that’s a big change, it’s the chance for the CFO role to evolve from ‘the numbers guy’ to being a mentor to the operational side of the business.
Working in finance gives a fantastic insight to an organisation: it’s like being the financial engineer of the business, understanding how it all works together. The CFO can help other departments to understand the financial impact of a decision. Most finance professionals love looking at strategic problems. They spend most of their time hacking through figures and building spreadsheets but they love to add value at the boardroom level, answering questions such as considering a new market. It’s about making a strategic contribution to the business, and there’s huge intrinsic value in that.
Another agenda item to kick-start discussion at the round table was the theme of CFOs enabling operational performance through business partnering. This approach involves finance working more closely with a particular business unit, sitting in on and contributing to an operational meeting.
One of the attendees pointed out how his predecessor would say no to every proposal, rejecting it on cost grounds. The speaker took a radically different approach, which prompted a comment from his CEO who noticed higher amounts of spending.
His reply encapsulated what the new, strategic finance function is all about: “I’m not here to stop you spending money, I’m here to support you investing. I’m here to help you make decisions based on a return for the business.”
Data-driven decision making
The third debate point also linked back to this theme of finance becoming more involved in consulting to the business. There was a good discussion about the number of reports that CFOs produce, and the consensus around the table was that most had reduced their management packs to two pages; one of the guests had reduced this from 47 pages. The feeling was to distil the number of KPIs to the essence of what’s important and consistent across the entire business.
Five KPIs, delivered frequently, is much more powerful than having to look at 100 indicators once a month. By having just five items, it’s much easier for everyone in the business to consume the information, which fosters more collaboration between different teams because it’s an easier language to discuss. The metrics can be about what the business needs to focus on, and they can align with the strategy. The assembled group also agreed that a lot of people in the business don’t even need to see the full P&L, where just a few numbers in an app would be enough.
Expect to see insights like these from our upcoming CFO roundtables; we’re already planning an event in Kuwait on April 19 and another in Norway on April 30, in association with our partner Adaptive Insights.