CFO Leadership

Some personality tests obviously have more credibility than others. At the one end of the spectrum is Myers-Briggs, which has been used for decades in a wide range of industries to help identify the traits that contribute positively or negatively to organizational outcomes. At the other end of the spectrum is the Cosmo Quiz, or those tests you sometimes see on Facebook. A recent post on CIO Insight, however, takes an unusual approach to the personality quiz by conducting research with CFOs, to whom IT leaders often report, then organizing the results into a series of personality-driven categories. These are just a few of them: Visionaries: Those who prefer to make decisions based upon experience and intuition Politicians: Those who lead cautiously with a methodical, team-based approach Revolutionaries: Those who take a maverick approach to data and who are happy to source it outside of designated business systems If none of these sound like you, don’t worry. That may be because you’re a “traditionalist” who sticks to established systems. Some of the other variations sound more accusatory, such as “carers,” who delay a decision rather than make a mistake (because they care, presumably). The point of all this, of course, is to help those leading technology decisions better prepare for the kind of interaction they might have with whoever is leading the finance department. If you want to improve your ability to forecast using data, for example, you might feel confident if you know you’re dealing with a “revolutionary” CFO, but maybe not if you’ve got a “politician CFO” on your hands. The Danger of Stereotypes Just as CIOs probably wouldn’t want to be pigeon-holed, however, it may behoove more finance leaders to improve their relationship with IT and ensure it’s understood that you don’t have a standard approach to every challenge or opportunity. There are also some of these personality profiles in every CFO, like “conductors” who “set tough goals for themselves and others,” aren’t there? Perhaps instead of trading in stereotypes, a healthy dialogue between finance and IT would help define how certain problems or potential technology solutions should be evaluated. Some might represent visionary or even revolutionary change, while others should be rooted in a “traditionalist” vein (like using Excel spreadsheets as the backbone of your corporate performance management play). Ultimately, our personalities are not fixed but forever evolving based on what we experience, how we learn and what we want to accomplish. CFOs are no different, and they need to make sure CIOs – and the organization in general – recognize that and interact with them accordingly.

We all probably accept the old adage that you can’t manage what you can’t measure. But what if you can’t avoid managing it – and have to take at least some steps towards trying to measure it? It’s not that finance teams lack key performers indicators, necessarily. It’s just that, as a recent report from the Chartered Global Management Accountant (CGMA) organization recently pointed out, there are some areas that may be ignored at a CFO’s peril.    The report, The Digital Finance Imperative: Measure and Manage What Matters Next, was based on more than 800 survey responses as well as one-on-one-interviews with finance leaders, and it showed that less than half of companies are looking at things like how effective their digital marketing is today or whether customers are engaging on social media. The report’s authors suggest this isn’t due to a lack of willpower or diligence by finance departments so much as not having the right tools: To measure intangibles, businesses must make connections between financial outcomes and pre-financial measures that they can use as leading indicators, usually based on a causal relationship or correlation. However, can businesses assemble and analyze the data needed to measure intangibles? Beyond picking the right technology, the report suggests finance teams should start by making correlations between the KPIs they track today and the things they believe deliver the most value to their organization. According to the survey, the top five value driver are all the things you might expect: customer satisfaction, business processes, customer relationship, quality of people and reputation of the brand. KPI Connections All these things can align well with the top eight KPIs that are monitored by more than 50 percent of those featured in the study. A KPI such as data quality, for example (which was the most-cited by 67% of the sample), can tie directly to a value driver like the quality of a firm’s business processes. Employee productivity, which came in at 65%, obviously dovetails nicely with a value driver like quality of people. Still, the second most popular KPI at 65%, return on investment capital, may require more thought around its relationship to value drivers. This is where the best CFOs shine, of course. In fact, the CGMA report is well worth a read not only for the statistics but also for some of the quotes from finance leaders. This one, from LinkedIn’s vice-president of finance Richard Wong, seems like a perfect way to end off: “The fundamental responsibility of finance is financial reporting, and compliance and risk management. These have to be done right,” he said. “On top of that, finance is responsible for allocating resources; shaping and defining strategy; using all the data to help leadership – the CFO is a co-pilot who can also pilot the plane; projecting into the future – looking into risks and opportunities; total understanding of the value chain and value drivers.”

Unless they’re lucky enough to be jetting off to a sunny location this winter, it’s unlikely you’ll see most North American CFOs hitting the links for the next few months. And that may leave some organizations breathing a huge sigh of relief. Fortune magazine recently reported on the results of a U.S. study that looked at the recreational habits of nearly 400 financial leaders over a four-year period. Specifically, the research was trying to find a correlation between the number of times CFOs were playing golf and the way they managed to steer the financial direction of the company which employed them. The short version? Being the Jordan Spieth of the finance department can be detrimental to the bottom line: The report found that the more CFOs golf, the more “accrual errors, discretionary accruals, and unexplained audit fees” are found in their work. It also found that earnings conference calls tend to be shorter with lower quality information. In sum, the more a CFO golfs, the worse a firm will likely perform. Best ‘Effort’ This might sound like a joke or something that required those involved to stretch the data to fit their thesis, but it’s not. In fact, it’s worth going well beyond the short article on Fortune and taking a look at the full 46-page report from Miami University of Ohio’s Department of Finance and David Cicero at the University of Alabama’s Culverhouse College. The information gathered in the survey is subjected to the kind of rigorous analysis that you would expect in a more traditional financial reporting process. The authors also go to great lengths in justifying the need for this degree of rigor. “Our findings suggest that CFO effort is a significant, and perhaps underappreciated, determinant of financial reporting quality,” they write. “It also suggests that not all CFOs are consistently putting in the effort required to generate financial data that is of the highest quality.” This is an intriguing conclusion, and begs greater discussion. No one would dispute that data quality is integral to sound financial management, but what do (and should) we mean when we talk about a CFO’s “effort?” Should they need to spend considerable amounts of time making sure information is accurate, or should they be investing in processes and tools that take on and automate those tasks? Should their efforts be such that there’s no time left to go golfing between nine to five, or should financial reporting simply be so streamlined and automated that they can invest more effort in relationship-building with other decision-makers – over a few rounds, for example. Running a finance department will never get so easy that CFOs spend more time working on their handicap than on their firm’s performance, but surely excellence in this role means more than putting in hours for the sake of it. Acknowledging as much should be par for the course.

Finance executives may differ on the specific ways they handle the challenges of the organizations they work for, but a recent industry event called 600 Minutes CFO showed just how aligned many of them are on the fundamentals of their job. 600 Minutes CFO gathered an invitation-only audience of global finance executives in Helsinki, Finland just a few weeks ago. In between sessions, a videographer caught up with about half a dozen of the most senior attendees, who answered questions in three major areas: What are the attributes of a successful CFO today? What are the top skills needed in finance departments of the future? How is the finance function changing overall? The clips can all be seen online, and most are only a few minutes long. But if you’re short on time, we’ve watched them all to bring you some of the most insightful comments. How Successful CFOs Behave “The CFO has to understand bigger and bigger pictures,” said Petri Härkönen, whose firm Ponsse Oyj manufacturers forestry vehicles and other machinery. “You have to be able to prioritize and guide your colleagues and your team at the right time.” According to Jan Montell, CFO with Finland’s national electric utility Fingrid Oyj, a big part of doing that is with harnessing data. “As always, it’s about safeguarding shareholder value, which is about optimizing cash flows, capital and risk. That is always our most important task, I think,” he said. “It’s also about business intelligence — analyzing data and information, but within the company and outside the company as well, so we can challenge the business in their decision-making and support growth.” The Finance Function of the Future Czerny Reinhard, CFO of IBM Austria, sees technological expertise as an inevitability, and not just at high-tech organizations like his own. From using Excel as an enterprise platform to more niche budgeting or financial close management solutions, tomorrow’s CFOs are expected to be as versed in finance technologies as they are with GAAP standards. “The finance team of the future needs to be able to take innovative tools and applications and use analytics,” he said. “First to drive cost efficiencies; second to identify emerging business opportunities; and third to sound the alarm if something goes wrong and of course, to take course correction.” This is particularly important as finance departments become more niche-oriented and specific in what they are tasked to do, suggested Jussi Siitonen, CFO of Amer Sports. “Now you have very clear functions for compliance type of topics, one function for business support, and then finance functions just to develop processes within finance,” he said. The Most Sought-After Skills in Finance Regina Sippel, financial leader at travel firm Tjäreborg Oy Ab, put it bluntly: “I’m looking for excellent Excel skills,” she said. “You need to be proficient, and then you need excellent language skills to cope in the ever-changing business environment. And you need to have a sense of adaptation, that you can adapt yourself to a changing environment.” The social aspect of the finance team was brought up by many of the speakers interviewed by the 600 Minutes team. “Even if you don’t have the skills, the attitude and the willingness to develop yourself continuously makes the difference,” said Riitta Vahter finance director at Canon’s Finnish operation. “(It’s about) listening, understanding the business and proactive in contributing to the business.” The post CFOs Around the World Agree on These 3 Key Questions appeared first on Blog | Vena Voice | Vena Solutions.  

Finance leaders question the hurry to do away with popular, familiar Excel spreadsheets. LinkedIn has come a long way since its days as an electronic resume and personal networking tool. As highlighted by a recent discussion on the service about Excel, LinkedIn is playing an increasingly pivotal role in shaping perceptions among corporate decision makers on everything from leadership styles to financial software. In this example, it all started with an innocuous question posed by a financial business controller based in France, on LinkedIn’s CFO Network Group (which boasts nearly 300,000 members). “Can you do without Excel?” he wondered. “Let’s talk about the tools to get this process more efficient and useful for both finance and the business.” Suffice it to say, his peers were more than ready to talk. And the answer, in short, was a decisive “No”. In fact, the comments making up the thread on LinkedIn could, if ordered properly, be a useful way to help not only CFOs but organizations as a whole understand why Excel has ruled for 30 years, and how it can be even better to further business outcomes. Let’s start with: The Reality Check It’s hard to disagree with the CEO of a finance process transformation company, who summed up the current state of affairs in finance departments pretty much everywhere: “What is the hurry to go away from Excel? If something better comes (along), we will automatically move ahead and Excel will be ancient. The fact that we are still debating shows there is not much to match the simplicity and ease of Excel.” Of course, that doesn’t completely articulate the reasons for Excel’s longevity to anyone outside of Finance. That’s why we need: The Tech Explainer A global consultant pointed out that Excel is more than just user-friendly, but something that naturally integrates with third-party products as the technology powering month-end financial close and other processes continue to evolve: “No Finance or Accounting guy can sleep well without Excel. Also, since most other tools have a compatibility with Excel to download or upload, Excel will continue to rule. A combination of a sharp financial brain with Excel is adequate in most situations.” That doesn’t mean, of course, that everyone should be continuing to use Excel the way they always have. This brings us to: The Action Item Kudos to an Iceland-based General Manager for summing up where Excel in the finance department is ultimately headed: “While Excel is indispensable for any finance professional, when it comes to planning and budgeting the main drawback is that it is not a database. This means that when you want to really distribute your work, using Excel creates a lot of overhead and errors keep creeping in all the time.” He’s right. Excel is not a database, but connecting it with one — along with a workflow engine and cloud computing power — turns one of the world’s most popular software applications into an enterprise-grade finance and business solution. [Shameless Promotion Alert] This is exactly what Vena does with Excel; combining it with a centralized database, workflow and other enterprise functionality to streamline and automate manual tasks in any spreadsheet-driven process – both within finance and across virtually every department in an organization. In any case and regardless of vendor, this is clearly a topic that warrants continued discussion and action, not just on LinkedIn, but in mid-large sized organizations everywhere.

Much like their counterparts in the CIO community, a growing number of financial executives are deciding that, rather than devote themselves full-time or on a permanent basis to a single organization, they will take on a sort of chief financial officer consulting role. Canada’s Financial Post recently profiled a number of leaders diving head-first into the so-called “gig” economy, as well as a placement agency called the CFO Centre which is connecting such professionals to small and medium-sized businesses that need them. “Virtual CFOs can also choose to work seasonally, and will often flex their hours up and down to suit their lifestyle,” the Post article said. “Virtual CFOs also have the opportunity to diversify their clients to gain new experiences, and many enjoy the satisfaction of having a direct effect on a company or organization.”  On the flip side, organizations that hire virtual CFOs (or those who decide to take on such work) should be prepared for major differences. Adam Shay, a CPA based in Wilmington, N.C. who specializes in working with entrepreneurs, says the model works best for firms in the sub-$15M revenue range. Virtual CFOs main value lies in formulating strategies, ensuring accurate reporting and improving business processes.   “You can get someone with a strong skill set who can bring experiences from working with other clients,” he wrote in a local business journal. “(But) a virtual CFO isn’t as dedicated to a company as a full-time one would be. While virtual CFOs can be really responsive, they can’t always drop other things they are working on and one company isn’t that person’s only focus.” Tools for Virtual CFOs Since virtual CFOs are of particular interest to smaller, high-growth companies, it’s also likely they’ll be exposed to tools and resources that match the on-demand nature of the services they’re providing, and that best serve the needs of high growth firms. If they’re not in the office every day, for example, they’re most likely going to be keeping in touch using cloud-based services and SaaS products that can dynamically provide access to data and insight to help their clients improve decision making. Cloud based Excel or corporate performance management (CPM) software are prime examples for finance, though there are many others. “They also get to nurture and shape the future of a lot of companies. The excitement and challenges of working with a growth company CEO is an enriching experience,” an article in India’s Business Standard said a few months back. As such, there’s no reason why some virtual CFOs couldn’t eventually move back into a more traditional position with a larger firm — bringing those valuable experiences with them, including the tools they’ve implemented. One need only look to companies like Saleforce.com or Netsuite to see how mid-market and even large enterprises have widely adopted financial and ERP tools from an initial SMB market. As with many other aspects of the gig economy, becoming a virtual CFO may be something that professionals do for a period of time, when it makes sense for their life and career. No matter how they choose to work, though, there’s nothing virtual about the potential impact they can have.

Enlightened CFOs can bring about a rebirth in how the boardroom and executive suite view the strategic value of the finance department To call someone “well-rounded” implies they know and pursue several different interests. A “jack of all trades,” suggests they are driven to take on many – often too many – different responsibilities. But what about the so-called “renaissance CFO,” a term that’s increasingly making headlines in finance circles as a new model of financial leadership? Even for the most experienced finance executives, the notion of a “renaissance CFO” can be more than a little difficult to define. According to consulting firm KPMG, however, more financial leaders need to not only start thinking of themselves as renaissance CFOs, but also to help get across the idea in subtle ways to their CEOs. That’s because, based on a recent KPMG survey of more than 500 senior executives, it’s clear that too many heads of companies aren’t recognizing their potential. Consider these stats among CEOs surveyed by KPMG: 41% feel the CFO needs to improve his or her leadership skills; 38% feel CFOs need to widen their focus; 45% think CFOs lack experience outside the finance function. The Renaissance Approach to Finance Fortunately, the KPMG survey also showed a lot of positive trends in how CEOs see the CFO. For example, 81% think the greatest strategic value a CFO can offer is their ability to apply financial data to achieve profitable growth – typically through effective budgeting, planning and forecasting. A “renaissance CFO” could handle many other functions, but they’re most likely to earn those opportunities by first proving how they can make the most of the information at their disposal. KPMG isn’t the only one suggesting CFOs will have to spread their wings to remain relevant. In a recent post on the Wall Street Journal, Deloitte’s CFO talked about the way organizations will want to see financial executives in the future: “The biggest change I see coming is the expectation for CFOs to act as the chief catalyst officer. By that I mean CFOs who can operationalize the strategic plan and get it done just like a business unit leader, but from the CFO seat. We’re already seeing CEOs and boards looking to hire not just CFOs who can be strategic leaders, but who can also execute the strategy.” Again, this starts by taking competitive advantage of trusted data and insights from the right financial tools, from existing Excel spreadsheets to more advanced corporate performance management (CPM) software. Armed with the best possible information, finance executives will be in a much better position to be a catalyst and change agent. To some extent, this all boils down to remembering what the word “renaissance” really means. The literal definition is not about doing many different things, but simply “rebirth,” doing things differently based on the availability of new, objective data and insights. By applying data to business growth in breakthrough ways, CFOs may experience not only a rebirth within their own careers, but for their organization and industry.

The CFO-CIO relationship is now more important than ever, so you gotta look for ways to make sure that relationship is a healthy, cooperative two-way street. A few weeks ago, the CIO Executive Council, an association for IT leaders, featured interviews with a number of their members in an article called “Attention CIOs: Here’s How to Bond With the CFO.” It argued that those developing technology strategies should be in regular communication with the head of the finance department, speak only at a high level about IT, and learn more about the CFO’s top priorities. In some organizations today, CIOs in fact report directly to the CFO. In most, they are peers in senior leadership who should be collaborating on shared business objectives. In some cases though, the relationship may be disjointed at best and counter-productive at worst. As such, we think it equally useful to share some of our thoughts on what matters to CIOs today so CFOs can successfully communicate with them, because creating a healthy relationship is a two-way street. 1. CIOs Are Aware of the Need (And Are Prepared) to Change: Do a quick online search for “the changing role of the CIO” and you’ll find a near-infinite number of blog posts, white papers and multi-day conferences devoted to helping shift IT leaders and their teams from being cost centers to groups that help create value for their organization. If you’ve heard about cloud computing and want to explore its benefits, your CIO may have moved certain areas of IT infrastructure there already. They can provide feedback on the pros and cons based on their experience, and help identify where software-as-a-service (SaaS) products – from financial software to your existing Excel infrastructure – might help reduce the finance department’s overhead and barriers to adoption. 2. CIOs Are More Eager to Talk Business than Bits The watchword among CIO communities today is “innovation.” IT executives want to be seen as helping to transform the customer experience, and they know they can’t do that unless they show they have a holistic understanding of the organization’s needs. Similarly, don’t be afraid to share details of what you’re doing as a CFO to help drive growth. IT management is actively looking to take on work that will demonstrate their capability to digitize manual processes for greater accuracy, efficiency and productivity. 3. CIOs Are Redefining their Core Metrics In the old days, a CIO might be considered good at his or her job if they managed to keep servers from crashing or preventing a computer virus from infecting machines. Today, they’re more focused than ever before on helping turn data into insight — a goal they share with most finance departments. If you think tools like corporate performance management (CPM) software can make you more predictive and proactive as a department AND as an organization, your IT executives may have the right, unique perspectives you need to fully understand the change management requirements necessary for success. “Financial executives are among the busiest people in any organization, so it’s important to learn something about what they do,” the CIO Executive Council said. That’s equally true of CIOs. The investment of time that financial executives make in developing a great relationship with IT could generate a return that will not only benefit them, but the organization as a whole.

Corporate Performance Metrics are the purview of the CFO, but they’re quickly evolving to encompass far more than financial data. A few months ago, Bill Budicin, a director at Chicago-based management consulting firm The Keystone Group, met with one of his CFO clients and asked how he measured success. In response, the CFO pulled out a monthly financial packet filled with profitability metrics. These included details on gross margin, operating income, EBITA and sales per employee. “Do you think your customers care about sales per employee? Do you think sales per employee gives you a competitive advantage?” Budicin asked the CFO. The answer, in short, was no. Budicin told this story during a recent webcast produced by CFO Thought Leader, which explored how financial executives may be forced to reimagine the way they evaluate their own progress and that of their organization. According to Budicin, it means CFOs have to act much less like a “scorekeeper” and more as someone who’s interested in influencing strategic outcomes. “Financials are just really a result metric. They’re typically a result of how the company interacts with its customers, how efficient operations are, how new products are brought to market, how employees are developed,” he said. “As a CFO, you should be the person helping the CEO translate his or her strategy and turn it into initiatives that will be measured for success. This becomes your reason to get out of the office.” Easy Does It Financial leaders won’t thrive if they stay locked away in a boardroom somewhere. As Budicin points out, they need to literally get out of the office. In fact, as they start to see the benefits of using Excel and other corporate performance management platforms, connecting with other parts of the business beyond finance, so too will they see a way of taking concrete action on the data that’s coming their way. The following scenario might be a textbook case in point: Budicin referenced a profitable industrial products company which wanted to grow and take market share. Intriguingly, the company measured its success in part by “ease of doing business.” Unfortunately, when Budicin asked around, it was clear no one had a consistent definition of what that meant. “Initially most everyone focused on customer service and looked at how easy it was to place an order, or the queue times when a customer calls in,” he recalled. “As we got more involved, the CFO was interacting with customers to get their feedback. He discovered that although customers could order products over the phone and online, (the) online (side) was a pain. They also wanted short lead times — it was taking too long to get products. Even packaging — customers said, ‘When we get your products, the way the packaging is designed is inefficient to store and takes up too much space.’” This lead to some major cross-functional teamwork. The CFO met with IT, for instance, and charged them with reducing the number of screens in the online ordering process by 50 percent. The operations department had to meet the same target in the time between making a product and shipping it. This is the kind of exercise more finance departments will likely go through, especially as they start using tools like Excel as more of an automated platform than simply a desktop application. And this is the precisely the kind of move that will free them up to pursue more high-value activities. Whatever the metric, defining, quantifying and working towards real change is essential – and all the more attainable when using proven, familiar and ubiquitous tools and metrics. “I think through this process CFOs get such a better understanding of what drives the business, what influences earnings so you’re not just reporting on it,” Budicin added. “It gives you the ability to be much more collaborative with the rest of the individuals in the organization.”