CHIEF financial officers (CFOs) may be viewed by most as the moneymen of an organisation, balancing books and issuing cheques, but increasingly they are also key players in executing a company’s growth strategy.
In this role, they have to operate with a strategic mindset that focuses on the long-term success of the organisation. Doing so successfully requires today’s senior finance executives to build strong ties with the rest of the company and its stakeholders.
“The challenge for CFOs is to choose effective ways to engage in the process. To be successful in executing strategic priorities, we believe that CFOs must build trusted relationships with the CEO, Board, business leaders and stakeholders. It is essential to understand which relationships support which priorities,” says Ng Jiak See, SEA CFO Programme Leader at Deloitte South-east Asia and Singapore.
Deloitte has developed a framework to guide CFOs in this new strategic role. Specifically, the “four faces of the CFO” framework helps them to visually compare where they currently spend their time with what they wish to focus on the longer term, so that they can plan and implement the required changes to be successful in the role (See below).
Based on Deloitte’s study, most CEOs and boards want their CFOs to be about 70 per cent “strategist” and “catalyst”, while spending 30 per cent of the time as a “steward” and “operator”. On average, most CFOs aspire to a ratio of 65 per cent to 35 per cent in strategist-catalyst versus operator-steward roles, the study showed.
“Time management has thus become a bigger concern for CFOs than ever before. They would have to balance their time between doing things themselves and ensuring that other people get things done for them,” says Ms Ng.
Industry players BT spoke to agree that most CFOs today are already closely involved in company operations and have a good understanding of market and business challenges.
“By leveraging both a financial and operational understanding, CFOs are the natural partner for CEOs for growth. After all, tracking strategic progress, validating business impact, measuring business performance as well as providing practical solutions for overcoming operational challenges all contribute to strategic growth,” says William Ng, CFO, Singapore and South-east Asia at industrial technology group ABB.
That said, CFOs should not lose sight of their traditional function as a gatekeeper even as they put on their strategic hats, warns Tan Wee Ko, CFO at IT retailer Challenger Technologies.
“Just because a CFO gets more involved in deciding whether his company should purchase a big equipment, it doesn’t mean that he can go ahead to ignore or forget about the need to safeguard and protect the equipment,” he says.
How far a CFO can go in becoming a strategist or catalyst will also depend on the direction from the top. While some companies involved their finance teams in key decisions, others still expect their finance function to primarily provide traditional accounting and finance services.
“The strategy process, however, extensively depends on the context of the company, and its business and leadership,” says Deloitte’s Ms Ng.
A BROADER VIEW
Strategic CFOs should always look at the big picture with a market driven mindset, experts say, while using their finance perspective to help address issues in a structured manner.
To do this, it is important to gain non-finance experience in other parts of an organisation, whether it is in general management, sales and marketing, or HR, to gain insights into other stakeholders.
“By moving beyond the function, professionals will broaden their views, create important spheres of influences and be able to contribute to a more rounded strategy. Furthermore, if an organisation has international operations, I would always encourage colleagues to take overseas assignments as a way of enriching and deepening cultural and business knowledge,” says ABB’s Mr Ng.
Finance leaders will also need to acquire strong communications skills, and also be well respected within the company in order to influence the outcome and direction of the strategy.
“Many CFOs can be insecure and defensive and this certainly doesn’t help in day to day dealings with colleagues, not to mention being involved in the execution of a big strategy,” says Mr Tan.
He adds that CFOs will also need a competent team to handle the company’s routine finance functions so that they can devote more of their time towards playing a strategic role.
Four faces of the CFO framework
The Strategist is a director, focused on defining the future of the company to enhance business performance and shareholder value. The Strategist provides a financial leadership in determining strategic business direction, M&A, financing, capital market and longer-term strategies vital to the future performance of the company.
The Catalyst is an agent for change, focused on establishing a value attitude throughout the organisation to execute strategic and financial objectives while at the same time creating a risk intelligent culture.
Stewards protect and preserve critical assets of the organisation and accurately report on financial position and operations to internal and external stakeholders.
Efficiency and service levels are the primary areas of focus for the Operator. The Operator must dynamically balance talent, costs and service levels to fulfil the finance organisation’s core responsibilities efficiently. DELOITTE