Finance professionals obviously need to have talent and passion for working with numbers, but over the past few...
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years, the role of the CFO has been evolving beyond that of a "bean counter," according to several speakers at the CFO Forum in New York City. With this trend toward strategic finance comes renewed interest in how to build effective organizations, successfully partner with other business areas, and acquire the skills required of the CFO of the future.
A common thread that ran through several sessions was the need for finance to become a true business partner, and to identify, support and communicate with key stakeholders. "At certain organizations, finance [can] sometimes be viewed as folks who just provide quantitative data," said Dev Parekh, chief financial officer (CFO) for Investor Communication Solutions at Broadridge Financial Solutions, headquartered in Lake Success, N.Y. "[But] the numbers allow us to have a view of the organization that many folks don't have. We're able to influence the organization to make better decisions, and how do we do that? We provide data and a message behind that data."
In addition to sessions on how CFOs can move their organizations and themselves toward a more strategic role, there was also a presentation on how a strategic finance function can significantly impact an organization's IT strategy.
Strategic finance requires building diverse and aligned teams
During his session, Building the Benchmark Finance Organization, Parekh advocated changing the infrastructure of the finance organization to drive change, in part by constructing diverse teams. "You want to make sure the skill set is complementary. Any one individual is not going to have all the skills necessary," he said.
Parekh used himself as an example. "As I walked into the organization, I thought about what I didn't bring to the table. The first thing I thought is, 'I don't bring tenure,' [so] I ensured that my team consisted of folks that had the right tenure behind them," he said. "I knew the company was moving in the direction of more acquisitions, so I said we should hire somebody to do acquisition integration."
He added that technology, while undoubtedly valuable, should be prioritized after people and process enhancements. "I think oftentimes people point to technology and say, 'That's the issue,' but frankly it's usually the user," he said. "I think if [organizations] would spend money on the right people, infrastructure and process, [then] technology would be used the right way -- as a support mechanism rather than as an end-all, be-all."
Parekh also stressed the importance of aligning finance with business strategy, a critical first step of which is identifying key stakeholders. Responding to an audience question about how to prioritize internal stakeholders (after he had said "everyone" could be considered stakeholders), Parekh said finance professionals should first look to who has the widest span of control, and who are the movers and shakers that drive change. At Broadridge, he said he compiled a list and then asked his direct manager to review it and determine if anyone should be removed or added.
Experience outside of finance becoming crucial for CFOs
A strategic finance function must have a dynamic CFO leading the way. That was a key point during the panel discussion, Understanding the Changing Role of a CFO, where Myles Corson, markets leader for financial accounting advisory services at Ernst & Young, presented research on how today's CFOs define their roles, and how the position is evolving.
Corson first separated the CFO's duties into three primary categories: execution, which involves providing insight and analysis into financials; enablement to fund the business strategy; and development for defining an organization's strategy and communicating progress to stakeholders. In a polling question posed during an October 2012 webinar hosted by Ernst & Young in conjunction with Financial Executives International, Corson said 42% of respondents named execution as the most important of the three functions. Development followed with 35%, and enablement was ranked last, with 23%.
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Panelist Gabriele Giudici, CFO of Heineken USA, based in White Plains, N.Y., expressed surprise at execution's high rank. "My sense is while execution remains a given, that's not an element that makes a successful CFO; that's the ticket to enter the game." He said in coming years, CFOs will likely be required to make the transition to business partners, and there will be a greater split between this strategic role and that of transactional finance.
Corson identified nine strengths of the CFO of the future: finance skill, merger and acquisition experience, leadership, exposure to market and shareholders, effective relationship with board members, commercial insight, international exposure, experience with transformative finance initiatives and "non-traditional" experience -- skills from business roles outside the finance department. Giudici readily agreed with the importance of the last competency.
As for the CFO's career path, Corson said the role is generally considered to be a destination position. According to Ernst & Young research, the majority of CFOs retire in the role. However, he added that there is a high degree of job satisfaction when the CFO considers herself to be the CEO's partner, a sentiment that was echoed by Giudici. "I like being the right hand of the CEO -- it's one of the best places to be as far as I'm concerned," he said.
Effective governance can increase IT innovation
Krish Venkataraman, CFO and chief administrative officer at New York-based NYSE Euronext, also encouraged finance to rearrange its internal organization, but in regard to how it relates to IT. Rather than the traditional model of IT reporting to the chief information officer and finance reporting to the CFO, he recommended creating a blended team that reports to a common person during his presentation, How to Get More from Tech While Spending Less: Bridging the Divide Between CFOs and CIOs." According to Venkataraman, such a reorganization can centralize reporting, increase transparency and eliminate shadow IT organizations.
He also said CEOs should be included in IT strategy, even though they are not at most organizations. "For IT to be successful, the CEO and management team have to [be] involved," he said. In addition, finance organizations should not start with previous years' IT allocations, since that "ensures the biggest consumer of IT will always be [the biggest consumer]." Rather, Venkataraman encouraged attendees to allocate according to where the business is growing.
And rather than being a "bad word," governance is an essential part of finance's role in IT strategy, Venkataraman said. "I think [one] myth about governance is it kills innovation," he said. "But in reality, good governance can enable technology to be innovative. When we look at what we want from technology in terms of … transparency -- it all starts with good governance."