In the modern business world, the role of the Chief Financial Officer (CFO) has become increasingly important. A great CFO can provide financial leadership, strategic vision, and drive growth for a company. But what makes a great CFO?
Let’s explore the key characteristics of a successful CFO and provide insights into how you can identify and cultivate these skills.
3 Pillars of CFO success
To be a successful CFO, it’s not enough to simply manage a company’s finances. Great CFOs understand the importance of partnering strategically with the business to drive profitable growth and create value. They are responsive to changes in the capital market, optimizing financial strategies to ensure the company has access to the capital it needs to pursue growth opportunities. Effective communication with the board is also a critical skill for successful CFOs.
They ensure that board members are fully informed on important financial issues and introduce new topics that align with the company’s strategic goals. Finally, successful CFOs are leaders of transformation. By embracing new technologies and processes that improve efficiency and reduce costs, they model the mindsets, behaviors, and culture needed to drive autonomous finance forward.
Let’s expand on these points.
1. Partnering strategically with the business:
A successful CFO understands that their role is not just limited to managing the company’s finances but also driving profitable growth. They work closely with the CEO and other business leaders to develop a strategic plan that aligns with the company’s vision and goals.
By providing insights into key financial metrics, they help the company make informed decisions that drive growth and create value for stakeholders.
2. Capital responsiveness:
A successful CFO is responsive to changes in the capital market and adapts the company’s financial strategy accordingly. They understand that the company’s financial success is not just about profitability but also about managing risk and optimizing the balance sheet.
By being responsive to capital market conditions, they ensure that the company has access to the capital it needs to pursue growth opportunities.
3. Board communication skills:
A successful CFO is an effective communicator who can educate the board on big-picture issues and introduce new or complex topics. They understand that the board’s role is to provide oversight and guidance, and they ensure that the board is fully informed of the company’s financial position and strategy.
By building strong relationships with board members, they create a culture of trust and transparency that helps the company achieve its financial goals.
4. Leading transformation:
A successful CFO leads transformation by modeling the mindsets, behaviors, and culture that drive autonomous finance forward. They understand that the finance function is undergoing a digital transformation, and they take the lead in implementing new technologies and processes that improve efficiency and reduce costs.
By embracing change and encouraging innovation, they create a culture of continuous improvement that drives financial success.
Top CFO priorities in 2023
As we enter 2023, CFOs are faced with a rapidly evolving business landscape and a number of challenges that will require their attention and expertise. To succeed in this environment, CFOs must prioritize initiatives that will drive growth, improve efficiency, and support their organization’s strategic objectives.
1. Lead finance transformation and organizational change initiatives
CFOs must take an active role in driving transformation initiatives instead of delegating them entirely. They should define clear objectives and commit to personal involvement in the process.
To achieve success in finance transformation, CFOs should ensure that transformation leaders possess three essential qualities: acute vision, relentless triage, and purposeful communication.
To engage employees in transformation initiatives, CFOs can introduce fewer, more sustainable efforts, provide targeted support and coaching, and incorporate employee perspectives into decision-making processes. This approach can help ensure a smooth and effective transformation process.
2. Develop and refine the data and analytics strategy
To maximize the value of data and analytics (D&A) investments, FP&A teams must align their scope and design with organizational strategies and priorities.
CFOs can leverage the Gartner Risk Opportunity Appetite Return (ROAR) model to drive business value from D&A investments, ensuring that risks and opportunities are managed effectively.
3. Align spend to growth
To promote capital responsiveness, CFOs and their teams must shift from a passive “reviewer” role to an active “capital activist” role, actively seeking out opportunities to optimize the use of capital.
Rather than simply keeping pace with competitors by spending more, CFOs should focus on reorienting their cost structures to prioritize differentiating costs. This requires a careful analysis of where the company’s unique value proposition lies and where resources should be allocated accordingly.
To encourage bold growth projects, CFOs must counter the unintended effects of finance processes and policies that may inadvertently discourage risk-taking. This includes identifying and removing any “anchors” that may redirect resources away from these initiatives. By doing so, CFOs can help drive sustained growth and innovation for their organizations.
4. Improve finance staff engagement
CFOs should prioritize updating and leveraging their organization’s unique employee value proposition to engage employees. This involves identifying and communicating the key benefits and values that make the organization an attractive place to work.
To ensure employees are aligned with the organization’s strategy, CFOs must effectively communicate it in a way that creates personal connections between the strategy and employees’ work. By doing so, employees can better understand how their contributions fit into the bigger picture and feel more invested in the organization’s success.
5. Set finance’s technology strategy and roadmap
To increase finance responsiveness to changing business realities, CFOs should adopt composable finance technology. This approach involves using flexible, modular technology solutions that can be quickly adapted to meet evolving business needs.
To prioritize technology investments for maximum impact, CFOs can use the Gartner Technology Bullseye framework. This approach helps identify the most critical technology investments based on their potential to drive business value.
The path forward: Autonomous finance
To achieve an autonomous finance function, organizations need more than just automation – they need to deliver augmented real-time and predictive insights, effortless compliance, and greater flexibility in financial strategy. This requires the use of self-learning software agents that can adapt and improve over time.
CFOs play a critical role in driving this transformation. They need to develop a robust technology roadmap that aligns with the organization’s strategic objectives and can support the development of an autonomous finance function. According to Gartner, 64% of CFOs believe autonomous finance will become a reality within the next six years.
Back-office use cases
- Process mining algorithms enabled by AI, which can capture all variations and exceptions in procure-to-pay (P2P) and order-to-cash (O2C) processes. By analyzing data from these processes, organizations can identify opportunities to streamline operations, reduce costs, and improve efficiency.
- Virtual assistants that use machine learning algorithms to process transactions with customers and vendors. These assistants can help organizations automate routine tasks, improve customer service, and reduce the need for human intervention.
- Cloud analytics services that deliver powerful analytics capabilities as a service. These services may include a combination of database, data integration, and analytics tools, enabling organizations to quickly and easily gain insights from their data without having to invest in costly infrastructure or technical expertise.
Front-office use cases
- Decision intelligence plays a critical role in enabling financially savvy tactical and operational decisions. Some examples of how organizations can leverage decision intelligence include:
- Predictive analytics, which can provide insights into driver-based revenue and cash forecasting. By using these insights as the foundation for predictive planning and automated scenario-planning, organizations can make more informed decisions about how to allocate resources and respond to changing market conditions.
Middle-office use cases
- Blockchain, which can enable an audit-ready continuous close. By using a distributed ledger to record financial transactions, organizations can increase transparency and reduce the risk of errors or fraud.
- Smart contracts, which can help enforce accounting controls and intercompany adjustments. By using automated, self-executing contracts, organizations can reduce the need for manual intervention and increase accuracy.
- Machine learning (ML), which can help identify and organize data from various sources in a single place. By using ML algorithms to analyze financial data, organizations can gain insights that might be difficult or time-consuming to identify through manual analysis.
Office of the CFO use cases
- Decentralized finance (DeFi), which is facilitating new options for raising capital and insuring against financial risk. By leveraging blockchain technology, DeFi platforms can provide greater transparency and accessibility than traditional finance models.
- Natural language processing (NLP), which can aid in better understanding retail investor sentiment. By using machine learning algorithms to analyze social media and other online sources, organizations can gain insights into customer behavior and preferences.
- Cryptocurrencies, which are enabling the creation of immutable digital asset markets and driving revenue generation and payment flexibility. By using blockchain-based tokens, organizations can create new revenue streams and offer customers more flexible payment options.
Winning big with communication skills
With the increased frequency of presenting to the board, CFOs are expected to provide not only data but also essential insights on intricate matters and critical initiatives. Collaboration with the broader organization is also necessary to ensure a comprehensive understanding of business needs. Furthermore, effective communication with finance teams is crucial to inspire change and creating a finance organization that is prepared for the future.
