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The CFO Office: how to transform from number trackers to game changers

Too often, Chief Financial Officer (CFO) offices are seen as number crunchers rather than innovators. But successful organizations are recognizing to maintain success, the Finance Department must become the driving force of change. And the result is proving to be the difference between average performance and extraordinary social and economic results.

The CFO office must understand the company’s vision, measure and monitor the company’s performance and provide strategic advice. Credit: http://ow.ly/dXio306GUTa.

According to a recent study, “the most critical task of the CFO office is measuring and monitoring their company’s performance .” But the role of the CFO’s office is changing. It’s being shaped by stakeholders who are demanding the creation of economic and social value. To keep up, Finance Departments are shifting their focus to help drive strategic change.

With its in-depth knowledge across all departments, the CFO’s office is perfectly positioned to identify trends and help drive growth in an organization. But to truly become a game changer, Finance must focus on two core elements: strategy and customers.

A focus on strategy
It’s not enough for Finance to just report on data. The CFO office must understand the company’s vision, measure and monitor the company’s performance and provide strategic advice. Too often, financial measures only focus on lagging indicators – data that’s a reflection of a trend or event after it has started – instead of earlier indicators of performance. By shifting the focus to leading indicators – those which create results and help predict future events or actions - the CFO office begins to drive strategic, proactive decision-making.

When thinking strategically, a good rule of thumb is to follow an 80/20 rule: spend 80% of the time on leading indicators and 20% of the time on lagging indicators. To make a difference Finance has to go beyond their traditional role and begin to use leading indicators to help identify and build the right capabilities across the people, processes, and systems to drive strategic success in the organization.

For example, by looking forward to identify trends in line with the company’s strategic vision, UK-based SABMiller reshaped their business model. The company identified an opportunity to establish a completely new supply chain and began producing an affordable local beer in Uganda, working with local farmers. The new beer was commercially successful inside and outside Uganda, and also met stakeholder demands for social impact, with profits invested into education, HIV/Aids testing and clean water.

Because leading indicators measure processes, activities, and behaviours, they are by nature more proactive and allow an organization, like SABMiller to adjust courses of action where necessary.

A Customer focus
A customer-centric organization looks at itself from the perspective of the customer – not just external customers, but internal customer and departments too. Finance needs to align its internal processes, talent, and technology to satisfy the customer’s needs. To establish a customer-centric culture, the CFO office must:

  • Develop a deep understanding of the internal and external customers’ needs: finance groups often have little understanding of the challenges, opportunities, and business models of the groups they support because they focus solely on reporting their financial performance. Finance should follow the lead of external-facing groups (like Sales) who spend a significant amount of time with their customers to learn about their needs. By breaking the barriers that traditionally separate them, Finance can get closer to their internal customers and begin to identify how thye can support their internal customers to realize the company’s vision.
  • Become a trusted advisor to the rest of the organization: rarely do other groups turn to finance for advice (with the possible exception of budgeting time). The CFO office need to become co-owners of the organization’s strategic success. Add value to your internal customers wherever you can. For example, finance recruiters should look for strategic problem-solving skills in their applicants, and managers should include customer satisfaction in their performance measurement.

The duration of such transformation will vary among finance organizations, but to accelerate the rate of success Palladium cautions CFOs to avoid focus on one dimension while not developing the other.

Order takers are too customer-centric, focusing only on satisfying customer requests rather than partnering with them to make optimal strategic choices. Visionary magicians are too strategy-focused, simply identifying courses of action with no consideration to feasibility and customer impact.

The key is to start looking forward
To provide strategic input to the company, the CFO office must have a clear understanding of the company’s vision and the role of each internal customer in realizing that vision. To do that, finance groups must move away from the traditional role of number trackers to game changers, helping to set strategy and enable the organization to achieve long-term aspirations.

The finance department is uniquely positioned in an organization. They interact with people throughout the entire organization, they’re exposed to a broad range of information and they have strong skills in defining, accessing, and analysing data. When stakeholders are demanding a better bottom line and an improvement in social impact, the CFO’s office is in the perfect position to drive growth and change direction to create positive impact.

 

For more information about our strategy execution services please email Caleb Powers (Caleb.Powers@thepalladiumgroup.com) and visit our strategy capabilities page.