CFOs are broadening their roles, taking greater leadership in strategic decision-making, catalyzing change throughout their organizations and working to become more of a business partner. Yet in many organizations the CFO is often viewed as a ‘Dr. No,’ whose role is to nix new projects, investments and growth opportunities in the name of cost-cutting and preserving the bottom line.
In this conversation, Dr. Ajit Kambil, global research director for Deloitte LLP’s CFO program, draws on his experience designing and leading the Deloitte CFO Transition Lab™ to discuss how incoming and established CFOs alike can overcome being perceived as naysayers and instead be viewed as value creators.
Of course, just saying “yes” to every request for funding is not prudent, but understanding which projects could add value—and why—and what finance can do to support them is critical, especially in this slow-growth environment.
“Most CFOs don’t have an organizational behavior or organizational design background. Yet, when they become CFOs, suddenly they are charged with working through the crucial “soft stuff” around relationships and relationship-building with other leaders, especially the CEO”
What can CFOs do to change the perception of finance as a roadblock rather than a catalyst for value creation?
I think CFOs can do a lot to alter that perception by asking themselves what they are doing or are going to do to create value for the organization.
CFOs are expected to protect the bottom line, and they’ve done a lot of important and necessary cost-cutting over the last few years, but they don’t have to be viewed just as a cost-cutter and a “Dr. No.” These days, CFOs are also expected to be catalysts for change.
With the runway shortening on cost-cutting, it makes sense to shift the focus from savings and value preservation efforts into actions that add value and promote value creation.
How can CFOs balance their role as steward and the accompanying fiduciary responsibilities with their role as strategist focused on value creation?
It is a delicate line in that CFOs do perform the important and necessary role of keeping a sharp eye on costs and value. But it’s important for CFOs and for the success of their organization that they don’t play the role of “Dr. No,” at the expense of sometimes being “Mr. Yes,” in positive, value-creating ways.
When CFOs take a leadership role in activities that create value, it helps them relate better to everybody and to the businesses.
And CFOs should not just say “yes”; they should also have strategies that enable them to say “yes.”
I think it is important for a CFO to ask, ‘‘what can I do to bring cash or value to my organization beyond cost-cutting?” And many of them are acutely aware of how important it is that finance add value to the organization; the CFOs who participate in our labs frequently name it as a top priority.
What is keeping CFOs from creating value?
I think the toughest role for most CFOs is being a catalyst of change in the organization.
Most CFOs don’t have an organizational behavior or organizational design background. Yet, when they become CFOs, suddenly they are charged with working through the crucial “soft stuff” around relationships and relationship-building with other leaders, especially the CEO.
CFOs have the authority to do a lot of things, but they may not be permissioned to drive change, or to drive change in areas they want to or feel they need to focus on. So they have to determine whether and how much permission they have to drive change.
They also have to learn how to effectively characterize the change issues they find and devise a communication strategy to drive resolutions to those issues. That can be a challenge.
For example, in my research, I have found that driving culture change—diagnosing and altering the underlying pattern of beliefs and assumptions in the organization—is an especially difficult task for CFOs, because they are often not permissioned to drive that kind of change.
Typically, CFOs are limited to driving culture change in their finance organization and only have a support role in a CEO’s companywide culture- change efforts. Drawing on culture-change models and our research, we have devised practical steps CFOs can take to diagnose the organization’s culture problems, then make the case for redirecting the organization to encourage new behaviors that help their CEO establish a new company culture.
“We often emphasize how important it is for a new CFO to find opportunities for 'quick wins'—projects or areas where a CFO can produce a value-creating impact for the organization within the first six months of taking the reins”
What can CFOs do to show business leaders they are partners and value creators rather than obstacles to change?
It’s about resetting the working relationship between the CFO and his or her peer leaders in the different business units.
Many CFOs are focused on providing better information to enable fact-based decision-making. In order to provide that value-added information, though, CFOs first need to go out and listen to finance’s customers in the organization and really understand what their needs are, what worked well previously and what didn’t work so well.
If the CFO can make finance more responsive to business units’ needs and get them to interact with finance better, finance has a better chance of providing information that helps business leaders accomplish whatever they are trying to do.
For instance, the CFO may be able to identify finance strategies to capitalize on an acquisition or help a business unit value and dispose of poorly performing assets.
Where else can CFOs look for opportunities to say “yes”?
We often emphasize how important it is for a new CFO to find opportunities for “quick wins”—projects or areas where a CFO can produce a value-creating impact for the organization within the first six months of taking the reins.
Raising cheaper capital and obtaining better credit ratings to lower the cost of capital are some examples of good “quick wins” for CFOs. Working to get more insightful forecasts to key business leaders on operating income and its drivers are another area we see CFOs investing in quickly.
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