What it takes for Finance executives to excel in a changing and uncertain world
Software provider SAP has provided SB Partners with VIP access to several noteworthy reports prior to being publicly published. As we review them, we will share those that we think may be of interest to you.
The opportunity to share reports arose after SAP invited us to participate in a pilot project that provided open access to their extensive database of reports and to share, as we saw fit with our blog audience. No strings attached and no requirement to blog. Their goal is to increase their “mentions” in social media by providing a win-win proposition to their partners of access to the latest research and thought leaders. Very bright.
This week, I reviewed The Superstar CFO: After the Crisis. It was very good, so I thought I would share some of the highlights with you. I hope you find the information as constructive and educational as I did.
The report was prepared by CFO Research Services in collaboration with SAP and will be released publicly later this week.
The report explores how, since the world was shaken by a series of financial, political and natural upheavals, changes might be affecting companies’ ongoing efforts to transform the corporate finance function into a true value-added partner to the business.
The Superstar CFO: After the Crisis is a follow-up to a 2007 report — The Superstar CFO — also published by CFO Research Services. That report was a survey-based study documenting the attributes senior finance executives believed were characteristic of highly successful CFOs.
To examine this topic, the research company interviewed CFOs and finance directors at multinational companies based in four regions — the United States, Europe, Latin America and Asia-Pacific, in addition to drawing from interviews running concurrently in other research projects. These finance executives discussed their experiences managing through the downturn and shared their views on the road ahead. It is a rich, comprehensive report:
“Strengthening the whole organization” has become the mandate for finance leaders of today. Today’s CFO often acts as a pivot point between the corner office and the shop floor.
At several of the companies where interviews were conducted, back-office consolidation was accomplished by developing shared-services centres for transactional types of activities. Several interviewees said their companies either started up shared-services centres or have been expanding the use of their existing centres. These companies are pursuing shared services not simply to reduce costs, but also to improve control over financial information and support growth in the business by standardizing processes.
With the worst of the recession behind them, the finance executives interviewed said their focus had started to shift toward supporting business-development and new growth opportunities. In this regard, they view the cost-reduction and process-standardization work accomplished during the recession as providing the foundation for their companies’ growth. With good processes in place to manage back-office activities for financial transactions and compliance reporting, they feel they can devote more of their own time and attention to working with the companies’ business units, as well as with their CEOs, on improving both operational and financial performance to support growth.
Finance executives cite a range of growth strategies for their respective companies coming out of the recession, from targeting growth from existing accounts to rolling out existing businesses in new or emerging markets. Depending on the company, they may focus on organic growth, selective acquisitions, or a combination of both.
Maintaining liquidity was another primary concern for most companies during the recession, with many building up cash reserves both as a buffer against volatile revenue streams and because short-term credit sources had become increasingly difficult to access. With companies once again starting to prepare for growth opportunities, funding strategies remain at the top of the agenda for CFOs, with many thinking about the best ways to put their cash to use.
Laying the groundwork for growth
The cost-conscious mentality reinforced by the downturn frequently has lasting effects. Several of the CFOs interviewed say that by streamlining routine finance processes, they can devote more of their own time and that of their staff to value-added activities.
Central to finance executives’ ability to support their companies’ growth is providing the right information at the right time. In particular, finance can help both executive leadership and operating units cope with the challenges posed by a volatile economy. The companies that spent the time to shore up their financial reporting and accounting infrastructure and processes are better positioned to deliver the right information at the right time.
Overall, the CFOs interviewed report that they spend the largest portion of their time working with others in the business on optimizing operational and financial performance. Interviewees estimate they spend as much as 60% of their time in this key area. Several interviewees note they spend a good portion of their time visiting the various operating units and meeting with business managers throughout the organization. They say it is important to maintain good contact with all the forces that shape the financial destiny of the company.
Those interviewed said they are using mobility technology to help them boost their contribution to value-adding activities and to achieve a better balance in their work lives. CFOs are very comfortable using mobile technology to help them keep closer to operating units or geographically dispersed locations — largely as a means for enabling them to stay in touch with their own offices and information systems while visiting different operating units.
Having a deep understanding of the true drivers of the business is critical for effective risk analysis, to better understand how the avoidance of risk can affect the course of the business as much as the acceptance of risk.
The interviews conducted for this report reveal that finance executives believe the ideal CFO is creative, adaptable, influential, and persuasive. They view their mandate as extending throughout their organizations, from the shop floor to the corner office.
For the CFO today, change is simply a constant. Regardless of the kind of change they face, CFOs work closely with business units and executive leadership to map the financial and strategic consequences of change.