The chief financial officer is taking a more strategic role within the enterprise, but the heightened responsibilities largely come from necessity.
Greater exposure to risk and pressure to boost revenue are hanging over CFOs’ heads “like a dark cloud,” according to The Hackett Group’s Jim O’Connor, one of the authors of the firm’s latest report, "The CFO Agenda."
“Companies are focusing on cost reduction across the enterprise, and this is clearly an area where finance can take a leadership role,” O’Connor, principal and finance advisory practice leader, said in a statement announcing the release of the report.
The Hackett Group identified the top priorities among CFOs this year in the face of these pressures. Those concerns, analysts found, offer insight into the paths these financial professionals will take this year.
What CFOs Are Up Against
Economic uncertainty and increased exposure to risk are two hurdles looking to trip up the CFO this year, the report concluded. And while CFOs at mid-sized and large companies are citing innovation as key to their business strategies, researchers also noted that these hurdles are causing corporations to reduce their budgets for innovation.
The Hackett Group found that, on average, corporate headcounts have declined by an average of 2.7 percent compared to the year before, with a 0.5 percent reduction in budget.
A survey of CFOs across the mid-sized and large corporate population found five top priorities for the year amid this environment:
- Improve finance leadership skills and business acumen
- Reengineer finance processes
- Improve finance performance management capability
- Develop a finance technology roadmap
- Roll out finance BI/analytics applications
Amid tightened belts and less talent, CFOs must choose wisely how they use the resources at their disposal, the report’s authors said.
In improving finance leadership skills, CFOs will be looking to strengthen their partnerships with the rest of the firm. But this is also true for financial executives without a C-Suite title, the report said.
“Today, it is widely understood that leadership skills aren’t just for people with senior management titles,” the report concluded. “As finance employees partner with the business, they must demonstrate leadership through persuasion and motivation, planning and organizing, taking initiative and making appropriate decisions.”
Reengineering the finance process is a tall order for a CFO but not exactly a novel concept, The Hackett Group noted. Today, that overhaul means taking on digitization, automation, robotic processes, cloud computing and other technologies that are disrupting companies across verticals.
A survey found that, this year, CFOs will prioritize the planning and business analysis processes but that compliance management is also a significant weight on their minds.
While improving finance’s performance management capabilities was found to be the number three goal this year, The Hackett Group also found a 26 percent gap in the number of executives that perceive the importance of this area and the number of executives that feel they have an actual ability to achieve this goal.
To improve performance management capabilities, analysts noted the role of Big Data and analytics to underscore a CFO’s actual value proposition for the enterprise. And the quality of that data will also be key.
For example, The Hackett Group found that “account-to-report organizations that focus on overall process costs exhibit better business partnering and relationship management than those that measure cost per transaction and other lower-level metrics.”
Improving performance management may be seen as part of a broader goal: to develop a finance technology roadmap.
The number four priority for 2016 also involves acknowledging that not all metrics are created equal. Introducing a roadmap to the enterprise can help the business obtain a bird’s eye view of their long-term goals and what they’ll need to achieve them in the short term.
The Hackett Group points to the array of categories of disruptive technology — robotic process automation or upgrading an ERP system — that can play a part in developing the roadmap, as can the various services offered by FinTech companies.
With the understanding of data’s role in achieving better performance management processes, the CFO also understands how important it is to introduce business intelligence and data analytics applications into the enterprise — the fifth priority for 2016.
Again, The Hackett Group stated, this goal should first be approached by CFOs understanding what data will be most effective in helping them with their goals this year, rather than by integrating a general analytics solution for the company.
Doing so will lead to a significant reduction in wasted man hours spent sifting through data and analyzing information that, ultimately, may not prove to be useful to the enterprise as a whole.
A Catalyst Of Goals
A deeper look at CFOs’ top priorities for 2016 uncovers a connection between each of them. Throughout each goal, for instance, data analytics plays a role, as does the understanding of disruptive technology.
“Looking at the top finance strategy priorities for 2016, it’s not hard to see how they are related,” said The Hackett Group’s O’Connor. He continued that data playing a common motif this year is no accident.
“Finance is in a unique position within the company, with access to all of its financial and much of its operational data,” the principal said. “By better integrating this data through enterprise performance management and business intelligence systems, finance can help companies understand performance, improve forecasts and take action to close gaps and take advantage of opportunities."
Data and technology, it seems, are the foundation on which corporate finance priorities are built in today’s economic climate.