y Dr. Murtaza Abbas Mooman (FCA, ACMA, CGMA) Chief Financial Officer, Siemens Engineering Pakistan Limited | April 25, 2014 |
The role of chief financial officers (CFOs) as business
leaders needs to be rewritten in the context of constantly evolving
business environments, which demand continuous adjustments and
adaptations in
the way organizations are managed. For CFOs and finance
leaders, I see a new frontier that is not a set of promises but a set of
challenges with related opportunities. We will need to play a more
diverse role, one of increasing authority and responsibilities in the
remodeled business world.
Traditionally, CFOs have been considered
primarily responsible for the accuracy of financial information, as
well as fiscal discipline, analytical support, sound governance,
financial planning, record retention, cost controlling, and
infrastructure, including real estate upkeep and optimization. All of
these roles are primarily inherited from the past. However, we are now
being asked to shoulder much greater responsibility—and for that, we
need to work beyond traditional parameters and take on a role that is
more proactive towards sustainable value creation.
Increasing
expectations of stakeholders—including, but not limited to, directors,
shareholders, and regulatory bodies—render it inevitable that CFOs will
need to invest considerable time in managing and prioritizing their
activities in accordance with their individual impact on the
organization. Therefore, it is the symmetry and reliability of
information available to all stakeholders, achieved through integrated
reporting, that will be indicative of the CFOs’ presence in developing
strategy and stakeholder management. In a nutshell, the required
paradigm shift is from a traditional custodian of value and keeper of
records to anticipator of the future, and enabler of possibilities into
realities for the organization; at the same time as maintaining a
balance and taking into account reasonable stakeholder expectations.
CFOs
need to emerge from the mindset of only raising red flags to
collectively identifying, understanding, and providing alternatives to
business problems. They will have to go beyond delivering numbers to
delivering insights that facilitate key decisions from the board.
Accordingly, CFOs have to position themselves as primary drivers of
corporate strategy along with CEOs and play a vital role in ensuring
value creation over time. It would not be wrong to say that a CFO with
strategically aligned capabilities can bring the revolutionary changes
needed for organizational growth. To meet such expectations, CFOs have
to operate as strategists rather than as tacticians to ensure the
financial health and sustainability of their organizations and, most
importantly, to ensure that the shareholders’ expectations are met or
exceeded.
To achieve this greater responsibility, a radical
mindset change is needed to a forward-looking focus. The traditional
myth that CFOs are showstoppers has to be done away with, which will
require continuous and meticulous effort from individuals and the
accountancy profession.
CFOs have to grasp every
opportunity to step out of their comfort zone and expose themselves to
situations and challenges that will help them fit in a strategic
leadership role.
This does not mean taking over the entire responsibility of the CEO but is rather an integral part of the management leadership.
To
handle the expanded role, CFOs have to consider how to best divest and
outsource routine and transaction processes, for example, by a captive
shared-service model for the back office and transaction-intensive
functions. The advantages and risks of outsourcing need to be carefully
considered. In my experience, shared services have resulted in reduced
costs, standardization, and real improvements in business processes,
which enable greater focus on strategy and driving sustainable business
value. This leads to improved efficiency and better results, and will
also give CFOs air to breathe—equating more time for strategy and
execution, the two key activities upon which the CFO is ultimately
judged.
CFOs do not have to control everything—they should be
prepared to let go. They need to participate in setting direction and
creating a learning and competitive environment that is based on trust,
thereby instilling a sense of urgency, responsibility, and
accountability within the organization to ensure that people are doing
the right things in the most efficient way and that they share the same
vision. This is the real shift of communication: it is not telling
people more loudly but
convincing people why something matters and then asking the very best of them.
So
what does it take to enhance our expanded role? Foremost, CFOs must
garner the patience and flexibility to consider others’
viewpoint—without feeling intimidated. They will have to shun
“predetermined strategies” and must be ready to change tactics.
Comprehending the situational sensitivity, CFOs must set aside egos and
even be willing to form alliances with former adversaries—just not at
the cost of giving up core values. All this complex relationship
management can be handled with one simple action: CFOs step up and take
the responsibility in tough situations, allowing them to listen and be
heard by others, which is not be possible without keeping different
perspectives in mind.
Traditionally, CFOs had a mainly cash
flow-centric perspective in managing customers, suppliers, and
competitors of their organization. But as strategists, it is impossible
for them to make sound decisions without understanding the role and
interest of these stakeholders. Stakeholder engagement requires strong
communication and interpersonal skills and an intuition for situational
sensitivity, which might be highly political with complex and
conflicting interests.
They must lead the way in generating
sustainable economic value, rather than simply maximizing revenues and
minimizing costs, and simplify the complex financial world into
organizable ideas and understandable concepts so that the steps in
sustainable value creation are understood.
In the coming years, we
will witness dramatic changes in skills, expertise, and competency
required of CFOs. CFOs wear more hats today than ever before and often
operate with vastly fewer and scarce resources. Being effective in this
challenging environment means recognizing what roles are expected of
CFOs and approaching each with a clear focus. Finance professionals who
aspire for the CFO role should learn their business inside and out and
be open to exploring related opportunities beyond finance and
governance. They must be passionate about their role and have a
willingness to follow through—acknowledging the fact that passion and
perseverance are vital to reaching leadership positions.