Last week's article conveyed the importance of chief financial officers (CFO) being active and eminent across the strategy dimension. This week's article addresses the CFO's contributions as an operator – what are the focus, roles, competencies and critical issues a company and its constituents should expect from a CFO to address within the operator dimension?
The CFO walks a tightrope within the operator dimension, deftly balancing the costs with the service level requirements while maintaining a constant focus on the finance's operating model along the way.
The focus of the CFO as an operator is to run an efficient finance function. In today's environment, boards and CEOs expect CFOs to bring down costs and lead by example. One way for CFOs to save is to alter the finance operating model. There are three key ways that CFOs can alter their finance operating models to reduce costs and improve efficiency:
- Shifting the service delivery model by centralising activities that are common across business units, geographies and markets into a Center of Expertise (CoE). CoEs focus on aggregating expertise to undertake low-volume, high-expertise tasks more efficiently. This is in contrast with shared service centres that focus primarily on a high volume of routine transactions. Moving select financial planning and analysis (FP&A) activities into a CoE allows for greater efficiency by having fewer people serve more customers with more consistent quality.
The first step is to identify FP&A activities that do not truly provide "analytical decision support".
- Reducing the demand for financial planning and analysis activities: There are many examples of clients with different analysis and reporting requirements across markets and business units because "that's how it's always been done". Challenging the inherent status quo offers finance additional cost savings opportunities. As a result, there is often a significant cost savings opportunity from reducing the demand for services to the initiatives critical to the overall strategy of the company.
- Reducing process complexity: An opportunity for cost savings lies in process simplification and standardisation. By standardising select analyses and outputs across units and regions, the finance organisation can process more analytical requests and reports faster.
The roles a CFO undertakes as an operator are to:
- Dynamically balance cost and service levels in delivering on the finance organisation's responsibilities
- Define and adapt finance's operating model.
A CFO demonstrates the following competencies as an operator:
- Leverage system capabilities – break up "IT"; focus on the "I" leave the "T" to the CIO or CTO where it belongs.
- Program/project management – An ERP implementation project should mark the end of manual accounting processes and excel sheet reporting in the finance function. Extended parallel processing is a resource drain and a duplication of effort and investment.
- Problem solving – A CFO's finance talent should be encouraged to solve problems not only identify them for someone else to solve.
- Adopting a cross border attitude – A CFO should be willing to embrace resources and solutions outside the home country environment when it is more efficient to do so.
A CFO actively addresses the following critical issues as an operator:
- Developing and evolving the finance operating model. CFOs will wish to maintain a close eye on the scale of the finance function relative to the company's strategy and overall growth.
- Talent management in financial disciplines: Through active talent management a CFO can develop people's skills thereby deploying them on opportunities that fit their strengths and interests.
- The author is CFO programme leader at Deloitte in the Middle East. The views expressed are his own. This is the third in a five-part series of articles examining the current state of the CFO in the Middle East
Determining how to allocate scarce financial resources to drive the greatest return on investment
Where to invest What to expect
- Talent management
- More flexibility, improved capabilities
- Chart of accounts
- Better control over data
- Performance scorecards
- People refocused on doing what
- Business intelligence
- Better insights, smarter decisions, less risk
- Financial close, consolidation and reporting
- Faster, smoother closing
- Budgeting, planning and forecasting
- One dependable version of the "truth"
- Finance merger integration
- Day one readiness
- Tax and treasury
- Higher profits, better compliance
- A better view of relative performance