We’ve written extensively about how the function of finance is developing from accounting to actively driving business performance through data-driven insights. But finance leaders such as the Chief Financial Officer (CFO) and Financial Director (FD) have a vital role to play in this transformation.
They are at the helm of the business, with unique analytical insight into operations, alongside access to C-suite executives and other stakeholders. As such, they are the ones tasked with creating and strategising performance initiatives and communicating and championing this to the rest of the business.
It’s no easy feat, but many finance leaders are already making strides in the face of these new expectations of their role by rethinking finance.
How finance leaders are driving business strategy
The CFO role has developed. Four in ten CFOs now say the majority of their time over the last year has been spent on activities that are not traditional or speciality finance, with the main activity cited as strategic leadership, followed by organisational transformation and then performance management.
This research is backed up by anecdotal evidence from current finance leaders. Rowan Baker, CFO of McCarthy & Stone, states:
“Gone are the days when the CFO was just a custodian of all the financials within the business, I’m extensively involved in strategy working with the other members of the management team. A critical part of my job is ensuring everyone has the information that they need for those decisions that need to be taken, and to be the voice of reason behind them sometimes, to explain them and to flag potential problems and risks.”
Finance leaders are increasingly expected to provide, if not lead, data-driven business strategies for the business to increase growth and profitability. The technological advances over the last decade have meant that finance departments have access to more accurate and insightful information than ever before, allowing them to make better decisions with improved outcomes.
But strategising alone isn’t enough, finance leaders must also be able to communicate this to other C-suite executives and stakeholders and convince them to buy in to new strategies and shift the status quo of business performance.
It’s a far more holistic role than the previous stereotype of bean counters. One that demands new skills, priorities and behaviours from finance leaders should they wish to succeed, but not an impossible feat. Finance leaders can drive improved business performance by:
- Embracing new digital technologies
- Forming closer partnerships with C-suite executives
- Closer communication and collaboration with other departments
- Developing commercial acumen
- Being a driver of innovation
- Adopting a global mindset
Embracing new digital technologies for actionable insights
Technological advancements aren’t new to finance departments. In previous decades, they allowed a huge range of transactional activities that took up valuable time to be automated, freeing up staff for more innovative and strategic endeavours.
But these technological advancements haven’t stopped coming. New financial technologies allow huge swathes of data to be analysed and contextualised like never before. This opens up huge opportunities for finance leaders to invest and capitalise on new technologies.
These new technologies can give advanced insights into where capital allocation is best used, which can then be aligned with strategic priorities for the business.
Forming closer partnerships with C-suite executives
The majority of finance leaders sit on the board with other C-suite executives already and research shows they are valued here. CFOs and other C-suite executives agree that CFOs are significantly involved in bringing deep financial expertise to discussions as well as focusing group discussions on the creation of financial value.
However, in many businesses the stereotype remains that finance function is very technical and is often still regarded as very separate from the rest of the business. As such, for many finance leaders, the role remains advisory. While 72% of CFOs state they’re significantly involved in allocating financial resources, only 29% of other C-suite executives agree. This shows a clear disconnect between the role and the perceived role.
This advisory partnership can develop to one of leadership through improved partnerships with other executives. Finance leaders should be very clear on where finance can add value and communicate that concisely with innovative and proactive strategies.
Closer communication and collaboration with other departments
On average, five functions other than finance now report to the CFO with risk, regulatory compliance and IT being the most common.
This is great news, because research shows that a whopping 88% of businesses agree the CFO has a substantial role to play in supporting operations performance across the business.
Finance leaders can ensure better collaboration with other departments by ensuring performance data is shared with other departments in an accessible format. They can also have open discussions with employees of various levels as to what the key drivers and metrics are to ensure a good understanding. This transparent approach better aligns departments and breaks down silos, allowing for improved performance across the business.
Developing commercial awareness
Though there is still a clear need for finance leaders to possess analytical skills, as they reposition themselves in the business as a leader of strategy, the need for commercial awareness is more apparent.
Research into the skills associated with an outstanding FD reveals that commercial acumen was a top priority, alongside communication and people skills.
Being a driver of innovation
The same research that revealed the disconnect of responsibilities in the C-suite also revealed that while CFOs cite a lack of resources and skill as the biggest barrier to finance function, the rest of the C-suite cites a lack of innovation.
Companies allocate 90% or more of their resources to the same projects and activities as the previous year, despite changes in environment or indeed strategic objectives. Finance leaders need to come up with innovative performance initiatives based on data that can better allocate capital to strategic priorities. They can achieve this through more insightful performance data alongside external industry data that can reveal where the largest value gains can be made.
Adopting a global mindset
The past year has made it painfully apparent how intrinsically linked the global economy is. Both emerging markets and volatility in existing markets impact on business strategies.
Finance leaders will need to navigate various unique challenges depending on regions, as well as develop a team capable of working across these regional differences. Therefore a global mindset of growth is vital in driving business performance.
Drive business performance through a clear and concise strategy
Ultimately, finance leaders can drive business performance by taking the lead in developing a clear and concise performance strategy, based on data, aligned with wider business goals.
As it currently stands, a mere 50% of companies have a clearly articulated strategy and less than 20% of employees are able to describe their company's strategy.
Finance leaders are in a unique position to deliver this change and revolutionise business performance and productivity.
You can learn more in our free PDF guide 7 Ways Finance Directors Can Improve Business Performance.