"The Strategic CFO"

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Source : Corefino

Resources Related to The Strategic CFO:

• Chief Financial Officer (CFO) (Wikipedia)

The Strategic CFO

Addressing a Pivotal Role in Flux

The economy continues to take center stage in 2009. Enterprises are looking for any and all advantages that can help them thrive in this environment. With financial pressures straining even the most efficient and lean organizations, forward thinking companies should now to turn to the CFO.

A change in attitude about the value of the CFO, in fact, has been a long time coming. Whether an enterprise faces an economic boom or protracted downturn, the role of the CFO has been morphing. This flux reflects both greater CFO responsibility and corresponding more difficultly. This also translates into financial management that needs to generate real value in the enterprise. It will not happen by accident but by careful assessment and enterprise and business process transformations. Enter the concept of the Strategic CFO.

The Strategic CFO is equipped with the proper tools, plans and fiscal philosophy that will transform the role of CFO into a strategic business asset. Devising and following a roadmap can create a framework for success with strategic methodology that translates into positive bottom line performance via financial information. There are specific processes and stages that allow the CFO to break away from the old paradigm of numbers crunching, get thorough the financial growing pains and ultimately focus on business strategy and competitive challenges.

Today's CFO: Death by a Thousand Cuts

The issues on the plate of the CFO are grander yet grittier than ever before. Consider all high level activities that CFOs are expected to coordinate: financial information gathering, integration, and interpretation as well as overall business process improvement. On top of that, add ever grown concerns around risk measurement, management and mitigation plus financial controls and compliance activities.

If that isn't enough also consider the more ‘mundane' aspect that need to be addressed such as accounting, payroll, tax issues, treasury, and the ongoing needs around the financial close process. Many CFO's have not progressed past the stage of babysitting ERP systems that only address these basic functions.

There are also added concerns of IT solutions and support that are in reality intertwined with supporting the many financial business processes necessary to run a company. In total, the sum of these issues, both great and small seems overwhelming to many CFOs-and the reality bears that out. In the December 2008 "Survey of Business Conditions," more than 50% of the over 400 surveyed financial executives believe CFO turnover will exceed records in 2009.1 Reasons cited in this survey, by executive services firm Tatum, LLC, are various but include the sputtering economy, weakened corporate earnings and the changing role of finance functions what has increased pressure on the role of finance and the associated role of the corporate CFO. The takeaway is that there is now widespread belief that the role of the CFO is exceedingly difficult to perform therefore turnover will become rampant.

Addressing the CFO Challenge

This belief- that the office of America's CFOs will remain the equivalent of musical chairs-only furthers the necessity for the CFO to become more strategic, marshalling information and not drowning in it. No matter if the enterprise is trying to weather a bad economy or is facing internal or external financial pressures, the CFO needs to see its role as that of information master and innovator.

A Strategic CFO, then, has the foresight, tools and vision to address the processes that fall under the mantle of the CFO and create competitive advantage for the enterprise. To do this the Strategic CFO needs to consider methodology models and IT solutions that improve and transform financial business processes while also taking care of everyday business. But even before that, there needs to be an honest assessment of ‘current state' business functions, IT support and solutions, and enterprise value the role of CFO is providing. This is critical to define where the enterprise is and how far it needs to progress.

Creating a Path to Success

The role of CFO, as mentioned, is changing rapidly but there also basic responsibilities that will remain constant. The CFO will need to address basic functional processes but also juggle new ways of looking at financial metrics that monitor financial performance. Going one step further, this is part of a larger picture to contribute to enterprise business challenges. These challenges vary and include:

• Identifying opportunities to increase shareholder value
• Enterprise cost control measure
• Financial and legal regulatory issues
• Technology needs and spending
• Restructuring costs
• Business acquisitions
• Capital Spending

To handle these issues, and others, the CFO must work to develop a strategic plan that collects financial information for reporting and analysis that positively impacts bottom line performance of the enterprise. Accomplishing this goal will position the CFO to become an equal among Clevel executives in fashioning strategic decisions and policy at the enterprise level.

How to Address a Pivotal Role in Flux

The need for a Strategic CFO in every enterprise is urgent, but this transformation should be done in stages. Developing a methodical plan requires inventorying current processes alongside financial issues that have yet to be addressed or that are on the enterprise ‘wish list.' A four stage approach to creating the Strategic CFO will take a company from basic transactions processing to strategic business partner.

The four stages of the Strategic CFO are evolutionary steps that expand the domain of the CFO to eventually include all the elements in Figure 1. By following a four-step process, the CFO can turn concepts into the reality of daily process improvement that then trickles up to be used in overall enterprise strategy. These four steps are also defined by the steady growth of value added functions that impact the role of the CFO for maximum strategic value:

• Stage 1: Focuses on non-strategic functions and transactions like basic back office financial solutions (e.g., ERP systems) the financial close period and associated reports and statements, and HR, benefits and payroll administration.
• Stage 2: Greater level of internal controls, audit issues and reporting for financial compliance, legal and regulatory matters as well as other financial areas like tax compliance and process automation.
• Stage3: Increased information gathering solutions to support analysis and Business Performance Management, budgeting and planning, and financial and operational risk management, as well as tax strategies and cash and treasury management strategies.
• Stage 4: Highest level of strategic processes to address M &A activity, strategic and geopolitical risk factors, high-level data analysis, corporate financing/fundraising activities, investor/analyst relations, and overall fiscal innovations that directly impacts shareholder value. Also IT innovation to support ongoing strategic initiatives is a critical element.

The various elements of these four stages can cut across business processes and IT solutions so as to broadly cover, create and provide financial data. This cross pollinations of IT and processes also helps to achieve satisfactory results during any of the four stages. For instance, Business Performance Management, a ‘Stage 3' element, enables businesses in the process of defining financial goals to measure and manage performance against those goals. Core BPM processes include financial and operational planning, consolidation and reporting, business modeling, analysis, and monitoring of key performance indicators linked to strategy. These processes therefore can also impact another Stage 3 element like internal (or external) benchmarking. However BPM can also impact items like strategic risk (Stage 4) while tax strategy and tax provisioning (Stage 2) can directly impact cash reserves and treasury functions (Stage 3). These types of dependencies show the complex nature of the enterprise financial framework. For that reason a phased approach to the Strategic CFO goal line is crucial to properly devise and execute.

Timing is Everything

Another important aspect to remember is that the path to a Strategic CFO is not short. The Strategic CFO timeline -much like enterprise financial transformation work which also involves many financial transactions systems- needs to be thought of in terms of months, not weeks. A reasonable timeframe, as shown in Figure 2, will take the enterprise from Stage 1 "Transactions" through Stage 4 "Strategic Enterprise Partner" in a 20 month time frame and focus on value added elements that greatly benefit both the enterprise and the office of the CFO.

This four step process and timeline may differ in specifics and durations depending on need variations at specific enterprises. However the concepts that need to be followed, along with the financial information streams that must be created, are largely defined by these business and technical elements. Following this methodology and calendar increases the odds of success when attempting to create a Strategic CFO.

Avoiding the Pitfalls

For CFOs, mastering the basics of their job role is not enough to be considered a true and equal partner at the C-level. Traditional data processing and control functions will not provide the insight to successfully work across the customary executive level boundaries. The Strategic CFO will throw off the shackles of a mere controllership role to become and enterprise leader. For this reason, becoming a fully formed Strategic CFO is crucial to become a master of your perception-and your true value to other C-level executive and to the enterprise. However, creating the Strategic CFO office can be fraught with dangers that produce failed results. Many CFOs may be damning themselves to the ‘road to hell' with good intentions but bad execution. The reasons for failure vary but many times include:

• Lack of enterprise sign off and commitment-The CFOs ownership of business process  improvement has not been ‘sold' to the rest of the enterprise or finance personnel
• Underestimating the change required-Change will come from both new finance strategy but also change from technology usage, corporate and employee buy-in, and process and workflow redefinition
• A disconnect between finance initiatives and IT-New or improved finance redefinitions
will need some level of IT support (either internal or external)and how it is valuable to finance processes to succeed
• Budget constraints- Finance reality sometimes takes the guise of budget cuts that can
negatively impact the requisite change that is required to create a Strategic CFO environment.