Over the past decade, there has been an unmistakable evolution in the role of the CFO, a shift that has only intensified with the adoption of new data-centric business technologies and practices.
The companies best positioned to drive growth and profitability are those that have embraced the data of their business. In a world where data and access to data have become more and more ubiquitous, the challenge is converting that data into actionable intelligence and executing swiftly. The companies poised to win are doing just that. Enter the CFO.
When a search is initiated for a CFO, unless a company is dealing with specific financial challenges, two types of candidates are typically surfaced: more traditional and accounting-focused or more FP&A-focused. In other words, someone with a deep knowledge of accounting practices and principles versus someone whose career exemplifies an executive more adept at working with the business.
For most companies, the most desirable CFO represents an ideal blend of both backgrounds. However, regardless of where a CFO sits on the continuum with respect to these two backgrounds — accounting or FP&A — a new requirement has emerged in the midst of this challenge: Today’s CFO must be data-fluent and deploy data as the foundation of decision-making and change-strategy across the enterprise.
Early in our search careers, in one of our first CFO searches, our client — the CEO of a fast-growth software company — told us:
“I don’t want my CFO to tell me, ‘We just flew the plane into the side of the mountain.’ I don’t even want my CFO to tell me, ‘We’re about to fly the plane into the side of the mountain.’ I want my CFO to tell me, ‘If we don’t change what we’re doing, we are going to fly into the side of the mountain; these are the ways we can change what we’re doing, and this is how these changes will impact our future.”
To a certain extent, this core aspect of the CFO role has remained unchanged. Then, as now, a successful CFO will not merely report on the company’s financial present nor just predict their financial future; she or he must also provide intelligenceto the company’s leadership that will guide topline growth and bottom-line profitability. In the past, this meant that the best CFOs analyzed the numbers and delivered reports to the business on what the numbers meant. Today, this is no longer sufficient.
Until recently, most finance functions and processes were manually driven and physically stored on hard copies and filed. There is a trend for all business information to be digitized and for all business systems and processes, including those of finance, to become fully digitalized. When this is coupled with the introduction of Big Data systems (systems that house the newly digitized unstructured data) and the integration of automation, AI, machine learning, and other digital technologies into business and finance, there is immediate access to and processing of information that was not readily available in the past.
This has led to an acceleration of thespeed with which business decisions are being made. Everything is happening faster: transactions, communications, and year-over-year growth.Importantly,the CFO has been the executive driving these changes within finance, and more often than not, also looked upon as the executive who is at the center of this transformation across the entire business. Therefore, in this fast-paced environment, the CFO must be creative, tech-savvy, and capable of acting swiftly on emerging business intelligence — in other words, an artistic, data-fluent business executive.
The CFO role has always been centered around understanding and reporting data. However, in the past, given that the CFO was predominantly working with non-digital data, the data available to be analyzed and reported on was far more limited and dated. Increasingly, data is being digitized and, hence, data is everywhere. In fact, most businesses are already traveling on the road that leads to total digitization of their data.
The question is no longer, ‘How do we get data?’ It is, ‘Which data actually matters the most, and which is just noise?’ In the end, all the data in the world won’t help if you don’t know where to look or which questions to ask. The CFO has become the key figure in identifying those KPIs which matter most across all areas of the business, and which give true insight into how the business is tracking in achieving those OKRs.
Five to ten years ago, the most complex data queries could only be conceptualized and composed by the most senior and knowledgeable data scientists; they took months to compose, and weeks, or even months, to run. However, today, while the most complex data queries still require skilled data scientists to conceptualize, complex queries can now occur in minutes rather than in months.
This increased power, coupled with the low cost of computing, is an incredible tool for businesses that know how to wield it. It is therefore essential that contemporary CFOs understand how to take advantage of this powerful resource and use the knowledge gained to shape the future of the enterprise.
While data warehousing is not a new phenomenon, it is only in the past five years that data analytics and business intelligence platforms have moved into the realm of ‘self-service.’ While composing complex queries still requires an individual with knowledge of data analytics and business intelligence, once the queries are developed, they can largely exist within a self-service platform that business leadership can access.
This shift in democratizing technology has driven an evolution in the FP&A role. It has increasingly been combined with the business intelligence function and become more focused on creating those self-service platforms that give insights into the state of the business to its leaders. This is significant, because this new combined FP&A plus business intelligence group reports directly to the CFO. As a result, CFOs now play a central leadership role in shaping their company’s digital strategy.
Much of the above has been confirmed by a 2021 report from Accenture that surveyed 1,300 senior finance executives. The report revealed that CFOs now have an exponentially larger role to play in digital strategy and execution. In fact, nearly three-quarters of CFOs surveyed reported that they have the final say on the appropriate technology direction of the enterprise. This same survey reported that over half of traditional finance operations are now automated. These findings underscore the seismic shift we have seen in the role and responsibilities of the CFO.
This movement in responsibilities is a result of the four factors discussed above, but it is especially the result of the changing structure of the FP&A function. As mentioned, the FP&A function has been increasingly combined with the business intelligence function. This means that more FP&A teams are being populated with individuals who have a deep understanding of data science principles, tools, and platforms. The CFO, as the leader of the overall financial function, is the senior-most individual to whom this combined FP&A and business intelligence group reports. This means that the CFO of 2021 has a far more powerful hand in shaping change across the entire enterprise.
As retained search consultants, we are in constant conversation with executives and industry experts as their needs and priorities shift. We frequently learn how business roles are evolving through structured conversations with clients.
Earlier this year, we were approached by the CFO of a longtime client, a top-tier growth-oriented private equity firm that engaged Stanton Chase for a VP of Business Intelligence role. The needs expressed during our diligence and discovery with this client illustrate a growing trend in how business intelligence has come to shape the CFO role in scope and importance.
Our client sought a candidate with a deep understanding of business from a data-centric perspective, as well as experience in working and communicating with leadership across the organization. His ideal BI leader would be “wired to think analytically,” preferably with a degree in statistics or computer science. This profile reflects one of the ways that the FP&A role is evolving to have a greater emphasis on business intelligence and data science. However, the most striking and important message we received from the client was this:
“I expect that this person and this team will have the best understanding of our business of anyone in the company.”
“I expect that this person and this team will have the best understanding of our business of anyone in the company.”
As the CFO, our client saw the need to transform the FP&A/BI team into the eyes and ears of the company using new data practices. In other words, this team — a team that reports directly to the CFO — would become the single-greatest resource for every business area and function across the company to provide ongoing and actionable insights into their operational state.
Ultimately, our search process helped our client clarify who was needed in this role to best support his work: an informed, systems-level thinker capable of guiding a team to conceptualize, architect, and implement a self-service platform, and whose primary function was to provide business intelligence to leaders across the enterprise.
Our client knew this placement was critical, in part because of a shift in his own role and responsibilities as CFO: “I think Finance should be the owner of the data, but that’s only justified if we are the best-versed in data. And this person and team will lead the company in this.”
Today, the finance function needs a team of data scientists along with a powerful self-service platform if they hope to take full ownership of the data, and the CFO now plays an increasingly central role in shaping and growing this business intelligence team.
“I think Finance should be the owner of the data, but that’s only justified if we are the best-versed in data. And this person and team will lead the company in this.”
This story highlights the CFO’s critical role in identifying the right personnel to provide a new level of business intelligence to a company’s leadership. In the case of our client, this was an individual with an ideal balance of analytical, digital, and business acumen — in other words, someone capable of understanding and explaining the business inside and out, all the while justifying that understanding through the use of data.
This story also underscores that the most forward-thinking CFOs, regardless of having an accounting or FP&A foundation or whether they have direct experience of the most modern applications of business intelligence, need to understand the impact these tools and technologies can bring to their companies. The CFO who has this understanding will be positioned and viewed as the best person within his/her company to bring new capabilities in understanding the state of the business to the company’s leadership.
Based on the feedback we received from our recent Global CFO Survey, CFOs have embraced the evolution of their role, although it’s not been without its challenges. For example, while the pandemic has added an additional layer of complexity, it has also forced the adoption of long-needed new technologies and the requisite talent to deploy and derive maximum value from that technology. This allows the finance organization to drive even greater business value and be the essential contributor to an organization’s corporate strategy. As the leader of the finance organization, the CFO who guides the integration of data analytics and business intelligence into the FP&A function is the CFO who will make the biggest impact in their company.
In this fast-paced, multi-dimensional environment, the CFO role has by necessity expanded beyond traditional financial insights and reporting and into the realm of data-analytic-driven business strategy, determining not just the organization’s success but how quickly that success is achieved.
In addition to ensuring that all financial data is integrated into data analytics, and that the business intelligence platform is accurate, the CFO is now also responsible for guiding the overall business. This means 1) identifying which systems are prioritized for digitalization, and with this digitalization, which data will make the biggest difference in understanding the business; 2) using data and technology to identify which KPIs are the most meaningful and able to deliver insight into progress on company OKRs; and 3) which business intelligence is worth acting upon.
The ideal profiles for CFOs, and their direct reports, are evolving to reflect this new reality. Going forward, the successful CFO will be using data, powerful computing, and business intelligence as the foundation of their decision making. To remain relevant and be of most value to their company, CFOs have to be both financialand digital strategists, as well as have a deep understanding of how to make connections and confidently act with speed.
and Cathy is the Global Leader of the CFO Practice Group.