The CFO’s role has been evolving and expanding and currently, many organizations and their CFOs are in different phases of evolution. The traditional role was more of a custodian — bookkeeping, accounting, financial reporting, compliance and budgeting. In the next phase, it expanded to include business finance, driving profitability for markets, products and segments, cost-out initiatives, etc. Currently, the CFO is being looked upon as a trusted business advisor for driving business strategy, contributing fresh perspectives on competition, markets and products, identifying growth and expansion opportunities and driving business transformation. Regarding business transformation, the CFO must play a strategic role by driving the business transformation instead of a side role of impact assessment, business case evaluation and acting as a tactical budget custodian. While driving business transformation, they have an essential role to play in several key areas.
- Baselining, objectives and prioritization: CFOs are well placed to understand the overall business objectives and where the business would go in the absence of business transformation. They have a normalized baseline financial performance for each market, product and segment and drive clear articulation of transformation objectives e.g., accelerating growth, enhancing customer retention, margin improvements and driving working capital optimization. Transformation Objective should include 3Es- Efficiency, Effectiveness and Experience. With the limited resources, organizations need to prioritize transformation initiatives. CFOs are pivotal in prioritization based on business strategy and Return on Investments.
- Greater visibility of cause and effect: Finance happens to be the culmination point for multiple business processes, e.g., payables in procure to pay, customer invoicing and collection for the entire supply chain and order management, record to report for many activities like capital expenditures, contractual obligations, project management, treasury operations for deploying operating cash and its availability for re-investing into business requirements. CFOs carry enhanced visibility of the interconnectedness of business processes and impacts of change in business strategy, which are essential to derive maximum benefits from business transformation.
- Technology landscape: CFOs may not be technology experts, but understanding the current technology landscape and evolutions has now become a foundation element for every CFO. Many new businesses like Fintech, Agritech, Edtech are established with technology as a foundation. Leveraging technology to drive efficiency goals is the bare minimum. Beyond this, CFOs can assess, evaluate and drive technology changes that are transformational in nature instead of driving marginal change. They should be able to complement emerging trends in addressable market and customer ecosystem with the emerging next-gen technologies to stay relevant and resilient.
- Data-driven and performance management: In any organization, most of the demand for the analytics team comes from the CFO. Their hunger and ability to establish cross-connects with multi-variable attributes is phenomenal. An eye for detail and the ability to link any transformation with the objective impact helps an organization to derive intended benefits from a transformation program. It is important to define, measure and improve key metrics for each operating unit and link them to larger business and financial metrics. Each transformation program must be evaluated against improvement achieved in respective performance metrics.
- External focused: Many organizations grow with a step-change approach in business processes and technology. This leads to a complex ecosystem where incremental change has minimal or no impact on business outcomes. At this point, the CFO’s ability to benchmark the current state of maturity with best in class becomes very important. They have a good understanding of the variabilities and by assessing the variability drivers, they can drive big transformation for a significant impact on business outcomes. Additionally, business transformation should be driven with a clear focus on making organizations future ready to embrace organic and inorganic growth.
- Collaboration and change management: We often see pockets of businesses asking "What's in it for me?" referring of course to their own business unit. CFOs are great change agents, as they have the visibility of the impact business transformation will bring to each market, product and department. Once employees understand the benefit of any change, resistance is reduced and more change agents emerge across the business. This collaboration and “one team” approach is very important for the effective execution of business transformation.