By Andy Burrows
[Published 23rd July 2018, edited 20th September 2018]
To be successful the future CFO will need to be all about mindsets and methodologies.
My presentation at the AICPA-CIMA Finance Transformation conference in London this year would have been entitled, “the DNA of the future CFO”.
And since I now can't do the talk because I'm having cancer treatment, I'm letting you know my basic thesis, right here!
But am I out of step?! I mean, surely the future CFO is going to be all about digital technology, automation and predictive analytics? Well the Finance Transformation conference is hearing plenty of perspectives on all those things from people more qualified than me!
Would you like to hear a different perspective? I knew you would! Here we go...
So, here’s what I mean by mindsets and methodologies. Four essential ingredients for being a successful CFO in the future. Four parts to the DNA of the future CFO.
Firstly, the future CFO will have the mindset of a leader. The leadership of your Finance team has to be your top priority. That way you have all your people focused on business performance, not just you and maybe a few others.
CFOs tend to see themselves mainly as business partners, Board members, strategic players. Very few see themselves as leaders within their own function. (I talk about the problems this causes in another article.)
And that leaves their team alone to do their jobs the way they think best. And then the remote, 100%-business-partner-CFO wonders why the business complains about them, and they’re continually “underperforming”.
This kind of CFO, unfortunately quite common, thinks, “they’re graduates, trained professionals and have good managers. They should know what they have to do.”
But here’s the thing. We are all juggling multiple priorities, tasks, projects and activities. The way we decide how to prioritise, where to apply materiality, how much time to spend, what our output should look like, is to use a set of principles and filters. And most of the time we do that subconsciously and intuitively from what we perceive as our purpose within that context.
What leaders do is to define those principles, so that the decisions of team members are more aligned with the direction they need. The more you talk about the vision and the purpose of what your team does, the clearer their work becomes, and the clearer they can see how they are contributing to something bigger. That increases motivation and energy.
And it means that, in the heat of the game, the whole team is making their role count for the championship.
So, the first essential ingredient is the CFO’s leadership mindset.
The next two points are around the mindset of the team.
So, secondly, CFOs must work to build a business-focused mindset in Finance.
Finance teams need a clear picture of how their role helps the business.
Once they know how they contribute to the performance of the business, the Finance team will want to do more of the things that help the most, and less of the things that help the least. They apply their purpose-filter to their prioritisation decisions.
We have to be clear on our purpose as a Finance function, so that we understand the purpose of the resources we have, the skills we need, and the tools we need to fulfill our role.
So, here’s what I say all the time, the foundational statement for most of what I write about in Finance:
The purpose of the Finance function is to drive business performance.
We don’t just report on past financial performance. We don’t just analyse past financial performance. And we don’t just plan and forecast. All those things are observing things from the outside looking in, like a sports commentator or scorekeeper.
We are in the business, helping it to perform as well as it can.
And I take this purpose statement from two things mainly.
Firstly, who do the owners of the business hold to account for the performance of the business? The CFO. If they’re looking to the CFO to make sure the business does as well as they expect, then the CFO’s team should help with it too.
And secondly (and this is the reason I think this is the purpose of the whole Finance function and not just the CFO), the reason that the owners have that expectation is that the Finance function is in the unique position of having access to every part of the business.
Without even trying, we see the financial outcome of everything that goes on in the business. We have to understand the past performance and be able to plan for future performance. And therefore, we have to understand every aspect of the business.
We are all about business performance. Not just processing transactions, reporting results or creating spreadsheets.
So, there must be a common mind across Finance that collectively we are there to drive the performance of the business.
The other things needed to make a Finance team – any team – successful, are positivity, belief, enjoyment, hope. When groups of people have this kind of positivity, belief and hope, they help and support each other, and they spend less time disagreeing over the priorities.
Leaders provide that.
I don’t know how many of you watch The Walking Dead, the drama series set in America after a zombie apocalypse? I love it.
Actually, what I like most about The Walking Dead is not the blood, guts, gore and horror (and there is plenty of that!). It’s the fascinating way that leadership is portrayed. There are many positive and negative examples I could use, but I’ll just mention the main one.
In the first season, Rick Grimes, the main character, comes out of a coma and finds the world has crumbled. Everyone has gone, his family has gone. And bloodthirsty resurrected dead people are lurking all around trying to eat him.
Meanwhile, his wife and son are safe with a small group of survivors, guarded by his friend Shane, camped in a quarry just outside Atlanta.
When Rick finds himself overwhelmed whilst exploring downtown Atlanta, without realising who he is, the same group rescues him and brings him back into camp. And there are emotional scenes when he realises that Lori and Karl are there safe, and he’s found them!
The thing that strikes me when I watch it is that from the moment that Rick comes into the camp, he becomes the leader. No election. No request from the group. The group just naturally accepts and follows him!
Why is that? Rick is simply a great leader, naturally. He oozes leadership!
What makes him a great leader? He inspires confidence, positivity, belief, hope. He is passionate about a vision for the future. He is honest, and not afraid to show his feelings. He puts himself in danger to protect and serve the group. He gives first, putting himself at risk for the sake of the group. He demonstrates and proves his hope and his belief by the actions he takes, and the risks he takes. And it takes a lot to shake his own belief.
And Rick always seems to have a plan…
So, finally, in order to lead effectively, the CFO needs methodologies to help guide and explain to their people the most effective ways to fulfill their role.
Let me use an analogy to bring this to life. Consider how a professional football team works. (Quite apt with the World Cup going on at the moment!)
The best football managers are leaders and coaches. They don’t just say to the players, “ok go out and play and win the game!”
Of course, they motivate and increase the energy of the team. They give them a vision. But they also break that down into what it practically means for each player.
What used to amuse me when my kids were growing up and playing soccer was the team managers who would do the team talk before the match, and say something like, “ok boys, today we’re playing with three at the back”. And then they’d scream at players during the match for not defending effectively.
But they’d never clearly told the kids how to play with three at the back!
Our methodologies for managing the performance of the business are like football team formations. What amateur youth football managers don’t normally explain to their young players is that formations are not all about the starting position on the pitch. Formations are a way of describing the strategy for winning, and the way each player has to play. Different formations mean different things for defenders, midfielders, attackers, strikers. They mean different things for the different phases of the game, what each player should do while in possession and out of possession, with the ball and without the ball.
When every player in the team understands what they have to do in every scenario, because they understand the principles of the formation strategy, the whole team will play together effectively. And a team that plays together effectively is more likely to win, whatever the formation.
So, we have to provide methodologies and frameworks to describe what the business does and what our team should be doing. How are we going to play the game of Finance and business performance?
Let me just illustrate a little more with a Finance example.
Let’s think about reporting.
I could say to my team, “I want you to provide a performance report for the business.”
And what they’d probably do is produce a report showing the profit and loss account for the month and the year to date.
But if I then describe a framework and methodology for business performance management that incorporates reporting and analysis as a way of seeing whether our strategies are effective and successful, would they take a different approach?
Of course they would!
If you see reporting as part of the strategic performance management cycle, then that immediately and intuitively changes the way we think about the content of our reports. We no longer think just in terms of a profit and loss account. We want to know facts about our customer service, our competitive position, the risks in the market, our sales effectiveness, and so on.
If you have that methodology, the team comes back to you with a report that has a set of non-financial KPIs as well as financial numbers. And it looks both backwards and forwards. And it focuses on what it can tell us about the strategies of the business.
So, methodologies and frameworks are important, and they help us to understand how to do things more effectively.
Ok, so if you’re a CFO, or aspire to a senior position in Finance, where can you start?
First, have a look at a white paper I've written called, How Finance Can Drive Business Performance. That teaches a good framework and approach that you can start with.
Then, do things to improve your leadership skills.
Be the one who is always positive. But also be the one who is honest and open. ‘Positive’ doesn’t mean saying you can do the impossible. It means not giving up even when you think it may be impossible, if it’s something worthwhile.
Start talking to your team more. Be interested in them, their jobs, what they care about, and who they are. Be open to answering their questions openly. Share your vision. Empathise with their difficulties, and encourage them.
Also, ensure there is time to educate your team in the frameworks, tools and techniques they need to achieve the vision.
Of course, I could say much more. But that’s a start. As a CFO, do you fear your leadership role? It’s natural. So, one last word of advice – “Feel the fear… and do it anyway!” You’ll be glad you did!
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