The CFO of the Future
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Today’s businesses face rapid economic, technological and social changes. CFOs need to provide decision support that will help their organizations outmaneuver competition whilst managing risk, volatility and uncertainty. The pace of risk and the degree of risk is unparalleled and will only increase and this creates tremendous opportunities for organizations. Ash will share what the American Institute of CPAs and their Joint Venture partners the Chartered Institute of Management Accountants are hearing from Finance Leaders around the world as to how the Finance is evolving and how the CFOs of the future are preparing themselves and their teams – not just to navigate but to actually help steer their organizations to create sustainable value. Speaker: Ash Noah, VP, External Relations — Management Accounting, AICPA Presentation delivered at ProformaTECH 2014 - http://www.proformatech.com Track: xxx | Session: yyy
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The CFO of the Future
- 1. CFO The Chief Future Officer? Ash Noah CPA, FCMA, CGMA VP External Relations, Management Accounting, American Institute of CPAs
- 2. The future business paradigm? 2 2 © 2014 Proformative
- 3. Chief Future Officer? Of Global CFOs do not believe that the ‘CFO’ title adequately covers the diversity in the role 3 © 2014 Proformative Finance Forte Survey 2011 Ernst & Young 3
- 4. Chief Future Officer? 68% Report the ability to find the right skills is progressively more difficult the higher the roles are within the organization 4 © 2014 Proformative Plugging the skills gap 2012 EIU 4
- 5. Chief Future Officer? 40% Reported high-end analytical skills as being the future success of their organization But only 15% Of those have these skills available 5 5 © 2014 Proformative Turning the Tide; Accenture
- 6. Developer of talent pipeline over a third Of c-suite respondents agreed that the ability to attract, retain and deploy the right talent is ‘the’ main competitive advantage 6 © 2014 Proformative Talent Pipeline Draining Growth 2012 CGMA 6
- 7. Measures and focuses on non-financial value 7 © 2014 Proformative Rebooting Business - 2012 CGMA 7
- 8. Recognizes value in non-financial measures* * Extent of value provided - % of respondents selecting 8-10 on a scale of 10. 8 © 2014 Proformative Rebooting Business - 2012 CGMA 8
- 9. Big Data enabled 9 © 2014 Proformative From insight to impact - 2013 CGMA 9
- 10. Big Data enabled finance • A minority (23%) report no role in anlaytics • Another minority (21%) claim a leading role • A 55% majority say finance partners with others (55% = 37% + 9% + 9%) • Interviews agree on a collaborative role 10 © 2014 Proformative From insight to impact - 2013 CGMA
- 11. Overcoming impediments to harnessing Big Data 11 © 2014 Proformative From insight to impact - 2013 CGMA 11
- 12. Big Data – the role of finance 12 © 2014 Proformative From insight to impact - 2013 CGMA 12
- 13. Five traits of the data enabled CFO 13 © 2014 Proformative From insight to impact - 2013 CGMA 13
- 14. Turns data to insights to action 14 © 2014 Proformative Source: IBM CEO Survey - Leading Through Connections
- 15. Finance function has delivered scale benefits Shared Service Centers Focus on Process and Technology 15 © 2014 Proformative Technology SCALE BENEFITS
- 16. The future is about delivering value Shared Service Centers Technology SCALE BENEFITS INCREASED INSIGHTS Focus on People and Products 16 © 2014 Proformative BUSINESS SUPPORT REAL BUSINESS BENEFITS
- 17. The catalyst for Innovation Garners C-suite support for innovation Promotes a culture of innovation permeating the whole company, not just R&D Devices employee incentives to both encourage innovation and innovative culture CFOs drive for predictability and reliability - an obstacle to innovation Flexibility and tolerance of failure are necessary Financial processes and metrics need to be aligned with innovation lifecycle Learns to ‘live with ambiguity’ 17 17 © 2014 Proformative Managing Innovation- 2013 CGMA
- 18. The innovation imperative Average tenure of a company in the S&P500 has fallen to 18 years from 61 years in 1950s 18 © 2014 Proformative Managing Innovation- 2013 CGMA 18
- 19. Leading innovation and managing risk 19 © 2014 Proformative
- 20. Chief Future Officer? 75% Collaborative 67% Communicative 61% Creativity % of CEOs that identified these skills as CRITICAL for future success 20 20 © 2014 Proformative Leading through Connections: IBM
- 21. Chief Future Officer? 52% Report international skills as being critical for the future success of their organization But only 18% Of those have these skills available 21 21 © 2014 Proformative Turning the Tide; Accenture
- 22. Chief Future Officer? 55% Of the global respondents identified ‘strategic vision’ as the hardest skill to find for executive roles within their organizations 22 © 2014 Proformative Plugging the skills gap 2012 EIU 22
- 23. CFO of the Future Will Create Strategic Impact 23 © 2014 Proformative
- 24. Striking the Right Balance 24 24 © 2014 Proformative
- 25. CFO of the Future Builds Business Capabilities 25 25 © 2014 Proformative
- 26. Importance of Various Skills for Finance – As Rated By Non-finance Personnel 26 © 2014 Proformative The inside track ; Partnering for value- 2012 CGMA 26
- 27. Skills Most in Need of Improvement by Finance Personnel 27 © 2014 Proformative The inside track ; Partnering for value- 2012 CGMA 27
- 28. Collaboration and Decision Support 28 © 2014 Proformative The inside track ; Partnering for value- 2012 CGMA 28
- 29. IBMs Chief Future Officer 29 © 2014 Proformative SOURCE: IBM Institute for Business Value, The New Value Integrator: Insights from the Global Chief Financial Officer Study 29
- 30. Collaboration and decision support 30 30 © 2014 Proformative SOURCE: IBM – The New CFO: Chief Future Officer
- 31. Applying principles to management process & practice 31 © 2014 Proformative SOURCE: CIMA- Building World Class Businesses
- 32. Greatest value coming from non-financial sources* Developer of talent pipeline CFO of the Future will create strategic impact * Extent of value provided - % of respondents selecting 8-10 on a scale of 10. 7 Talent Pipeline Draining Growth 2012 6 CGMA CFO – Striking the right balance Will be data enabled Leading innovation and managing risk The role of finance throughout the innovation lifecycle 24 8 22 32 © 2014 Proformative
- 35. Thank You For Attending CFO The Chief Future Officer… anoah@aicpa.org www.cgma.org
Hinweis der Redaktion
- ...businesses face growing levels of complexity. [pause to allow audience to view quote]
- For many, finance leadership roles, and the CFO role in particular, are more diverse and complex than ever before. There appears to be broad agreement on this trend across professional institutes, academia and advisory sectors
- For many, finance leadership roles, and the CFO role in particular, are more diverse and complex than ever before. There appears to be broad agreement on this trend across professional institutes, academia and advisory sectors
- For many, finance leadership roles, and the CFO role in particular, are more diverse and complex than ever before. There appears to be broad agreement on this trend across professional institutes, academia and advisory sectors
- This increasing importance of non-financial value explains why it’s so important that businesses have the ability to capture and measure it. As we see on the right, 75% of our business leaders want to put more emphasis on measuring and demonstrating the non-financial value of their organisations. 76% agree the current reporting system promotes an excessive focus on financials.Interestingly, research shows that in 1975 a total of 83% of the market capitalisation of companies in Standard & Poor’s 500 index was accounted for by tangible assets. And by 2009, the figure was just 19%. This poses a challenge for management accountants.
- The overwhelming business value can be found within the human dimension.Business leaders were asked to rate on a scale of 1-10 the extent that each of the items (customer relationships, knowledge and human capital, etc.) contribute to the overall value of their business. The chart depicts the percentage of respondents who selected a score of 8, 9 or 10 for that item. The majority (68%) of business leaders believe that most of their organisational value is coming from non financial sources. They see people’s ideas, skills, knowledge and relationships as more important than traditional, financial sources of value.
- So what is the role of finance in overcoming these challenges and unlocking the potential in data?As mentioned, in preparing this report, we surveyed more than 2,000 CFOs and finance professionals. Nearly nine in ten (87%) agreed that it is going to change the way business is done over the next ten years.Over eight in ten (84%) of those financial professionals polled think that big data and analytics will require a change in how they do their jobs in the coming five years.More than 90% of survey respondents agree that finance has an essential role to play in helping their organisations benefit from data-related projects.The advanced analytical techniques necessary to mine data, identify new correlations and develop algorithms to predict behaviours are in the domain of data scientists. Some highly quantitative accountants may have the aptitude to acquire those skills. But for most management accountants, their roles in producing financial accounts, providing analysis to support investment appraisal, and in the processes of budgeting, forecasting and performance management, put them in contact with every aspect of a business. These roles provide management accountants with an excellent overview of the business. They can therefore play an important role in ensuring that analytical insights gained from data are translated into tangible commercial impact.
- So what is the role of finance in big data?23% of respondents to our survey reported that finance focuses on financial data leaving analytics to others. However, 37% of respondents – the single biggest group – said that within their companies, finance leads on all finance related data analysis, while playing a supporting role in relation to other data analysis. Another 9% reported that finance works with IT on analytical tasks and a further 9% said that finance provides the link from analytical insights to the planning and budgeting needed to achieve impact. Together, these three segments, a majority totalling 55% ,report that finance partners with others in the use of data. And 21% of the respondents to our survey claimed that their finance team leads most initiatives to analyse data in the business.This fits with input from those interviewed for this study, which emphasised that finance has less to offer in terms of advanced analytics, but that they are vital when it comes to translating these analytical insights into tangible business outcomes. According to James Miln, Senior Finance Director, Global Product Group at Yahoo!, finance professionals are especially well placed to ask the right questions at the outset of a data analytics project, while also ensuring that any insights generated are actually used to aid decision-making and drive business performance. In essence, they can serve as a bridge between the technology specialists who carry out the core data analysis, and the board and senior managers needing the tangible insights derived from this analysis. To quote him: “Finance is a link between the data and its financial implications,” Furthermore, this provides a key opportunity for finance to play a bigger role in identifying new opportunities.According to Gwyneth Gittings, Vice President, Global Segment and Management Reporting at American Express, both the finance team and other functions are engaged in analysing business data. The company’s management accountants are closely involved in both process and performance analytics aimed at boosting both organisational effectiveness and business outcomes, whereas the financial accounting team focuses more on results analysis and the breakdown of data into specific components. Forward looking predictive analytics is performed in many finance decision support teams but is also the responsibility of specialised business functions and data scientists that sit outside finance.
- These examples are impressive and there is lots of excitement about the potential here but there are challenges:For most companies, fully adapting to a data driven era of business remains a work in progress. 86% of the finance professionals we surveyed agree that their businesses are struggling to get valuable insight from data, not least due to issues such as organisational data silos, challenges relating to data quality, or difficulties in working with unfamiliar non-financial data.Once the problem they are trying to solve is defined, organisations must identify the data needed to answer their questions. Bringing that data together in a way that can be analysed is itself a significant challenge. In our survey, organisational silos that obstruct data aggregation were flagged as the most common weak point, cited by 62% of respondents.Data quality is another issue, with about half of finance professionals seeing weaknesses within their organisations on this. Furthermore, about two-thirds felt that significant improvements were needed on the accuracy and reliability of data, in order to properly inform decision-making or performance management. However, it is important to strike the right balance. Accountants can tend to overemphasise the importance of data integrity because that is so important in financial accounting for statutory reports. Insights or correlations about customers’ behaviour can be useful without being absolutely accurate.
- So the role of finance in big data is as illustrated here. It is about providing a link between the business and the data scientists. This role is about understanding the business, asking the right questions, contributing commercial insight and helping to ensure that decisions can be managed through to impact. Yahoo!’s James Miln stresses the role to be played here by the finance function: “Good finance people ask good questions of the business.” At the very least, they can ensure that whatever analysis is being conducted is aligned with business needs. As BAT’s JaroslawChrupek puts it: “It’s likely to be more of a challenge for someone based in IT to define the information that is needed for the business than it is for someone in finance.” Often, finance forms part of a core data team, which brings a variety of skill sets together to ensure robust analysis. As part of this relationship, finance can also provide quality control, to ensure that data is being properly used and interpreted by the broader team. David Axson, Director of Management Consulting with Accenture says “Organisations are now looking to their finance teams to put rigour and credibility around information. They are looking to them to verify it and bring analytical integrity to the process. For example, organisations come up with a lot of correlations when working with data, but these could be entirely random. We need to understand what is really meaningful, and establish the causal relationships. Management accountants have a responsibility to verify the data and understand what’s important.”
- More details of the skills required to unlock the potential in Big Data will be the subject of a further report. Meanwhile, this report includes a Top Five of the traits of a data enabled CFO need: 1. Able to identify which data points are useful in understanding what drives the business.Data-enabled CFOs understand the fundamental drivers and metrics of the business, as a foundational element in assessing new, less structured sources of data.2. Have a clear sense of what customers care about most, and ideas about how to track this.They also have a clear grasp of why customers choose their organisations’ products and services, how those customers are acquired and what helps retain them.3. Able to embrace new forms of data, and creative ways to incorporate this into business decision-making. Beyond pure financial and enterprise data, a data-enabled CFO needs to be open-minded about new types and sources of data, from sometimes unexpected or unconventional sources – both for themselves, and their team overall.4. Comfortable with uncertainty, including the reality that big data may not provide definitive answers. As they embrace new and in some cases less proven data sources, companies move into types of analysis that may not provide the certainty finance prefers. CFOs need to embrace fresh techniques and strategies that can boost decision-making in a world flooded with data.5. Explore new ways to interpret data to better inform management. Data-enabled CFOs are also adept at quickly picking out the results that matter from data, often finding new visual ways to communicate the points that matter most – and to ensure a stronger commercial uptake and impact.
- 1,700 chief executive officers in 64 countries.
- Over the last several years, finance leadership has driven efficiency and cost reductions in transaction services.
- Forward looking analysis and business support will help finance drive value for the organization.
- First. To innovate successfully, having the right cultural mindset in your organisation is absolutely critical. This was borne out by our qualitative discussions, and confirmed also in a McKinsey survey of senior executives. It’s a mindset that needs to embraced by the CEO, endorsed in corporate strategy, and trickled down not just to the lab or R&D function, but to the shop floor. It’s a mindset that tolerates and learns from, rather than punishes, failure. It’s a mindset that promotes – excuse the cliché – thinking outside the box. Let me give you examples. Companies can encourage – or in the jargon, incentivise – their employees to think innovatively outside their core responsibilities. Google famously does this. Shell’s CFO described to us his company’s ‘game-changer’ budget that staff can apply to for funding for pet projects. These incentives encourage a culture of creativity; more importantly, they also produce results. The ubiquitous yellow Post-It note was born this way. Finally, Finance professionals needs to bring a new cultural mindset to innovative activities – one that eschews the desire to apply KPIs and other performance metrics to innovation activities, and allows ideas the breathing space to grow and prosper. This mindset point is an important one. Research from business school INSEAD1 shows that the actions of finance can serve to discourage innovation. This is something that finance professionals need to guard against, not least as the research shows that conservative accounting policies and short-termism can act as a clear barrier to innovation. Finance needs to be careful here, in its mindset and approach. But the good news is that with the right approach, the same research highlights that finance can also be an enabler of innovation, and help to nurture creativity. For a business to learn, sometimes senior managers need to accept that individual projects may fail if the overall strategy is to succeed – something which can be anathema to finance professionals steeped in the art of risk mitigation.
- CHRISTENSEN CLAYTON FROM HAVARD CALCULATED THIS STATISTIC.It is important because it holds the key to long-term corporate success.This statistic, which shows the fall in the average number of years that a company stays in the S&P500, is startling. In the last decade alone, about half the firms in the index have been replaced by relative newcomers like Google and Facebook. To thrive, companies need to reinvent themselves, and their products and services, to appeal to an ever-changing world…
- For many, finance leadership roles, and the CFO role in particular, are more diverse and complex than ever before. There appears to be broad agreement on this trend across professional institutes, academia and advisory sectors
- For many, finance leadership roles, and the CFO role in particular, are more diverse and complex than ever before. There appears to be broad agreement on this trend across professional institutes, academia and advisory sectors
- For many, finance leadership roles, and the CFO role in particular, are more diverse and complex than ever before. There appears to be broad agreement on this trend across professional institutes, academia and advisory sectors
- The role of the management accountant is becoming much broader than producing the necessary information, reports and analysis. It is about improving decision making. Decisions have to be properly framed so they are considered against the right objectives on the basis of the evidence available. Effective decisions achieve their intended impact. A recurring theme is that finance business partnering takes the management information provided by accounting operations as its starting point. It is about understanding relevance, sharing insights, influencing decisions in the best interests of shareholders and helping to manage performance and risk through to the achievement of impact.This takes management accountants on a journey from their quantitative roots, where the business imperative is to maximize efficiency to where the emphasis is on enabling value creation – from many traditional accountants’ comfort zone to where they must apply qualitative skills. In this new role, they can be of greater value to the business and enjoy wider career prospects.
- Toby Willson, FD, Microsoft UK describes the role of the finance function as, ‘Balancing responsibilities to control and empower. Finance business partnering is not so much a new role as an extension or rebalancing of the finance function’s traditional responsibilities so that finance is not just an overhead but helps to create value.’This requires a change in culture where the finance professional’s objectives and the business manager’s objectives are seen to be aligned, and finance’s contribution to management decision making is expected and valued. By deploying finance business partners across the business to cascade the FD’s role, decision making can be devolved to allow business units more autonomy. This should allow business managers the flexibility to innovate within risk parameters. Innovation can be encouraged by rewarding success as well as those failures which demonstrate both a preparedness to innovate and the application of proper controls to limit the risk.
- Experience in typical in-house accounting roles develops finance competencies. But senior finance roles usually require business capabilities. These qualities do not necessarily require an accounting background. In the current climate there is a swing back to basics and finance business partners must combine finance competencies with the business capabilities required to strike a balance as appropriate to their client and the level of the partnering service to be delivered (see figure 11).Research by recruitment agency Badenoch & Clark has found that although accountants recognize how the role of finance is changing, when it comes to their professional development, many accountants focus on developing their technical accounting and IT skills. This clarity about the skills required to fill finance business partnering roles can help management accountants to identify their development needs and take the initiative to future proof their own careers.
- The core importance of technical accounting skills pervades and remains at the heart but with a growing emphasis on an awareness of business and commercial issues and a need for improving skills in these areas. This is evident across all finance roles.Our research illustrates that to management, outside finance, the most important skill that finance personnel need to have and demonstrate is technical accounting. This is the core value skill that finance professionals bring to the organisation. In this context, the finance professional in business continues to need broad based technical skills and training as a foundation to their competence and career. We see this underlined in The chart above, with technical accounting skills rated as the most important skill set finance contributes to the business as rated by management outside finance in our global survey.
- Indeed, finance professionals themselves recognize this trend and reinforce the need for further development as we see when looking at the skills that most need improving, rated by finance personnel in our global survey. The top three skills identified by finance personnel highlight an emphasis on having and improving commercial and management skills. In particular interpersonal, communication and strategic competencies as well as leadership development are prominent as shown in Figure above.
- Global respondents in the CIMA research, who see the need for further change in their finance function to improve its contribution to the organisation, rated the need to increase cross-functional collaboration and business partnering as the number one priority. This research and input from the finance community highlights a clear perception that better integration of finance with other functions will be needed in future to enhance the performance of finance in driving the organisation to meet its goals.Furthermore, we also see a need for improvements in the use and performance of systems, both in the sense of technology and for the processing and analysis of financial information. Increasing efficiency is also rated as important and in this context potentially frees up time for increasing focus on management support. These themes suggest that better management information will be needed to support the management accountant’s role in strategic decision making – another key priority identified – as it continues to increase working and partnering with the organisation.
- Global respondents in the CIMA research, who see the need for further change in their finance function to improve its contribution to the organisation, rated the need to increase cross-functional collaboration and business partnering as the number one priority. This research and input from the finance community highlights a clear perception that better integration of finance with other functions will be needed in future to enhance the performance of finance in driving the organisation to meet its goals.Furthermore, we also see a need for improvements in the use and performance of systems, both in the sense of technology and for the processing and analysis of financial information. Increasing efficiency is also rated as important and in this context potentially frees up time for increasing focus on management support. These themes suggest that better management information will be needed to support the management accountant’s role in strategic decision making – another key priority identified – as it continues to increase working and partnering with the organisation.