New age CFO

SSON's new columnist brings a CFO's perspective to our discussions...

Finance isn’t an island on its own, but is, instead, a function of what the business and its institutions need from it. As these are largely driven by socio-economic and other mega trends like digitalisation, globalisation and big data, so Finance, too, will have to adapt. What’s next for Finance, then, and for the Corporate CFO?

Traditionally, Finance has been a backward looking discipline, asking "how did we do?" But applying the past to the future isn’t very helpful when the future looks so dramatically different from the past. Responding to digitalisation isn’t just about new IT sophistication; we need to change our whole physical and operational approach, too. Consequently, CFOs must have a view on where these influences are taking the business – and respond accordingly.

In the past, Finance hasn’t exactly been the driving force behind change; today, we must accept that change is inevitable and requires a new mind-set. Our responses will entail structural and systematic future-proofing, adjusting the whole underlying Finance model to accommodate new business models we haven’t even thought of yet.

"Sidestepping into a business role at some stage is going to be a must."

Let’s imagine a new model, one where Shared Services Centres have robotics at their core and are fully automated – meaning the requirement from the Finance division is very different, indeed. Now we achieve scale through transactional, repetitive services and with a lower labour cost base. The Finance teams won’t need detailed understanding of financial processes, as these will be automated, but they will need to be able to cope with constant adjustments and re-structuring to drive efficiencies, and to know how to liaise with relevant third parties and on-board technological support.

Let’s imagine a model where we have fully transferred to Centres of Expertise, where a core of Finance has superb technical capabilities but is somewhat divorced from the business (may even be located in lower cost geographies at a distance from the operational activities they advise). The Finance teams must be able to connect with the business over distances, overcome cultural and communication challenges, and still demonstrate value from skilled experts.

Let’s also imagine a model where the Finance Business Partner bridges that gap, creating connectivity with the business, acting as advisor to the operation, but in addition offering deep analytical expertise to support decision making. The Finance professional will need to possess operational management and commercial skills that are not typical of a pure Finance career, so sidestepping into a business role at some stage is going to be a must. This experience will give the Finance professional the credibility to advise and guide their business colleagues; they will have connectivity – relationships that come from working side-by-side with someone; and it will widen their experience and diversity of view. We can no longer afford to develop and maintain the ‘Business School only’ mentality – we need pragmatists who know how to generate value.

"The new CFO will need a new mindset and language to cope with the new economies."

It’s unlikely, in this new model, that hard-core accountants will be able to develop the relevant commercial and relational expertise, so the whole talent model and performance management of cycle will need to be rethought. We may not yet have adequately valued and progressed the talents we’ll need tomorrow.

No-one will have to change more than the CFO. The new CFO will need a new mindset and language to cope with the new economies. He or she cannot afford to outsource judgment about data warehousing, cyber security and data insight to technologists. He or she will require a new education, or the wool will easily be pulled over their eyes. He or she needs to maintain their Stewardship role to protect the business, and the Efficiency Driver role will no doubt come through automation and a clever cost focus.

But it’s in the Business Partner role that he or she will add the most value: working alongside Board colleagues; ensuring close proximity between the Finance teams and their operational colleagues to influence decisions and hold the business to account on performance; and sharing the pain but never losing their independence.

That’s the bridge from the island to the mainland which CFOs will need to navigate.

Jens Madrian is the CFO/CCO Reactive Technologies. Prior to this Jens was CFO of RWE Npower, one of the big six energy retailers, and was responsible for meeting the energy needs of over 5 million customers, from individual households to SME and large industrial businesses. Connect with him on LinkedIn .

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