Are CFOs ready to become Chief Performance Officers of the future?
Monday, 12 Sep 2016
If we started with a blank sheet of paper, would we design the Finance functions we have today? Possibly not, according to a recent hypothesis from PwC about the CFOs of the future.
Until recently, Finance has been tasked to lower costs, provide governance, and increase insight. These financial skills and disciplines will still exist in future, but it’s time to look beyond the old chestnut of “adding value to the business”. The digital revolution is creating a huge opportunity for CFOs to play a more dynamic and facilitative role than ever as “Chief Performance Officer”, as organizations increasingly focus on connectivity, interaction across business units and transactional synergies.
This emerging role will be based on four key principles, elements of which I already see in my Finance function to some degree:
As the commercial landscape transforms, effective Finance teams will need to steer the business through unfamiliar terrain to success. Complex orchestration between Finance and lines of business will be required to analyze past direction and future possibilities, and collectively decide on the appropriate course. Sharper analytical capability and forecasts in near real-time will become prerequisites, taking into account relationships between a broader array of variables across the business. Performance targeting and monitoring will need to move from arbitrary internal benchmarks or absolute comparisons with previous years to a more rounded judgement of success relative to competitors and markets.
In an era of growing consumer and shareholder activism, intensified by social media and 24-hour rolling news, stakeholder engagement and financial reporting will become vital to reputation management. As stakeholders dig deeper into the relative quality of a company’s products, what they stand for and how they operate socially and environmentally, Finance will become the lead originator, collator, reconciler and communicator of all information about the business, through a range of non-traditional channels. Annual reports will still be needed to meet market listing requirements and analyst expectations, but they will be just one element of a much broader stakeholder interaction.
Established approaches to risk management will be increasingly tested and outpaced by the speed, magnitude and contagion of unfolding events. Finance teams will need to become ‘resilience champions’, enabling the business to withstand extreme or unforeseen events and allowing it to take advantage of emerging opportunities. A highly manual Finance function will be overstretched with routine transaction processing and reporting, and less able to support the business during a crisis. Having highly automated and reliable information becomes even more important when external scrutiny increases and time to think is limited. Organizations will require forecasting models that are nimble enough to be run on a daily basis, together with scenario analysis techniques such as stress testing.
The endless push to deliver more value for less cost, to automate, offshore and reorganize, is creating challenges for Finance functions in terms of capacity, keeping teams connected and finding the right balance between technology and people. Established organizations will need to adopt automated front-to-back transaction processing, with the role of “machines” being to complete routine tasks that don’t require judgement, emotional intelligence or perception. This would allow Finance teams to focus on relationships and interpreting the future requirements for the organisation. However, Finance will still need to maintain a “feel for the numbers” and not overlook the incidental value in processes such as budgeting in creating opportunities for collaboration, stakeholder interaction and risk and opportunity analysis. In the face of growing automation, Finance as we know it needs to innovate in order to remain relevant. The challenge is to look beyond the cliché of “becoming a strategic partner to the business” to orchestrating better performance, providing richer communication, enhancing resilience and providing a more connected and cohesive Finance offering.
 PWC: Finance Matters: Finance Function of the Future