CFO Research Report 2013


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CFO as Catalyst for Change Research Report

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CFO Research Report 2013

  1. 1. The CFO as Catalyst for ChangeHow finance can take the lead in business transformationExecutiveSummaryThe OperatingEnvironmentTechnologySkills andCapabilitiesConclusion
  2. 2. ExecutiveSummaryExecutive SummaryAbout this reportFor this report, we conducted a series of in-depth interviewswith CFOs from leading companies based in every majorregion. In addition, we conducted an online global surveyof CFOs that attracted 930 respondents in total. Of these,270 (29%) were from Western Europe, 205 (22%) fromNorth America, 160 (17%) from Eastern Europe, 150 (16%)from Asia-Pacific, 95 (10%) from the Middle East and Africa,and 50 (6%) from Latin America. Half of the respondentsrepresented companies with annual revenues in excess ofUS$1bn, with the remainder at companies with revenuesbetween US$250m and US$1bn.930 CFOssurveyed acrossAsia, Europe, Latin America andNorth AmericaExecutive SummaryThe role of the CFO continues to evolve. Tasked with steering theirbusinesses through the worst economic times since the Great Depression,CFOs used their expertise in cost management and operational efficiency toensure the survival of their organizations. Those who succeeded earned therespect and confidence of executive management, the market, and externalshareholders, helping to elevate the role of CFO from financial steward tocorporate strategist and change agent.Today, CFOs must find new ways to sustain performance and grow the business.Rapid technological change, the rise of emerging markets, more empoweredconsumers and employees, and more active government intervention have allcombined to disrupt traditional business models worldwide. As their influencehas grown, increasingly it falls upon the CFO to not only manage disruption,but to also identify and invest in the business models, products, and servicesthat will lead to sustainable, profitable growth.The tools and structures that served finance leaders well in the past may nolonger work so well. Cost levers that used to be effective are becoming lessso, as margins become squeezed and incremental operational efficiencies areharder to uncover. Volatility makes it more challenging to set priorities and planfor future investments. Complex organizational structures hamper the abilityof CFOs to gain visibility into performance across the enterprise. And disruptivetechnologies, such as big data, cloud computing, mobile and social media,have given rise to new forms of competition that are challenging even themost established enterprises.Longitude Research commissioned by Oracle and Accenture recently surveyed930 CFOs across Asia, Europe, Latin America, and North America to understandhow finance executives are leveraging their growing influence to managechange and drive growth in this disruptive environment. What we learnedwas surprising: despite their increased profile, CFOs realize that their roleas corporate catalyst remains incomplete. They recognize that there is stillinsufficient collaboration between the finance function and the business, andthat they are not playing as significant a role as they would like in either strategyor business transformation.How then should CFOs address these challenges? While the past few years havebrought uncertainty and volatility, they have also provided CFOs with a uniqueopportunity to demonstrate their abilities in a whole range of strategic areas.Above all, the work that many have already completed has given them a platformto drive change across the whole business, not just within the finance function.In short, they should assume the role as the key catalyst for change across theentire enterprise.Our thanks to all surveyparticipants and to the followingindividuals in particular for theirtime and insights:•• Sandip Parikh, Head of Finance &Operations, Reliance Commercial Finance(India)•• Ken Gregor, CFO, Jaguar Land Rover (UK)•• Valdemir Bertolo, CFO, Serasa (Brazil)•• Henry Hon, Group CFO, Telstra International(Hong Kong)•• Robin Washington, CFO, Gilead Sciences(USA)•• José Manuel Alejo Cantú, CFO, Metalsa(Mexico)•• Thibault de Tersant, Senior ExecutiveVice-President and CFO of DassaultSystèmes (France)•• Jan Siegmund, CFO, ADP (USA)43 2 31 4 5
  3. 3. The operating environment:New challenges requirenew solutionsBelow are some of the keyfindings from our research:A focus on cost management will remain critical but must be balanced with an increasedfocus on growth. Over the past three years, the top priorities for CFOs have been profitability,cost management, cash flow, and working capital. These will remain top of the agenda in theyears ahead but continuing to deliver cost savings is becoming more difficult. At the sametime, finance leaders must balance this cost focus with the need to identify and exploit growthopportunities in a slowly recovering global economy.The CFO role is becoming more strategic and influential, but challenges remain. More than70 percent of CFOs say that their overall level of strategic influence has increased over the pastthree years. But for now, most CFOs say they still play a supporting, rather than leading, rolein strategy, despite an appetite to become more deeply involved. Among our respondents, 35percent identify shortage of time as a key barrier to being more effective in their role, which issecond only to the challenging economic environment, cited by 37 percent.CFOs are poised to become more effective change agents. Among our respondents, lessthan one in three CFOs play a leading role in business transformation, with just 32 percentplaying a leading role in building the rationale for business transformation, and only 18 percentmanaging the transformation process. But, given their experience in finance transformationand cost management, and their unique perspective over the business, this is an activity thatCFOs are extremely well placed to lead. Becoming an effective change agent requires CFOs todemonstrate strong leadership, commercial and strategic insight, and the ability to overcomeorganizational resistance.Maintenance and integration issues remain the biggest concerns from a technologyperspective. Asked about the aspects of their company’s technology that causes them greatestconcern, 30 percent of respondents point to the cost of maintenance, 29 percent to the costof integration, and 28 percent to the lack of integration between systems. Dealing with theselegacy problems consumes a disproportionate amount of time and also prevents CFOs and CIOsfrom focusing their attention on exploiting more innovative technologies that can help improvecompetitiveness and drive growth.Technology innovations provide CFOs with an opportunity to shape IT in a way that supportsbroader business goals. Cloud computing, big data, analytics, mobile, and social technologiesare having a dramatic impact across almost every business function and activity. Among ourrespondents, 57 percent agree that investments in big data and analytics will be a key sourceof competitive advantage. But many CFOs understand that they may lack the knowledge toplay a more active role in how these technologies are adopted. Finance leaders now have awindow of opportunity to collaborate with CIOs and other members of the management teamto implement these technologies in a way that will achieve vital business objectives: increasingefficiency, improving collaboration and visibility between finance and the business, increasingorganizational agility, and fostering innovation.BALANCING COST CONTROLand growthThe past few years have required CFOs to apply every leverimaginable to rein in costs, conserve cash, and maintain marginsagainst the backdrop of a highly challenging economic environment.Asked about the activities that have been their key areas of focusover the past three years, respondents point to profitability and costmanagement as the number one priority (see chart 1). The relatedactivities of cash flow and working capital follow close behind.Respondents tell us that these activities continue to dominatethe agenda.Yet this focus on cost management will become increasinglydifficult to maintain. The cost levers that worked in the past maybe less effective in future because the easy wins have already beenearned. At the same time, many companies worry that furthercuts, particularly to headcount and fixed assets, may make it moredifficult for them to take advantage of growth opportunities whenthey emerge.Emerging technologies are increasingly at the heart of new CFOstrategies to overcome these challenges. Cloud computing, forexample, offers CFOs opportunities to drive additional efficiencies,both because it reduces the need for up-front capital expenditureon hardware and software licenses, and because it minimizes theuncertainty associated with investing in new technologyThis frees up capital that can then be allocated elsewhere.A Profitability and cost managementB Cash flow and working capitalC Risk and controls effectivenessD Regulatory and compliance issuesE Finance transformationF Business transformation and change managementG Sustainability management and reportingH Planning, budgeting and forecastingI Supporting the growth agendaJ Investment in technologyK Managing external stakeholdersChart 1: Over the past three years, which activities have been yourthree key priorities and which do you expect to be the three keypriorities over the next three years?Profitability andcost managementPast three years Next three yearsCash flow andworking capitalRisk and controlseffectivenessRegulatory andcompliance issuesFinace transformationBusiness transformation andchange managementSustainability managementand reportingPlanning, building andforecastingSupporting thegrowth agendaInvest in technologyManaging externalstakeholders53%47%50%50%39%32%29%25%20%22%17%20%16%16%14%17%13%18%11%12%10%11%ACEGIBDFHJK65 62 31 4 5Click to zoom
  4. 4. THE OPERATING ENVIRONMENTIn addition to its cost benefits, cloud computing offers strategicbenefits as an enabling technology. Its flexible deployment modelsenable CFOs to get in touch with every area of the business-as wellas capitalize on opportunities to grow the business wherever theymay arise. New cloud-based enterprise resource planning (ERP)solutions, for example, enable CFOs to integrate the back-officeoperations of a new acquisition or business unit with those of theparent corporation rapidly and inexpensively. Cloud-based talentmanagement solutions can also help CFOs recruit and staff a newoperation quickly, ensuring that it contributes to top-line growthsooner rather than later.“As we grow and move into different geographies, there has to bea system that keeps us all connected, both at the desktop andbeyond,” says Sandip Parikh, the head of finance operations atIndia’s Reliance Commercial Finance. “Cloud computing isimportant there.”The road to a biggerstrategic roleFinance leaders today are expected to be strategic thinkers andbusiness partners as well as having a mastery of the numbers. Arecent survey from Accenture found that nearly three-quarters ofC-suite executives said they were satisfied or very satisfied thattheir finance organization contributes to the strategy or executionof strategy for the larger enterprise1. “A CFO is a key member of thestrategy team,” says Henry Hon, Group CFO of telecoms businessTelstra International. “A CFO can focus on delivering results,understand those results, and think about how to improve them ina strategic fashion. Very few other people in the organization cando that.”Certainly, many CFOs have seen their strategic role become moreprominent since the financial crisis. Among our respondents,71 percent say that their overall level of strategic influence hasincreased over the past three years, while almost two-thirds haveseen their influence over setting and determining strategy grow (seechart 2). Respondents from North America are particularly likely tohave experienced this, with 79 percent having seen their strategicinfluence increase.“As we grow and move intodifferent geographies, there hasto be a system that keeps us allconnected, both at the desktopand beyond,” says Sandip Parikh,the Head of Finance Operationsat India’s Reliance CommercialFinance. “Cloud computing isimportant there.”A Overall level of strategic influenceB Setting and determining strategyC Business transformationD Executing strategicchoicesE Human resources and talent managementF Information technologyChart 2: Over the past three years, what change has therebeen to the level of your influence within the business in thefollowing areas?Increase No change Decrease71%27%2%Overall level ofstrategic influence65%32%3%Setting andetermining strategy47%48%5%Businesstransformation36%55%10%Executing strategicchoices31%57%13%man resources andtalent management25%49%26%InformationtechnologyACEBDFA Aligning strategy with finance processesB Strategy executionC Strategy validationD Strategy formulationChart 3: What role do you currently play in the following aspectsof strategy?Leading role Supporting role No role47%49%5%Aligning withfinance processes24%66%10%Strategyexecution43%53%4%Strategyvalidation34%63%3%StrategyformulationACBDA Challenging economic environmentB Shortage of timeC Lack of integration between finance functionand other parts of the businessD Evolving regulatory environmentE Gaps in finance function skills and capabilitiesF Constantly evolving scope of CFO responsibilitiesG Lack of required resourcesH Lack of good quality, accurate dataI Poor technology infrastructureJ OtherChart 4: What do you currently consider to be the main barriers tothe effectiveness of your role?37%35%31%30%27%26%23%21%17%0%Challenging economicenvironmentShortage of timeLack of integration between financefunction and other parts of the businessEvolving regulatoryenvironmentGaps in finance function skillsand capabilitiesConstantly evolving scope ofCFO responsibilitiesLack of resourcesLack of good quality, accuratedataPoor technology infrastructureOtherACBDEFGHIJ1, 2Accenture 2011 High Performance Finance StudyYet despite these promising signs, many CFOs still struggle toachieve their strategic potential. The CFO’s role in strategy ismost likely to be viewed in a context of aligning finance processesaround it, with 47 percent playing a leading role here. Among ourrespondents, other aspects of strategy are less central to the CFO’srole. Only one-third, for example, play a leading role in strategyformulation and just 24 percent in strategy execution. Where CFOsdo play a leading role, it is most likely to be in aligning strategy withfinance processes. But, even here, only a minority say this is an areawhere they play a leading role (see chart 3).Asked about the key barriers to the effectiveness of their role, surveyrespondents point to a challenging economic environment as theleading factor (see chart 4). But shortage of time follows closelybehind, particularly for respondents in North America. These twofactors are closely interlinked: difficult economic conditions presentCFOs with greater challenges and more problems to solve, andthis cuts down further on the available time, particularly when thebreadth of the finance leader’s role is taken into consideration. Thisis consistent with other research: one survey from Accenture foundthat lack of time to focus on value-oriented finance capabilities wasamong the top three challenges for senior finance executives2.Lack of time will always be an issue for CFOs. At one level, theyneed to ensure that they have good enough teams around themto delegate those activities that are consuming too much time ordistracting finance leaders from the more important aspects oftheir job.97%say their overall level ofstrategic influence has increased87 2 31 4 5Click to zoomClick to zoomClick to zoom
  5. 5. THE OPERATING ENVIRONMENTMore fundamentally, finance transformation programs, whichinclude hiving off routine, transaction-based processes into sharedservices centers and developing centers of excellence to deal withspecialist activities, can help to alleviate time shortages and enablean increased focus on what matters most. “Finance transformationallows my more senior people to get away from looking at day-to-day activities and focus on what really matters to the business,” saysMr. Hon of Telstra. “It means gaining resources to address customerrequirements and opportunities rather than spending too muchtime on operational issues.”A more strategic focus also enables opportunities to be capturedmore quickly. “Spending more time on the strategic aspects of therole means that we understand market opportunities better and canmove more quickly,” says Mr. Hon. “If you can reduce bureaucracyand increase transparency, you can move a lot faster becausepeople understand what needs to happen.”Eyes turn to growthAs the global economy starts slowly to recover, CFOs will need tospend more time thinking about growth opportunities, and howthey can steer the business towards making the right investmentsand decisions. Although still small, the proportion of CFOs whosay that they will need to support the growth agenda over the nextthree years is greater than the share of those for whom this was afocus over the past three years (see chart 1).As growth opportunities emerge, CFOs need to work withbusiness colleagues to ensure that investment and resources areallocated appropriately and at the right time. “We need to findthe right balance between capturing growth opportunities andsustaining our existing business,” says Valdemir Bertolo, CFO ofthe Brazilian financial services business Serasa. “This makes thedecision-making process a critical area of focus for the CFO toensure an appropriate prioritization of the investment portfolio.”The need to maintain a careful focus on cost control while at thesame time enabling growth will be a delicate balancing act overthe next few years. It will be important to recognize that thesetwo issues are closely intertwined. CFOs are uniquely qualified toassess which opportunities for growth come with the potential foracceptable margins. Their role is to “green-light” the best of theseopportunities while applying the brakes to the more costly projects,and continuing to seek out new efficiencies across the enterprise.Improving collaborationPlaying a more strategic, business-oriented role depends oneffective communication and collaboration between the financefunction and other parts of the business. But this is an areathat remains challenging. CFOs in our survey point to lack ofintegration between finance and the business as a key barrier tothe effectiveness of their role. Respondents from Asia-Pacific areparticularly likely to raise this as a concern.Despite efforts over recent years to embed themselves intooperations and perform a “business partnering” role, there canremain a mistrust of finance because it is wrongly perceived as thefunction that says “no”. Building stronger relationships is thereforecrucial. “Our customers, especially operations, recognize finance asa strategic partner that ensures added value and supports decision-making with business sense,” says José Manuel Alejo Cantú, the CFOof Mexican automotive components group Metalsa.Misalignment between the operating models in finance and therest of the business can also cause problems. In the past few years,finance functions have been in the vanguard of driving changes tothe operating model under the banner of finance transformation. Inmost companies, however, these changes have not filtered throughinto other functions, such as HR or IT. As a result, finance and otherfunctions can appear out of step with each other.Poor integration between business processes across the enterprisecan also hamper collaboration–and the ability for CFOs to gainvisibility over corporate performance. Finance has led the way onend-to-end processes, where the focus is on all the steps betweeninput and outcome, rather than on specific business processes,often through automated mechanisms. These improvements mustnow be rolled out across the business.One emerging solution to the collaboration problem is the adoptionof Integrated Business Services, a more advanced evolutionof shared services that focuses on business outcomes, userexperience, and how to simplify the business. In the new worldof Integrated Business Services, the focus is no longer strictly onsavings. Instead, it is about end-to-end processes at a more granularlevel combined into service models, with a strict focus on positiveoutcomes for stakeholders, customers, and vendors. The end resultis simplified processing, better collaboration, and more value to theoverall organization.Playing an active strategic roleat Gilead SciencesRobin Washington, CFO of GileadSciences, a global biopharmaceuticalcompany, is a relative newcomer tothe sector after spending much ofher career in technology companies.Inevitably, moving from one highlyspecialist sector to another entaileda steep learning curve to becomefamiliar with the business. But for Ms.Washington, this has not preventedher from becoming very activelyengaged in the strategic decision-making process.“In some respects, the scientific aspectof the strategy is something that I willnever be able to fully participate in dueto its highly technical nature,” she says.“But that being said, I can still play avery active role in strategy by makingsure that we have the right financialmodeling tools in place, putting inprocesses around scenario analysis andunderstanding the outcomes of thestrategic decisions we needto make.”She argues that CFOs must playas active a role as possible in bothstrategy and broader businesstransformation. “The CFO should be aneffective business partner who addsvalue as part of the decision-makingprocess,” she says. “Along with theCOO, we are the company’s real agentsof change. If it relates to internalbusiness processes and efficiencies,this is where a CFO can have thegreatest impact.”Eyes turn to growth atJaguar Land RoverFollowing its acquisition by TataMotors in 2008, Jaguar Land Roverhas overcome a highly challengingeconomic environment and bucked thetrend in the automotive sector. In itslast financial year, the company postedrecord pre-tax profits, driven in partby successful new models such as theRange Rover Evoque.For Ken Gregor, Group CFO at thecompany, the priorities are now quitedifferent than in 2009. “Back then,the focus was on survival, but we’venow moved on from that to considerhow to grow, sustain the present levelof performance, and make the rightbusiness decisions for the long term,”he says. “We’re still just as focused onmanaging cash flows but, on top ofthat, we’re supporting many businessdecisions around where we wantto invest.”The finance function plays a key rolein that investment decision-makingprocess and is embedded in keyfunctional and business areas. “A bigpart of the strategic role of finance isto say: ‘let’s make sure we make theright business decision here’,” saysMr. Gregor. “Let’s make sure we’rereally clear about what we’re gettingourselves into.”109 2 31 4 5
  6. 6. THE OPERATING ENVIRONMENTBecoming a catalyst for changeLack of collaboration between finance and the business makes itdifficult for CFOs to become engaged in broader, enterprise-widetransformation projects. For example, just 32 percent play a leadingrole in building the rationale for business transformation, and 20percent in mapping out the process for change (see chart 5).Yet because of their broad perspective over the entire business,and their experience in leading large-scale finance transformationprojects, CFOs are often best placed to play a leading role indriving change throughout the organization. The CFOs’ broadeninginfluence–which in many companies now encompasses IT,procurement and operations as well as finance and strategy–alsomakes them well positioned to become the catalyst for change intheir organization.“You can’t do the job properly as a CFO without thinking constantlyabout how to improve performance and efficiency and that cannotbe done without change,” says Thibault de Tersant, Senior ExecutiveVice-President and CFO of Dassault Systèmes. “You can alwaysmake incremental improvements but you quickly reach the limits ofwhat is possible. Beyond that, you need to transform the businessto get to the next level of efficiency.”“Operating as a catalyst for change is definitely my role,” says JanSiegmund, CFO of ADP, the US payroll and HR services company. “Ithink there are two elements: the role I have within this organizationis to operationalize ideas and to create accountability so ourexecutives can make progress on what we say we want to do.”Many industries are realizing that the ways in which they mademoney in the past are unlikely to be appropriate in the future.Moreover, the pace of change is now so rapid that companies mustconstantly be rethinking their operating and business models andadapting them to suit an evolving external environment. This meansaccepting large-scale change as a normal part of doing business,rather than the exception. “Constant reorganization has become ourtool to deal with the rapid pace of change,” says Mr. de Tersant. “Inour organization, it’s not unusual for 40 percent of people to changetheir jobs every year.”From the perspective of the CFO, this change needs to take placein a way that minimizes disruption and duplication of effort, andmaximizes efficiency.“Business transformation on the scale that wehave implemented means that we need systems that are flexibleenough to accommodate change without heavy customization,”says Mr. de Tersant. “It’s also essential that we can comparebusiness results before and after the change without distortion.”Few companies possess the capabilities to embed appropriateinnovations to their business models. But CFOs can play arole in developing these skills. A more structured approach tostrategic insight and decision support, along with a strong graspof information through more robust use of analytics, can helpcompanies to stay one step ahead. CFOs can also support thetransformation process by building the rationale–and challenging–potential courses of action for the business.“You need to strike a balance between sustaining the existingbusiness and introducing change,” says Mr. de Tersant. “It’s easyto consume too many resources on making incremental changeswhen in fact what is needed is deeper business transformation. Thebiggest barrier to change is that people only want to focus on legacyactivities. As CFOs, we need to convince them to let go of activitiesthat are not useful and focus on new ones that are.”Greater involvement in business transformation, including businessmodel innovation, demands CFOs with the leadership skills whocan overcome resistance to change and bring employees along withthem. “Ultimately, you need to convince people that the changeis good and that they need to embrace it,” says Mr. Bertolo. “Youcan use reason to prove that the change is good, but you also needpeople skills to make the change happen.”32%are playing a leadingrole in building the rationale forbusiness transformation“Operating as a catalyst for changeis definitely my role,” says JanSiegmund, CFO of ADP, the USpayroll and HR services company.“I think there are two elements: therole I have within this organizationis to operationalize ideas andto create accountability so ourexecutives can make progress onwhat we say we want to do.”“You need to strike a balancebetween sustaining the existingbusiness and introducing change,”says Thibault de Tersant, SeniorExecutive Vice-President and CFOof Dassault Systèmes. “It’s easy toconsume too many resources onmaking incremental changes whenin fact what is needed is deeperbusiness transformation. Thebiggest barrier to change is thatpeople only want to focus on legacyactivities. As CFOs, we need toconvince them to let go of activitiesthat are not useful and focus onnew ones that are.”A Securing buy in from key stakeholdersB Measuring the effectiveness of businesstransformationC Building rationale for business transformationD Mapping out the process for businesstransformationE Managing the business transformation processChart 5: What role do you currently play in the following aspectsof business transformation?Leading role Supporting role No role35%63%20%key stakeholders33%61%19%ss transformation32%60%11%es transformation20%60%8%ss transformation18%54%6%ormation processACBDE1211 2 31 4 5Click to zoom
  7. 7. Technology: A need forinnovation, not justmaintenanceTECHNOLOGYWorking together with CIOs, CFOs recognize that they mustmaintain their focus on technology innovations to improvecollaboration between finance and the business, to enable thebetter flow of information and insight, and facilitate quicker, betterdecisions. Better use of data and the incorporation of leading, aswell as lagging indicators, can help finance teams to look forwardsas well as backwards. Yet for many CFOs, the role that they play inintroducing these innovations remains limited. Just 31 percent ofrespondents, for example, agree that big data and analytics haveshifted the responsibility for IT from CIO to CFO.Similarly, the technology responsibilities of CFOs are for the mostpart still focused on more passive activities, such as measuringreturns on IT investment, or scrutinizing IT infrastructure purchasingdecisions (see chart 7). Fewer claim responsibility for aspects oftechnology that are better able to drive business change, such asbig data/analytics and IT services purchasing.The challenge, then, is for CFOs to really grasp the powerof technology to deliver the change they aspire to for theirorganizations. In order to do that, they must make more effort tounderstand what innovative new technologies can offer.30%are concerned about thecost and maintenance of theirtechnologiesDealing with the problems oftomorrow, not just todayCFOs have long complained about the ongoing struggle with legacyIT systems that are poorly integrated and expensive to maintain. Oursurvey finds that these concerns have not gone away. Asked aboutthe aspects of their company’s technology that causes them greatestconcern, respondents point to the cost of maintenance, the costof integration and the lack of integration between systems as theirtop three concerns (see chart 6). Other problems, such as the age ofcurrent systems, data quality and integrity, and system complexity,also rank highly.Simply dealing with these legacy problems consumes a significantamount of time that might otherwise be better used to implementmore innovative technologies, such as cloud computing, mobile,and social, into the business. Keeping the lights on has been akey focus for CFOs, but the true power of technology lies in theopportunities for productivity and growth it offers. CFOs need abetter understanding of the capabilities of technology innovations,such as big data and analytics, in order to make better judgmentsabout where to prioritize the company’s investments.A Cost of maintenanceB Cost of integrationC Lack of integration between systemsD Age of current systemsE Data quality and integrityF System complexityG Lack of IT securityH Poor alignment with needs of the businessI Increasing demand for IT investmentJ Lack of analytical toolsK Lack of appropriate IT skillsL OtherChart 6: Which of the following aspects of your company’s currenttechnology assets and infrastructure cause you most concern?Lack of integration between systemsPoor alignment with needs of the businessIncreasing demand for IT investmentCost of maintenanceCost of integrationn between systemsof current systemsquality and integritySystem complexityLack of IT securitynment with needs ofthe businesseasing demand for ITinvestmentck of analytical toolsf appropriate IT skillsOther30%29%28%26%26%24%23%22%17%17%16%1%ACBDEFGHIKJLA Measuring ROIof IT investmentB Enterprise performance managementC IT infrastructure purchasing decisionsD Strategy for big data and analyticsE Transactional/operational systemsF Maintenance of current IT infrastructureG IT services purchasing decisionsH Allocation and structureof IT resourcesI IT outsourcingdecisionsChart 7: Which of the following IT decisions are currently theresponsibility of the CFO in your company, and which do you expectto be the CFO’s responsibility in three years’ time?Measuring ROIof IT investmentNow Three years timeEnterprise performancemanagementIT infrastructurepurchasing decisionsStrategy for Big Dataand analyticsTransactional/operationalsystemsMaintenance of currentIT infrastructureIT services purchasingdecisionsAllocation and structureof IT resourcesIT outsourcingdecisions61%59%53%44%44%40%28%30%26%26%24%22%23%21%21%21%19%20%ACEGIBDFH1413 2 31 4 5Click to zoomClick to zoom
  8. 8. TECHNOLOGYA lack of knowledgeAsked where they most need to improve their own capabilities,many CFOs cite knowledge of technology as key area of focus (seechart 8). Indeed, only industry knowledge is seen as a greaterpriority. As mobile, analytics, cloud computing, and other majortrends play a greater role in both the cost and growth agendas,better understanding of technology is becoming a critical capabilityfor today’s CFOs.This does not necessarily mean that CFOs need in-depth technicalknowledge or be able to manage technology on a day-to-day basis.For Ms. Washington of Gilead, it is the application of technologythat matters. “Thinking about how to leverage technology iscertainly vital,” she explains. “But more importantly, I need to focuson implementing effective business processes because, as we grow,it is my job is to ensure that we continue to do so profitably.”Building bridges withthe IT functionMost finance leaders recognize that technology is a critical tool toenable them to fulfill their role. And, as a result, CFOs have becomemuch more closely involved in IT investment decisions and inmanaging IT infrastructure. No wonder, then, that 84 percent ofCFOs say that co-operation between the finance leader and CIO hasincreased over the past three years (see chart 9). And amongrespondents from Asia-Pacific and North America, this proportionexceeds 90 percent.At ADP, for example, Mr. Siegmund says his relationship with thecompany’s CIO is now one of his closest in the business. “My CIO ismy office neighbor and we’re best friends at work,” he says. “Thetitle on my door doesn’t change my approach: I still offer ideas forproduct direction, I review products, I offer improvement ideas asI observe them. So I really engage in a wide variety ofbusiness problems.”Yet, despite this closer collaboration, our survey finds a lack ofconsistency around how CFOs perceive technology as part of theirrole. On the one hand, there are signs that the CFO’s role in IT willbecome more prominent. Looking ahead to the next three years,just over half of CFOs expect that their influence over IT will increase(see chart 10). Despite this shift, only 38 percent agree that IT is nowa fundamental part of their responsibilities (see chart 9).84%of CFOs say thatco-operation between the CFOand CIO has increased overthe past three yearsA Industry knowledgeB Technology knowledgeC Strategic capabilitiesD Deeper knowledge of geographic marketsE Regulatory complianceF Communication skillsG Change management skillsH Risk managementI Budgeting and forecastingJ Target settingK Analytical skillsL Leadership skillsM Project management skillsN Performance reporting and analyticsChart 8: In which of the following areas do you think you mostneed to improve your skills and capabilities?Industry knowledgeTechnology knowledgeStrategic capabilitiesDeeper knowledge ofRisk managementBudgeting andTarget settingndustry knowledgehnology knowledgetrategic capabilitieseper knowledge ofaritory compliancemmunication skillshange managementRisk managementBudgeting andTarget settingAnalytical skillsLeadership skillsroject managementformance reporting31%28%26%22%21%20%19%18%16%14%13%13%11%10%ACBDEFGHIKJLMNA Cooperation between the CFO and CIO has increased over thepast three yearsB Access to information is the key factor that will make ourorganization more agileC Appropriate investments in the big data and analytics will be akey source of competitive advantage for our businessD IT is now a fundamental part of the CFO’s responsibilitiesE Big data and analytics have accelerated theshift of responsibility for IT from CIO to CFOF The majority of our IT budget goes to maintaining currentsystems rather than making strategic investments in new onesG Analytics skills within the finance function are increasinglyscarce and expensiveH The KPI’s by which I am measuring have not kept pace with thebroadening of my roleI Having poor quality data has caused our organization to makethe wrong decisionsChart 9: Please indicate whether you agree with the followingstatements. (Chart shows percentage that agree)abcdefghi84%79%57%38%37%31%30%25%21%abCooperation between the CFO and CIO has increased over the past three yearsAcess to information is the key factor that will make out organization more agilec Appropriate investments in the Big Data and analytics will be a key source of competitiveadvantage for our businessd IT is now a frustrating part of the CFO’s responsibilitiese Big data and analytics have accelerated the shift of responsibility for IT from CIO and CFOf The majority of our IT budget goes to maintainging current systems rather than makingstrategic investments in new onesg Analytics skills within the finance function are Increasingly scarce and expensiveh The KPI’s by which I am measuring have not kept pace with the broadening of my rolei Having poor quality data has caused our organisation to make the wrong decisionsACBDEFGHI1615 2 31 4 5Click to zoomClick to zoom
  9. 9. TECHNOLOGYEmerging technologies suggest a stronger role for the CFO in IT.Consider investments in big data and analytics, for example. Almostsix out of ten finance leaders agree that appropriate investments inbig data and analytics will be a key source of competitive advantagefor their business (see chart 9). This is consistent with researchfrom Gartner, which forecasts that 70 percent of high-performingbusinesses will manage their business processes using real-timepredictive analytics by 20163. Another report found that retailersthat could leverage big data effectively stood to gain a potential 60percent improvement in operating margins4.Analytics is becoming a key area of focus. According to a recentstudy, business intelligence and analytics ranked top among CFOinvestment priorities in 20125. “Anything that can help us reduce theamount of time that we spend analyzing data and converting it intoinformation that is actionable is interesting to us,” says Mr. Bertolo.“These tools can really advance our ability to understand trends witha greater level of granularity and on a much timelier basis.”Moreover, such tools are valuable internally, as well as in externaldealings. ADP’s Mr. Siegmund says: “The big data analytics thatwe’re planning to run to, let’s say, better analyze the need for whatother products clients should buy, or to support our sales teams andour sales finance teams in understanding why clients are leaving,will depend on the same data we are using in finance. It’s just adifferent side of the same medal.”These technologies mean that, whether they like it or not, CFOsand CIOs must collaborate more closely on technology projects.Both executives need a common understanding over how to usetechnology as an enabler of both efficiency and performance. Thismeans that CFOs must take a close look at key IT projects and usetheir finance skills and insight to ensure that the right investmentsare being made. “If the CFO is not at the forefront of decisions ontechnology, then I think that’s a mistake,” says Mr. Hon.CFOs and CIOs must also collaborate with other members of themanagement team, as investments in innovations such as cloudcomputing and big data affect every part of the business. Marketingis a case in point. According to Gartner, investment in high-techmarketing now exceeds overall IT budgets and the decision overselection of marketing technology is shifting towards the CMO6. Itis therefore essential for CFOs to engage more closely with CMOsand ensure that investments can help to achieve broader corporateperformance goals.57%agree that investment inBig Data and Analytics will be a keysource of competitive advantageJan Siegmund, CFOof ADP, says: “The bigdata analytics that we’replanning to run to, let’s say,better analyze the need forwhat other products clientsshould buy, or to supportour sales teams and oursales finance teams inunderstanding why clientsare leaving, will dependon the same data we areusing in finance. It’s justa different side of thesame medal.”A CIOB CFOC COOD Divisonal CEOE CROF CMOChart 10: Over the next three years, how do you expect thedegree of influence on IT decisions held by the followingindividuals or groups to change?Slight decrease Significant decreaseSignificant increase Slight increase No change25%48%22%4%1%14%38%36%10%2%7%36%43%11%2%7%23%36%31%3%5%23%53%15%3%5%18%41%31%4%ABCDEF3 Data: The Next Frontier for Innovation, Competition, and Productivity, McKinsey Global Institute, June 20115“Top 10 Findings From Gartner’s Financial Executives International CFO Technology Study”, Gartner Research Report May 16, 2012 6IT Key Metrics Data ’12: Executive Summary, 15 Dec 2011, Gartner1817 2 31 4 5Click to zoom
  10. 10. Skills and capabilities:Building the financefunction of the futureSKILLS AND CAPABILITIESSix hallmarks of high performersThe best performing finance organizations are far more likely to have advanced capabilities in thefollowing areas:•• Finance function strategy and governance: developing an operating model and governance structurethat will support the strategy of the organization and reporting capability necessary to measure howthe company is performing against strategic objectives.•• Value-centered culture: driving a shareholder value orientation throughout the organization, ensuringanalytics and metrics are understood and leveraged in key decision making processes.•• Strong focus on emerging technologies: working together with IT to build a business case for, anddeploy, innovative technologies such as cloud, social media and analytics. The ability to apply thesetechnologies to drive the next level of efficiencies, and support broader business decision-making, hasbecome critical.•• Strategic planning and target setting: linking value drivers and key performance indicators to thestrategic objectives, and developing targets that are cascaded down through the organization.•• Forecasting, reporting and analytics: developing an integrated approach to forecasting andreporting to provide timely insights that will provide for near real-time course corrections to be madethroughout the organization. Most companies are focused on historical information, which does notallow for timely corrections.•• Financial risk management: managing risk more proactively and holistically across the enterprise.Traditionally, credit and operational risk have been managed separately. However, the ability to assessand report these risks across the enterprise provides the organization with the ability to monitor riskexposures before they become financial operational losses.Understanding whereskills gaps lieFinding talent in the finance function remains challenging for manycompanies. One recent survey found that 59 percent of CFOs findit challenging to find skilled finance professionals today7. If CFOsexpect to free up capacity in order to focus on strategic mattersand solidify their role as change agents, they need to have a teamwith the capabilities to handle core finance activities, such as costmanagement and risk assessment. “Finding and keeping greattalent is absolutely critical because when you don’t have great talentit forces the CFO to be less strategic,” says Ms. Washington ofGilead Sciences.Changes to the role and responsibilities of the finance function haveexacerbated the talent challenge. Senior finance professionals arenow expected to possess strategic insight, be agents of change,and manage highly complex projects, such as the implementationof shared service centers or enterprise technologies. This is verydifferent from the more “traditional” role, which would have beenmuch more focused on the numbers.Asked where they think their direct reports most need to improvetheir skills and capabilities, communication skills top the list, withleadership skills also making the top five (see chart 11). As financefunctions become more focused on “business partnering” anddriving enterprise-wide change, these softer skills are becomingessential–and, indeed, are more important than traditional financeskills. Companies want finance professionals who are commerciallyminded and with strong leadership capabilities. Yet, for manyfinance professionals, this has not formed a key part oftheir training.A Communication skillsB Analytical skillsC Industry knowledgeD Technology knowledgeE Leadership skillsF Change management skillsG Regulatory complianceH Deeper knowledge of geographic marketsI Performance reporting and analyticsJ Project management skillsK Strategic capabilitiesL Budgeting and forecastingM Target settingN Risk managementChart 11: In which of the following areas do you think your directreports most need to improve your skills and capabilities?Communication skillsAnalytical skillsIndustry knowledgeTechnology knowledgeLeadership skillsChange management skillsRegulatory complianceDeeper knowledge ofgeographic marketsPerformance reportingand analyticsProject management skillsStrategic capabilities33%29%27%24%24%21%19%17%16%15%15%Budgeting and forecastingTarget setting14%12%Risk management 11%ACBDEFGHIKMJJN7Survey of 1,400 CFOs of U.S. companies conducted by Robert Half International2019 2 31 4 5Click to zoom
  11. 11. SKILLS AND CAPABILITIESThe rising importance of technology–and the skills required to leverageit–also creates gaps, with CFOs pointing to analytical and technology skillsas key areas for improvement among their direct reports (see chart 11). Ascompanies embed big data and analytics more deeply into their financefunctions and operations, they need confidence that they havethe right skills in place to extract the maximum from these technologies.Companies also need to be careful that structural changes to financeoperating models do not weaken the talent pipeline further. The creationof centralized shared service centers offers the opportunity to pool skillsand disseminate best practice, but it can create a silo-based platformfor career development. Five years ago, in-country finance managerswould have been exposed to a broad range of finance activities. Today,however, the number of in-country finance managers has shrunk, makingit more difficult for up-and-coming finance professionals to gain valuableexperience. Organizations with shared services centers should considerrotational roles and personalized career development planning of theirhigh potential professionals through the center and the business to helpalleviate this situation.Cloud-based talent solutions are playing an increasingly important role inhelping CFOs plug talent gaps. They can help companies to understandwhere skills gaps lie, and provide valuable insights into where talent assetsreside–both within the company and externally. This helps them to adopta more strategic approach to workforce planning, ensuring that they havethe right people in the right roles, and that skills and capabilities in thefinance function are keeping pace with a fast-changing environment.Key recommendations for a changing roleIn this report, we have explored some of the key challenges facing the financefunction, and how leading companies are addressing them. Below are someof the steps that we believe senior finance professionals should consider toovercome these challenges and help position their business for future success.The operating environment:1. Apply emerging technologies to drive the next generation of efficiencies inthe business2. Work with business colleagues to ensure that investment and resources areallocated appropriately and at the right time3. Explore integrated business services as the next evolution in the sharedservices agenda4. Adopt a forward-looking approach to strategic insight and decision support,along with a strong grasp of information through more robust use ofanalytics, to stay one step ahead of business model innovation5. Take the lessons from finance transformation and use them to drive changein the broader businessTechnology:6. Shift the focus from maintenance of IT systems to technology innovation7. Develop a better understanding of how technology can support both thecost and growth agendas8. Collaborate with other functional areas, including marketing and HR, toensure that technology investments enable the right business outcomesSkills and capabilities:9. Adapt training and recruitment to keep pace with the changing finance role10. Apply cloud-based talent systems to assess skills gaps and enhanceworkforce planning2221 2 31 4 5
  12. 12. ConclusionCONCLUSIONConclusionCFOs have made significant progress over the pastdecade in transforming their roles and the contributionthat they make to the company. They have becometrusted advisors to the business and strategic partnersto the executive team. And, through their work over thepast few years on cost and cash management, they havein many cases saved their companies from obsolescence.Within their own function, CFOs have also been at theforefront of innovation in organizational change. Theimplementation of finance transformation programshas provided a radical overhaul of operating models,introduced significant efficiencies and enabled thepooling of resources and knowledge in centers ofexcellence. This has set the blueprint for the rest ofthe organization, leading to discussion of similartransformations taking place in HR, procurement, and IT.With their profile now higher in the organizationthan at any time in recent memory, CFOs now havethe opportunity to become an agent of broader,business-wide change. Leading CFOs are now helpingorganizations take a much closer look at processes,using their enterprise-wide perspective and objectivityto determine the rationale for change, prioritizeinitiatives, and then drive them through theorganization as efficiently and effectively as possible.Technology is increasingly proving to be an importantenabler of this new role. Innovations such as big dataand analytics are giving CFOs and other managers theinformation to identify the need for change, make well-informed decisions, and prioritize different initiatives.Becoming an effective agent of change requires CFOsto possess the leadership and communication skillsto work with CEOs to outline the vision and overcomeresistance. They must possess the strategic insight andability to challenge accepted ways of doing things anddemonstrate why an alternative would be better. Andthey must have the ability to prioritize their own agendaand find the time and resources to dedicate to changeprojects—a challenge itself at a time when the CFO rolecontinues to become more demanding and complex.ContactsLongitude Research Contact and CoauthorRob MitchellEditorial DirectorLongitude ResearchTel: +44 (0)1367 820919Email: rob@longituderesearch.comWeb: longituderesearch.comOracle Contact and CoauthorAnne OzzimoSenior Director, Applications Business GroupOracle CorporationTel: +1 805-929-0135E-mail: anne.ozzimo@oracle.comWeb: oracle.comAccenture Contact and CoauthorScott BrennanManaging Director - Management Consulting,Finance Enterprise PerformanceAccentureTel: +1 704-370-5328E-mail: scott.brennan@accenture.comWeb: accenture.comOracle Media ContactDanielle Cormier-SmithCorporate CommunicationsOracle CorporationTel: +1 610-766-3463E-mail: danielle.cormier@oracle.comWeb: oracle.comAccenture Media ContactBarbara LyonSenior Manager, Corporate CommunicationsAccentureTel: +1 703-947-1838E-mail: barbara.d.lyon@accenture.comWeb: accenture.comAbout AccentureAccenture is a global management consulting,technology services, and outsourcing company,with approximately 259,000 people servingclients in more than 120 countries. Combiningunparalleled experience, comprehensive capabilitiesacross all industries and business functions, andextensive research on the world’s most successfulcompanies, Accenture collaborates with clients tohelp them become high-performance businesses andgovernments. The company generated net revenuesof US$27.9 billion for the fiscal year ended Aug.31, 2012. Its home page is OracleOracle engineers hardware and software to worktogether in the cloud and in your data center. Formore information about Oracle (NASDAQ:ORCL),visit Longitude ResearchLongitude Research is an international researchbusiness that produces and manages influential andimpactful thought leadership projects on behalf ofcorporate and media clients. We assist with everystage of the research process, from surveys andwriting, through to editing, project management,and presenting research findings. To find out more,visit 2 31 4 5
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