From bean counters to beanstalk growers

The near-crippling effect of the global financial crisis made a deep and lasting impact on the many ways chief financial officers – of companies and organisations of any size – work and think.

That, near the end of 2014, there is a tentative-only economic recovery, has only increased the pressure for new approaches and new responsibilities at the CFO level.

A recent opinion piece by Accenture Strategy – The CFO as a Corporate Strategist – tracked the changes for CFOs.

“Until recently, finance chiefs played only a narrow role in strategic decision making and virtually no role in business transformation. They were expected to take responsibility for the financial implications of the strategy, to be sure. But most remained almost entirely focused on their own function.

“No longer, the Great Recession thrust CFOs into the corporate spotlight.”

“The CFO often has a more analytic view of what's going on inside the company and the way in which the different elements of that are working and operating; but they may also have a different analytic view of the marketplace,” says David Mann, Managing Director for Accenture Strategy, Australia New Zealand.

“It's really important for that analytic view and for that understanding of what will drive the return on the value, the return on the investments, to be taken through to the next level. Hence they have a very important role to play, which not that long ago was not considered to be part of the CFOs role.”

Danuel Rebecca is the CFO at Crucial Cloud, a fast up-and-coming mid-sized web hosting business in Australia and the US.

He notes some nuances and distinctions that CFOs must take into consideration – depending whether the business is a mid-market player like Crucial Cloud, or a Top 100 monolith like his previous employers.

“With the mid market, the biggest challenge is there's no real organisational hierarchy, so everybody is involved in every decision.

You've got to be talking to everybody within the organisation, right down to the bottom.”

Get the board onside

“In large organisations the finance teams are pretty much remote from some of the day to day activities, whereas when you're a CFO in a mid-sized firm you've got to be right down there in the weeds.

You've also got to be able to step back and operate more at the board level as well, because a typical role for a CFO in a mid-sized organisation could also be as the corporate secretary.

“So you're not just focusing on the financial side, you're also then stepping back into the board role and making sure the board functions well. You've really got to make sure that you're understanding where each of those different stakeholders is coming from within that business as well,” he says.

“The board is more concerned about the strategy and if you’re achieving the strategy; whereas occasionally you (as CFO) might be bumping shoulders with some of the key customers who are more concerned about how the service has been delivered. So it's really about forming a big understanding of how the organisation works and being able to articulate that clearly when you are asked to make comments.”

To gain further insight into CFOs and mid-sized businesses in particular, American Express recently released the findings of its CFO Future-proofing survey based on interviews with 285 CFOs from companies with revenues of between $2 million and $200 million.

“We felt there was a real missed opportunity and there was a voice that wasn’t being heard,” explains Christine Wakefield, Vice President and General Manager for American Express Global Corporate Payments, Australia and New Zealand.

We really wanted to get insights into how CFO’s from mid-sized Australian companies operate and what was on their mind.

“We connected with nearly 300 CFOs in the mid-size range of companies, and we created an environment where it was anonymous. We didn’t want people to be tagged necessarily with a company or shareholder obligations and got some very candid insights into what companies and CFOs are doing.”

Under pressure

The survey, tagged Innovate or Fail – Anticipate Risk, Act and Thrive, confirmed that the CFO role has extended well beyond the traditional finance function with responsibilities including oversight in human resources, procurement, supply chain, planning and strategy, IT, investor relations, systems and processes.

One candid comment from a CFO said “CFOs are the neck that turns the head” while 58 per cent of all CFOs confirmed their role had changed in just the past couple of years.

Asked to detail how the role had changed, the CFOs responded with 79 per cent saying more pressure to deliver results; 64 per cent citing greater responsibility; and 28 per cent higher boardroom influence.

Some confident CFOs expressed the view that “I’m not counting beans I am growing them”, and more than 75 per cent of them playing significant roles in helping to lead or implement future proofing strategies.

For CFOs of mid-sized or Top 100 companies in the new globalised marketplace, another increasingly common issue is the growing complexity of dealing with a foreign corporate parent – or relative.

Engage regional stakeholders

Simon Hayes is the Sydney-based director of the International CFO Forum.

“One of the issues that CFOs who work for multinational subsidiaries in Australia face is the need to interpret what's going on at global head office and the strategy that's set out in London or New York or wherever it happens to be; and is then translated through a regional head office which is typically in Hong Kong or Singapore; and then making sense of that in Australia and interpreting and explaining that strategy to a whole range of stakeholders.”

“Those stakeholders may be staff, they may be clients and customers, they might be politicians, regulators et cetera. So often you'll sit there at global head office and you'll say one thing and it'll make sense from a global perspective, but by the time it trickles down to Australia, it's got to be reinterpreted,” Hayes says.

“The CFO in that role really has to have the ability also to push back to the global and regional offices when it doesn't make sense, and also to be able to explain to a whole number of stakeholders in Australia who may not necessarily understand why or what they're doing.

“So being a CFO is all about execution, but it's also about really making sense of strategy that you may not have actually been involved in developing yourself.”

Another internationalist CFO, Matthew McQuade of global beauty products giant COTY says sometimes, especially in economically slow times, CFOs have to just help set the direction and … set sail.

“A CFO comes from a background where they get to see the whole organisation. They see the transactions, how the mission is turned into the dollars and cents in the business. So they have a great technical understanding – and there’s generally a lot of complexity there.

“But we can’t always spend our time discussing the complexity, we have to set the direction and make sure the ship sails in that direction.

“If you look at economic growth at the moment, we’re flattening out at 2 per cent, so perhaps the only way to get beyond that is to look at more bullish approaches to the market – whether it be M&As, or by offshoring, or looking at different funding models where you can generate a greater return.”

Look to the near north

Accenture Strategy’s David Mann agrees there are different views on how CFOs should respond to the economic conditions ahead.

“There are different views and macroeconomic factors – like what's happening with the Australian dollar; you're looking at trade and the position of trade both into Australia and going from Australia outwards. Today the Australian dollar is down to about US87c; there are a number of different views on whether it belongs – a couple of cents lower or a couple of cents higher.

“But it's certainly relevant to take a perspective, simply to understand what the context is in which I am going to operate, particularly if you're either dealing overseas or you are part of an overseas operation.

“I think a lot of Australian organisations are going to need to look north. Whether that means from the north coming into Australia or whether it means Australia going north – I'd like to see a lot more of the latter because I think there's huge opportunities there; and CFOs need to start to understand and take a point of view on that,” Mann says.

Crucial Cloud’s Danuel Rebecca looks at the years ahead and to overseas: “We've got an interesting industry at the moment because we're seeing a lot of interest from large overseas companies. We've got major competitors already in the marketplace, so we're really looking at what we can do to deliver a product that's different to what they're doing, how we can get it into a niche market.

“But we've also got shareholders and a board as well, who want to extract value, and they also may want to look for an exit at some point in time, so we've got to maximise our value that we're delivering to those shareholders but also keep the company growing.

“Whether or not that's through organic growth or acquisitions – we're still looking at where the organisation want to be in the next five years, or even less than that at times, because if we stand still, don't release new products, don't make things similar for our customers, then we're not going to have a business in three years' time because technology is just that – it just moves so quickly that we'll be left behind.”

American Express’s Christine Wakefield says it’s essential for CFOs to play a lead role in change.

“They need to be the change that they expect to see in their organisation. I think CFOs actually have to challenge themselves, and step outside of their comfort zone. Standing still is not an option; they need to be working across multiple stakeholders. It’s not a nice to do anymore , it’s business critical.”

Delivering a message of transformation

The CFOs challenge going forward will be to drive revenue growth, not just profitability. And that will require a bolder, less risk-averse approach to strategic transformation than many are accustomed to.

Leading CFOs, however, are already developing the enhanced skills they need to power such growth, as well as the experience to lead it.

Their core skills helped save their companies from obsolescence during the downturn, and many of these same skills continue to support corporate cost structures lean and flexible enough to survive another one.

“Moreover, by leveraging sophisticated analytics to gain the deep insights they need to identify truly profitable growth opportunities, and by taking a pivotal position in building the globally integrated business service structures that will give them the agility to seize them, these leaders are starting to prove their worth as catalysts of transformational change.”

Donniel Schulman & David Axson

Accenture Strategy: The CFO as a Corporate Strategist