The one key element that has changed the way of doing business is the flow of information. The new-age CFO must now realise that he is no longer expected to linger in the background and surface every time the results are to be announced.
As the one person in the organisation who has intimate knowledge of both the past performance and the expected future growth, it becomes his responsibility not only to steer the company towards a better future but also be able to provide a transparent, big picture view of the future, to internal stakeholders, customers and investors.
There has been a shift in measuring performance from profits to profitability, earnings to economic value and so on. The focus is on creating ‘value’ which comes from both increased sales, driving better margins, increased efficiencies in operations among others, which improves stakeholder confidence and builds company valuations.
Smart performance would, therefore, mean looking constantly for opportunities to improve economic profits for the company, both inside (operational productivity) and outside (sales). Smart performing companies and their CFOs are identifying, recording, measuring, comparing and finding ways to improve scores on the short- and long-term value and growth metrics by working on:
Processes and Systems
One of the challenges that companies face is to constantly look at improving each of their key processes, be it sales, operations and HR . The CFO plays an extremely important role in defining the key metrics, and more importantly, tracking them on a consistent basis, which not just helps in measuring business performance but also bring out possible areas where process improvements are possible.
The need to evaluate and implement systems, particularly IT systems that cut across functions and integrate them is a role that most CFOs are involved with. The CFO’s input in the selection, design and implementation of an integrated system (ERP) cannot be emphasised more. In that sense, the CFO is only next to the CEO in terms of importance within the organisation.
Vision alignment and relentless execution
Alignment of thought process and being able to articulate the company’s vision are paramount for a good CFO. The CFO also needs to have a strong buy-in to the CEO/company’s strategy and should also play the role as an implementer of the thought process/strategy to the hilt. Increasingly, CFOs are playing a key role in developing and implementing strategy within their company, partnering with CEOs to creatively design growth opportunities for the future. Successful CFO leadership requires a deeper understanding of strategy, leadership skills and an ability to effectively communicate knowledge to non-financial colleagues.
The CFO needs to communicate on an ongoing basis and also provide an assurance on the direction and pace of growth. A CFO has got to do the communication himself/herself as far as possible so that the intent is not lost or misinterpreted. Any kind of misinterpretation can have significant implications on the company concerned. Regular engagement with the market/investors and with the analysts is crucial in building investor confidence. A CFO needs to work closely with multiple stakeholders. A CFO probably needs to work hard on influencing others, improving his/her diplomatic and people management skills. A CFO needs to be a leader, understand the business dynamics and be familiar with all the elements of the business as well as the operating model in order to be able to be the ‘Quasi CEO’ or the ‘next in command’. In today’s economic scenario, CFOs are increasingly seen as natural contenders to the CEO position.
CFOs can become agents of change, creating smarter work patterns throughout their organisation with insights that drive performance and help achieve better results.
This article has been written by Mr. Deepak Narayanan, co-founder, MyCFO and has been published in the Hindu Business Line on August 27 2014.
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