Adding up five modern, relevant priorities for today's CFO

Profile picture for user brianssommer By Brian Sommer November 2, 2021
Summary:
What should CFOs be doing these days? Their plates are actually quite full, but change waits for no one. Here are the top five CFO priorities for those wanting to deliver great value to their shareholders.

priorities

A colleague rang me the other day to discuss the future of finance (a topic I do frequent talks on) and what a CFO’s priorities should be today. The conversation was strategic and not focused on a specific technology or vendor. Here are the highlights from that conversation.

Priority #1 – time to re-examine the CFO’s legacy (or what it will become)

A recent client has been CFO at his firm for almost 15 years. In that time, the company had grown 3X but no accounting technology improvements had been made. Furthermore, the company had to pass on two potential acquisitions as the firm realized its systems and people could not handle the increased transaction volume. In all that time, only one thing had changed: the number of spreadsheets in use had grown exponentially.

This CFO was bothered, materially, by the idea that he would retire without having left the Finance/Accounting organization in better shape than the way he found it. His legacy would have been uncomplimentary regardless of his and his organization’s other accomplishments.

Many CFOs get the gig after a career stint at a major accounting firm or an investment banking organization. And while some CFOs change employers every 3-4 years, a significant number I know make this position the last professional role they’ll possess before retirement. In recent weeks I’ve spoken with three CFOs who are contemplating retirement.

I find many CFOs to be contemplative on this matter. They have tried to be a good steward of the firm’s many resources and assets and want to leave on an up note. They want their replacement to inherit a great organization that has great tools at their disposal. They want to leave behind a great legacy.

Two kinds of CFOs don’t care about this, though. One is a job-hopper who only cares what the next employer or PE firm thinks about their ability to pull off some kind of liquidity/financing event, restructuring or cost control effort. The other kind is only motivated by money. Unless the legacy adversely impacts his/her golden parachute, they just don’t care. But, thankfully, these are minority views that I encounter.

Most CFOs now want to leave their organization:

  • Fully Digital and Paperless – If the office is paperless, then work can be done anywhere. That’s the future.
  • A Place that People Want to Work For – People want to work in an environment that is equipped with current/relevant accounting/finance technology and not reminiscent of a 1980s organization (e.g., fax machines, inboxes, on-premises software, etc.)
  • Scalable (Up and Down) – No firm wants to pass on mergers/acquisitions or have difficulty with lenders due to their creaky, inaccurate, patchwork and/or obsolete financial accounting systems.
  • Flexible – Financial Accounting should be able to support new business models, new geographies, new markets, new kinds of products/services, etc. at the drop of a hat.
  • Spreadsheet Free – While I know many of you think that’s not possible, you can certainly set goals to reduce the number of spreadsheets in use by a form factor.
  • A Fountain of Business Insights and not a Documenter of Prior Business Transactions – Can you make Finance/Accounting the go-to place where Operations, Investors, the Executive Committee and the Board want to get the best business intelligence possible?

What will your legacy be?

Priority #2 – move Finance/Accounting beyond internal business transactions and JEs

We all know that record amounts of data are being captured and that firms that exploit this information can outperform their competitors. But, in some firms, Finance /Accounting is challenged to do more than dutifully record accounting transactions. Why?

Many lack systems to handle all of this dark data, big data, external data (e.g., social sentiment data), operational data, etc. Some lack time to work on this as their schedule is consumed with closings, external audits, internal audits, putting out fires with lenders, etc. Some don’t have the skills to use the Hadoop, AI/ML and other technologies to integrate these new data sources and glean insights from them.

CFOs have to make this a priority if they are to help their firms:

  • Understand the continuously and rapidly evolving competitive landscape.
  • Determine the effectiveness of digital marketing and digital advertising spend.
  • Understand what competitors are doing in near real-time.
  • Utilize big data to improve every single line item on the P&L.
  • Reduce fraud.
  • Produce more realistic and dynamic plans/forecasts.
  • Get early visibility into problems with their products and those of competitors.
  • Etc.

We’re well past the talking stage on this. CFOs must act now!

Priority #3 - fix the Finance/Accounting brand

Brand? Yep! Your firm’s Finance/Accounting group has a brand that potential hires and/or transferees see. And, for many firms, this brand is currently a train wreck (and getting worse).

Ask yourself, “Who would want to work in our finance/accounting group?” The answer might stun you but it sure would explain why your finance/accounting group is struggling to attract talent. There’s a good chance your organization wasn’t winning the war for talent pre-pandemic and it’s really losing it now. For many firms, no one wants what your group is offering.

Your finance/accounting recruiting and employment brand is made of many components that jobseekers consider when deciding whether your firm is worth their time. Jobseekers get their intel from outside sources (e.g., Glassdoor), contacts they have within your firm, social media and elsewhere. I know many CFOs and Controllers don’t use social media (based on a poll I did at a major CPA event) and I would bet few know what others think of the culture, career advancement opportunities, work environment, systems in use, etc. your firm has.

Finance/Accounting professionals have choices now and what they DON’T want are employers that offer:

  • A chance to, once again, work with on-premises and/or green screen systems. Using the same tech as their parents is NOT appealing!
  • A guaranteed 90-hour work week (with more during closes and year-end). Why do you require so much overtime? You’re either understaffed or have atrocious systems. Fix these and many morale and retention issues can start to fade away.

What Finance/Accounting jobseekers want is:

  • A personal AND professional life not one or the other.
  • A very dependable work schedule – If you absolutely must have the staff in the office a day or two a week, make sure it’s the same days every week and that everyone in the group has the same schedule. Employees have to work around day care, elder care, pet walkers and other factors. If you’re the kind of CFO who absolutely must have everyone in the office to respond to your infrequent, but mandatory, becks and calls, you are really out of touch and doing your group/firm no favors. That requirement that everyone be in the office either means you don’t trust your team or you’re a bad leader.
  • An inclusive culture not a boy’s club – I still see this. Fix it!
  • A reasonable amount of overtime and to be compensated for it – Some CFOs never seem to address the root cause behind the OT or chose not fix this. You might think that lots of overtime is a badge of honor when it’s actually a sign of poor planning and rotten management. Find the cause and eliminate this retention killer! If these are problems, then fix them:
    • Bad integrations
    • Underpowered or obsolete systems
    • Bad data from subsystems
    • Manual data entry
    • Not enough (or any) RPA
    • Too much data manipulation in spreadsheets and PC-based databases
    • Poorly documented schedules, repeating entries, etc.

Some CFOs and Controllers think they should have a vainglorious work environment. If the department doesn’t have that Battle of the Alamo or 300 fight to the last breath vibe, then they think they are too soft on people. Newsflash, the vainglorious hero culture with its monster overtime efforts, no vacations, cancelled training, etc. is inappropriate, counter-productive and, in a word, stupid.

  • A culture they enjoy – Just because you worked day and night on Wall Street or as a public accounting partner doesn’t mean your staff wants that same career or culture. Some CFOs came from ‘up or out’, ‘constructive criticism’ and other tough cultures. Without thinking, they bring these to their new corporate CFO or controller role. It’s rarely an appropriate culture and needs to go. When you do this correctly, you create an environment where people want to stay years longer than they otherwise would have.
  • A career path – After years of shifting accounting jobs to low-cost countries, implementing RPA (robotic process automation), etc. what career opportunities actually exist for your team? Seriously, how can you retain your best and brightest when you don’t honestly know what’s next for them career-wise?  Have you shared the career paths with people lately – what’s new? Anything? They will seek true love elsewhere unless you can provide real plans and insights for them.
  • Modern technology – Why do staffers hate old tech? Because there is no upside in learning obsolete technology. They’ll never find another employer who uses this stuff or will pay a premium for this knowledge. Your old software, equipment, IT, processes, etc. are liabilities to your firm.
  • An accessible leader - Can people talk to you? Without fear or recrimination? Who are you mentoring? Should you do more? Do you arrange brown bag lunches for your team with outside experts? Do you attend? Do you only interact with your fair-haired heir-apparent?

Priority #4 - re-work cost accounting, briefing books, annual reports, etc for the ESG era

ESG requirements are more prevalent and are becoming major reporting requirements for both large enterprises and mid-market firms. The number of countries requiring this documentation has exploded of late and the number of companies that must report has grown materially, too.

For many firms, the collection of environmental and other data is taking people away from operations, finance and other job responsibilities. The data they collect is usually going into custom spreadsheets. Information is not being collected automatically. Worse, most information simply reports what happened in the prior reporting period (e.g., water consumed, tons of non-recyclable trash generated) with little to no documentation as to how current findings can be reduced/improved. Any metrics or verbiage to explain y/y changes must be manually created.

In short, the processes are ad lib, paper-based and manual. Worse, the output might meet the letter of the law for current requirements but it does nothing to help a company achieve societal, marketing, competitive advantage or other gains.

To do this right, a company may want to capture all kinds of water, gas, electric, raw material, VOCs, particulates and other stats at each step of the production and distribution processes. More granular data could help illuminate which products/plants/machines produce greener end-products. But wiring up plants with all of those sensors, meters and more won’t solve the problem. Insights will happen with those changes are part of enhanced/reworked cost accounting and managerial reporting tools.

CFOs need to work with operational leaders and their technology to get this more granular data. They also need to rework some financial systems and possibly the chart of accounts. When this new information can be automatically collected in real-time, then ESG reporting is simply another kind of real-time reporting that can be part of modern briefing books and annual report supplements.

The current crop of CFOs may be getting the ESG reporting job done but, like sausage making, it’s not pretty, cost-effective or state of the art. That has to change, now.

Priority #5 - re-work briefing books and analytics for the digital era

As the business world continues its digital march, CFOs have to adapt. In particular, they’ll need to significantly upgrade the briefing books they (and their team) produce for the Executive Committee and the Board.

Here are some of things that need to be included in the new/revamped briefing books:

  • Metrics that measure the effectiveness of programmatic ad buying (e.g., web advertising, job listings, etc.).
  • Continuing and increasing productivity gains via RPA.
  • New metrics for new business models.
  • Tracking competitors and their products across social sentiment and other big data
  • Effectiveness of radically reimagined processes and the tools that are bringing these to life.
  • Metrics that bring data from IT, the back office, the front office, OT (operations technology) and more into a single unified view.
  • The inclusion of new data sources for the development of new insights and analytics from sources like:
    • Operational data
    • External data
    • Non-structured data
    • Dark data
    • Big data
    • Etc.
  • Smart analytics that not only identify anomalies but also suggest new courses of action.
  • The incorporation of new benchmarks to assess how operations actually compare to others in the industry.

This will not be a one and done effort. New data sources, changes in the business, new technologies and technological advancements will trigger the opportunity for better decision making if the company continues to enhance things.

My take

These are five big priorities that a colleague and I discussed. If we didn’t cover one of your initiatives it may simply be due to a lack of time not a lack of interest. These five, though, cover several different areas like culture, people, technology and more.

Time is never in abundance for a CFO or their staff. Between monthly closes, audits, producing lender documentation, managing bank relationships, etc., there is rarely time to do much else. Unfortunately, technology, competitors, current events, workforce changes and regulators keep changing and/or demanding more of the CFO’s time. A CFO may not like all of that change but they must, nonetheless, deal with it.

I get calls from a number of disenchanted corporate accounting/finance types on an almost weekly basis. These folks will be part of the Great Resignation if CFOs and Controllers don’t implement a number of changes now. The goal of a great leader is to create an environment where people want to stay years longer than they otherwise would have. If you do not, you may be a finance/accounting leader who will get taken to the boardroom’s woodshed and/or fired. It doesn’t do your career any good to get the mechanics of finance and accounting right if you end up running away all of your great talent.

It’s time for change….