Trends report says CFOs should have one foot in the market and the other in the C-suite.
According to Page Executive’s Eight Executive Trends for 2019, business is facing the most significant shift in a generation – the rise of artificial intelligence and automation – and companies are responding with the best weapon in their arsenal: people.
Says PageGroup CEO Steve Ingham:
“The most agile is are going to great lengths to become more empathetic, purpose-driven, diverse, open and understanding of people's wellbeing. In short, more human.”
In its fourth edition, the Page report explores the challenges facing business leaders around the world. It said that the CEO is typically seen as the company’s visionary, responsible for plotting a path to growth and expansion. But the CFO’s guardianship of the big picture is critical.
The CFO: Eyes of the market
According to the report, the CFO is a company’s eyes of the market, responsible for financial stability and planning, which contributes directly to the wellbeing of all employees.
CFOs need to drive organisational change, especially when it comes to transformation, scaling, data and the digital world. They are the key manager to make sure a company is not left behind by a narrow focus on short-term results or too much concentration on long-term goals.
“The CFO forges a bridge between the company’s long-term vision, grounded with the capabilities of the company, and the ebb and flow of the market,” said Page Executive partner and head of global finance practice Daniel Yates (pictured).
Traditionally, CFOs were specialists in numbers and analysis, focusing on treasury, accounting and budgeting. But in recent years, business has seen a shift towards CFOs being more proactive. This has given rise to a more strategic profile, allowing them to affect planning, strategy and performance management in a more profound way, thanks to their analytical abilities and new soft skill competencies the 21st century CFO requires.
Friction at board level
The report states that the CFO is a bigger unifying force than ever. And the lessons for what can happen without that unity, when the executive board, C-suite and shareholders do not agree on the big picture vision, are salutary.
One damaging result is a shareholder rebellion, stemming from poor performance, executive bonuses or strategic disagreement with the C-suite. Stockholders may even threaten to reduce the share price through synchronised selling of their holdings.
“Institutional shareholders can be negligent in holding administrations accountable because they concentrate on choosing correct actions rather than protecting their interests through their actions.”
Why guardianship of the Big Picture matters
According to the report even the idea of the big picture matters.
“Big picture” used to mean thinking of the long term and not just the short terms. However, today it means looking far beyond commercial impact.
Balancing the short and long term
The CFO is emerging as one of the most vital roles in getting the balance between quarterly results and the constant search for new profitable opportunities. This is because CFOs are well-placed to understand and advocate for the right kind of measurement.
Turning short-term loss into long-term gain
In the technology sector, it is common to make major investments in order to gain market share and to profit in the future. A great example of this strategy being used is Uber. The report states:
“Operating globally, disruptors do not need to make a profit today or in the next quarter, but they must in the medium-term. Early losses are understood as expansion investments only as long as a company is scaling rapid growth.
“Uber invests heavily in new markets so that they can operate without regulation, unlike taxi drivers. That is reflected in its strategy: expand to as many locations as possible, have more drivers than the competition, and generate high returns for shareholders in the near future.”
Balance is key
Only a strong C-suite team that anticipates and understands the concerns of the board and shareholders, while maintaining future strategy, can avoid the conflict that comes through misunderstandings within the leadership structure.
“Businesses need a CFO with one foot in the market and the other in the C-suite, who offers in-depth analysis that can assist in building a lasting legacy for the CEO’s vision and the board’s needs. By keeping innovation and expansion in mind, aligning systems for better reporting and driving performance, CFOs can do more than navigate a company through uncertainty. They can be the counterweight to short-termism and pilot companies to long-term success,” the report concluded.