The CFO has been on a steady evolution over the past 15 years. The 2008 global financial crisis was a major inflexion point, as savvy CFOs largely eradicated the historic ‘beancounter’ stereotype by playing a crucial part in steering companies back to growth. Since then, they have increasingly been expected to be a key business partner, solidified by the Covid-19 pandemic, which has seen the more strategic CFOs ride to the rescue again.

Through all of this, however, not all finance professionals have kept up with the change. This has caused the finance function to be almost split in two, in many organisations, between the traditional transactional and operational parts of finance, and the new breed of more business-focused teams.

Although this divergence has been happening for some time, the pandemic has vastly accelerated its presence, as well as the need for the office of finance to provide a real-time, or close to real-time, view of how the business is performing and where it is heading.

“What I've seen generally in most organisations is that split is becoming more prominent,” says Gavin Fallon, general manager for Northern Europe, the Middle East, India and Africa at decision-making platform vendor Board International. “Managing the transactional and financial performance of the business is the CFO’s bread and butter - and it’s still important - but organisations now expect them to support decision-making across the wider business.

“It ultimately strengthens the position of the CFO, but only if they’re prepared for it across people, process and technology. The CEO is the captain of the ship, but the CFO can navigate through uncharted waters. The CEO relies massively on the CFO for that strategic direction. They need to move from paper-based navigation to more sophisticated GPS navigation, which provides the capabilities and intelligence to navigate more successfully.”

As businesses now move from survive to thrive mode, leveraging the expected economic rebound from the pandemic, there is no better time for CFOs to lead a transformation in decision-making, not just in their own function but also at board-level and across the organisation. The pandemic has only amplified the crucial role of data in decision-making and empowering all departments with the insights needed to fuel growth.

Managing the transactional and financial performance of the business is the CFO’s bread and butter - and it’s still important - but organisations now expect them to support decision-making across the wider business

There are a wider range of stakeholders involved in business decision-making than ever before, and they are informed by larger volumes of data from more disparate sources. Feeding more data into a group-based decision-making process can accelerate business strategy, if that information is processed and presented in the right way. If it is not, organisations will quickly find their decision-making processes are slowing down.

The shift from traditional financial planning and analysis (FP&A) to extended financial planning and analysis (xP&A), which extends the scope beyond the finance function to enable better organisational decision-making, exemplifies the journey CFOs must go on. A successful office of finance is the collection point of information, plans and processes that connect to the whole business. With a more holistic focus, CFOs feed insights back to all functions and departments that contribute to financial performance. But what are the key components CFOs need to facilitate and drive business decision-making?

“Firstly, you need to be able to collect all the information points across a business that will inform decisions to the right level of granularity,” says Fallon. “You need a very high-performance analytical tool for that. You then need to be able to very quickly take that analytical information and start to make some planning around that – the supporting components of taking analytics and driving it into your plans. That needs to be managed through a governed and auditable process, which is where a workflow capability comes in.

“Once you’ve moved from analytical into planning, with the workflow wrapped around that, the final piece is being able to take advantage of AI, machine learning, predictive and prescriptive analytics - all of those new ways of supporting the decision-making process.”

Board International provides all of these capabilities within its end-to-end decision-making platform, which unifies business intelligence, planning and predictive analytics. The platform enables CFOs to produce a single, accurate and complete view of business information, gain actionable insights and achieve full control of performance across the organisation.

Of course, CFOs have to ensure everybody in the business comes on the journey; that means arming them with the skills to get the best out of the new technologies and processes in place. Doing so successfully means starting at the top: the board. In their new role as strategic business partner, CFOs must lead the discussion and mindset shift around how all decisions are made, which includes decision-making processes at the highest level.

“The future CFO understands and embraces technology, and they look into the business to identify and eliminate inefficiencies and upskill talent,” says Fallon. “But they also need to take the board on that journey of embracing technology and changing decision-making processes.

“For our customers which have really adopted the digital boardroom concepts, it's come through the office of finance, and CFOs drive board meetings through technology as opposed to with paper, PowerPoints and spreadsheets, which increases the pace and quality of decisions. 

“Technology is ultimately the enabler for CFOs being able to play that role, provide the right information and answer vital questions immediately. The CFO as a business partner is going to be massively important to the success of businesses coming out of this crisis, and any future ones.”

Many CFOs are at a crossroads on data transformation. The upheaval of the past 15 months has been a catalyst to overhauling their tools and techniques to become more future-fit. As many companies made sweeping changes to their ways of working and business models, CFOs used this pivoting landscape to create new data strategies.

Chris Argent, managing director of Generation CFO, says the Covid pandemic has been the tipping point many finance leaders were waiting for, giving them momentum, time and resources to look afresh at data transformation. Some recognised that they were tending to rely on gut instinct but are now looking for more data-based, future-looking approaches. 

“The increased demands on planning and cash [during the pandemic] have led CFOs to take a long look at finance team agility, talent, tools and process,” Argent says. “As business confidence increases, we are seeing budgets made available.”

Whether that momentum runs out after the pandemic or catapults the CFO and their team into a more lasting data transformation that will impact insight and decision-making will depend on each CFO’s skills and energy levels.

Maintaining momentum

One way for CFOs to maintain this impetus is to learn more about the many potential obstacles to data transformation. Joe Scarboro, CFO at technology provider AltViz, believes these barriers are mostly cultural.

“To bring the company with them, data cannot be a black box technology because that may reduce trust. A considerable barrier will be explaining the methods used and how results are interpreted. CFOs need to be able to understand and articulate that,” he says.

Making data digestible is vital to embedding it in company culture and the boardroom. “If a CFO can't explain concisely what data shows and why it is helpful, it'll get lost,” says Scarboro. “CFOs need to highlight the internal benefits and market value of the data, linking it to business strategy and embedding the idea that data as an asset is equally important to physical assets.”

CFOs also need to foster rapport with the rest of the company to ensure they meet the organisation’s data needs, as well as develop excellent communication skills to educate the company on the benefits of analytics.

“If CFOs cannot demonstrate the value to the teams they need the data from, the task becomes a lot harder,” says Scarboro.

Refocusing attention

Data is becoming more accessible and user interfaces are improving, requiring minimal and sometimes no knowledge of coding. Argent believes this is helping finance professionals use data to speed up decision support, and move away from infrequent analysis to real-time tracking and correction.

If CFOs cannot demonstrate the value to the teams they need the data from, the task becomes a lot harder

Data projects can help solve almost any big corporate question, but only if there is access to the right information and talent, both of which can be major barriers. CFOs also often struggle to pull the team out of other processes and make them available for transformation tasks. Even if they can do this, finance teams often lack strategic knowledge about how to use predictive analytics, meaning they might work long hours on the wrong things.

“We see investment in technology but much less in talent and training,” Argent says. “Many excellent tools are used badly and teams have no idea of the opportunity at their fingertips.”

Another impediment is not having all the data in one place due to the proliferation of legacy systems. But as a leader with influence across the business, the CFO should be able to address this.

“CFOs need to help create and safeguard this intangible asset, while avoiding silos or making it a cottage industry in finance,” says Scarboro. “These are cross-functional, multidisciplinary projects and I can’t think of anyone better to lead them than the CFO.”

Data modelling and analysis can better prepare boards to make strategic decisions about data. The challenges posed by Covid-19 have been proof of this for companies. CFOs are now putting forward new strategies for managing and understanding data that can steer the business forward, through times of crisis or calm.

“Covid has really shone a light on the need for real-time, or at least very current, data,” says Jenny Himsley, CFO of London-based financial software company Arkk Solutions.

“Most CFOs know that having a group of junior accountants sitting in a room hand-cranking out data late into the night is no longer a viable option. They instead need to introduce financial technology across their businesses and automate processes - topping that up with AI and machine learning-type programmes - if they are going to make internal reporting more accurate and efficient.”

She points to opportunities afforded by real-time financial analytics such as being able to produce models that can forecast what might happen if one particular revenue stream grows quickly and another slows or declines. That then enables a conversation at board level about strategy and where the business should focus its time and resources. 

Covid has really shone a light on the need for real-time, or at least very current, data

The goal is usable, accessible data that can be shared widely across a business and used to boost resilience and to spot and seize new market opportunities. Himsley says such scenario modelling can, for example, underpin decision-making on acquisitions and disposals.

“It’s about giving decision-makers the information they require as quickly as possible to permit them to make informed decisions,” she explains.

Revolutionising the day-to-day

Better scenario modelling can also impact what finance directors, as well as other finance staff, do on a day-to-day basis. In its 2021 financial trends report, financial technology firm Zoho Corporation predicted that the surge in cloud-based and AI-driven accounting will transform the finance function. It suggested that low-level tasks and “number crunching” will no longer be performed by finance professionals and accountants, but transferred instead to computers, freeing up finance staff to focus more on strategic initiatives. 

However this nirvana could be some way off. In a survey of 450 CFOs working for companies with turnovers of more than $1bn (£709m) in Europe and the US by Accenture, 99% said they wanted to make use of real-time data to enhance corporate decision-making. However, only 16% thought they were currently able to do so.

The survey also revealed that CFOs are channelling 33% of their finance departments’ budgets into building real-time operations and processes. A further 68% believe AI, machine-learning algorithms and real-time data will be critical to enabling better business decisions, more accurate forecasting models and improved data accuracy.

Arkk's Himsley says having buy-in from a company’s board is essential before a real-time approach to group financial data can be introduced. “The board has to be fully aligned [with the planned programme] in terms of how they want data to be presented and how it will be used.” 

Himsley also points out that the businesses furthest away from achieving real-time data and rolling out standardised financial data across their organisations tend to be older, larger, more disparate conglomerates that have a host of, often incompatible, legacy computer systems.

People are the biggest cost in most companies, typically accounting for up to 70% of the cost of doing business. But, people are also a company’s greatest asset. Despite this, employees and workforce management have traditionally been the domain of the HR department.

However, CFOs in many businesses are working increasingly closely with HR to ensure that decisions on headcount take into account both strategic and financial goals. This is because the CFO is uniquely able to determine aspects including required investment, the impact on operating expenses and margins, and organisational structure. 

But how close should they get, and where are the lines between HR and the finance department?

“This depends on how a business is structured and the impact of staff costs on the financial performance of the business,” says Alan Pepper, CFO and COO at Essensys, a flexible workspace provider. “The CHRO is there to advise the operational parts of the business, and manage and oversee the HR processes, while ensuring the company culture is lived up to and the development of talent is continual. The CFO should work alongside to challenge underlying assumptions and ensure the strategy is effective and profitable.”

As with any area of business, the C-suite must work together and in the same strategic direction, and the workforce is no different. Rob Gorle, financial director at employee experience platform Perkbox, says both CFO and CHRO are aiming to create team structures that will grow with the company, but draws a clear distinction between the two jobs.

“There is much overlap but the primary focus for the finance team is to review the expected return on investment from different sized teams across different areas,” he says. “For example, are we ready to invest in a new product team or region? The CHRO has a greater involvement in advising on the skills mix of the team and areas such as career pathways and succession planning.”

But the boardroom of the future is likely to demand plural leaders: people who are not straitjacketed by their discipline, but can appreciate the widest viewpoint. According to Velizar Tarashev, CFO at international payment provider Moneycorp: “In order to transform at pace, we have found that it is necessary to distribute leadership throughout the organisation, at every level and as a collective exercise.

“This is plural leadership in action: our business requires self-motivating, self-correcting cross-functional teams who understand the goals and direction they were part of creating and can deliver against them. This understanding of direction and goal setting is critical to maximising productivity, and ultimately shareholder value.”

Employees are expected to make decisions based on analytics and data, whatever their department. It is no use creating a package of staff incentives without the analytics that demonstrate those incentives are driving the right behaviour to meet strategic and commercial outcomes.

The primary focus for the finance team is to review the expected return on investment from different sized teams across different areas

“Partnership is at the heart of our business and that involves co-developing tech solutions, integrating APIs and reporting with clients,” says Tarashev.

At Perkbox, data is a vital part of risk management, used to help set hurdles and targets for investment. Gorle says: “For example, we might compare sales efficiency across different teams to decide where to prioritise additional resources to bring us the best return. Or we might determine when to expand a product team upon achieving set targets of customer engagement on the platform.”

The past year has forced a sea change in workforce planning, as companies grapple with economic pressures and altered expectations from employees. On a positive note, it has provided businesses with an opportunity to look afresh at the workforce.

“We have been trying to gauge how much of our capacity is unutilised,” says Pepper. “Of course, this has been extremely difficult to judge as many of us continue to work remotely. But understanding exactly how much of our office capacity is underused will remain a key focus for now, as hybrid working becomes standard.”

Although the relationship between the CHRO and CFO is still nascent in many businesses, it’s clear there are benefits to them working more closely together, enabling greater insight into workforce practices and delivering greater efficiencies to the companies.

CFOs are best-placed in many organisations to lead, role model and champion predictive analytics.

Growing volumes of data and technological improvements are allowing organisations to use statistical techniques such as data mining, predictive modelling, and machine learning to forecast events and gain competitive edge. The CFO’s influence across the business often makes them the best person to own these tools.

Florian Mueller, partner at Bain & Company, says: “CFOs have a broad understanding of all areas of the business, including strategic initiatives and the value of underlying investments. They naturally interact with data from all corners, including signing off analytics use cases, and being the gatekeeper for much of that information.”

Diarmuid Cotter has 20 years of senior finance experience, most recently as divisional CFO of IBM Digital Sales, Europe. He agrees the CFO should lead on predictive analytics, adding: “This is not a side-project. Potential returns are significant. The CFO needs to stand by data insights for critical decisions and forward-looking statements, so they might as well lead it.”

CFOs, he suggests, also have the opportunity to embrace predictive techniques that improve decision-making in many areas. These include revenue opportunities; for example, agriculture companies are developing machines that adjust fertilizer and pesticide levels based on data and cameras that inspect individual plants and weeds. Another driver is operational efficiencies; utility companies using analytics to monitor assets and predict when they need maintenance, for instance.

Leading predictive analytics will help CFOs execute the increasingly strategic roles they are adopting, particularly around risk management and growth planning. 

Anand Soni has been a CFO in diversified businesses for more than 10 years. “To execute their more strategic roles, CFOs need to ‘deep dive’ further into financial and commercial business aspects; gather more data and use it for more future-looking analysis,” he says.

Burgeoning uncertainty and pivoting markets during the pandemic have further increased the need for data support with rapid, accurate forecasts. But leading on predictive analytics present significant challenges for CFOs given that their core expertise is not in data science. To succeed, they will have to learn more about this area, says Soni.

Finding and recruiting people with the right skills to drive this in their team is another challenge but also key to success. This is because establishing a data-driven mindset and culture is critical, according to Mueller.

“This can reinforce the power and value of analytics, through training and a change communication programme,” he says. “Allowing access to data at all levels also enables people with limited expertise to use it.”

To bring colleagues with them, CFOs need to debunk any lingering misconceptions that they are backward-looking record keepers, rather than forward-looking strategists. Learning how to overcome barriers — such as unclean data, poor systems, siloed data; and insufficient resources — will also be critical to effective leadership.