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As business becomes more global, regulated, competitive, and digital, CFOs can expect their role to continue to evolve. Many of them — particularly those outside high-tech industries — are still struggling to understand how to harness digital technologies to run their organizations more effectively, increase shareholder value, and perhaps even chart a future course for their own careers.
The CFO of 2020
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Looking ahead, what will the CFO role of 2020 look like, and what different skills and traits might finance chiefs need to add to their toolboxes in order to excel?
Deloitte CFO Frank Friedman
First, they will need to be more digitally sophisticated and tech-savvy in order to leverage technological innovations — from the cloud to big data, data analytics, and visualization — to advance their finance agenda and finance’s ability to partner with the business.
Internet entrepreneur and Silicon Alley venture capitalist Mark Andreesen famously quipped, “Software is eating the world.” Similarly, digital technology is fundamentally changing the way business is done and the way it provides value. Five years from now, a world-class finance organization may be defined by how well it uses innovative business tools and applications that leverage technologies like mobility, software-as-a-service, data visualization, predictive and cognitive analytics, and even social media to drive cost efficiencies, identify emerging business opportunities, sound the alarm when their organization is at risk, and help course-correct corporate strategy.
For example, with predictive analytics, a manufacturing company’s finance organization can forecast results by modeling probable outcomes based on real-time inputs and variables rather than point-in-time assumptions of what the key drivers are. That means finance can produce revenue predictions based on customer-experience profiles and actual current demand instead of previous results and prior-year trends, as most companies still do today. Those are the types of business insights that would be of significant value to most any company.
Likewise, finance can employ social media and crowd-sourcing technology to expedite business processes within the finance organization, such as the monthly close. The use of these collaboration tools can drive cycle-time reduction and enrich finance’s ability to capture explanatory content on challenging issues during the close process.
Already CFOs and their teams have troves of data at their fingertips to help address these and other questions. Five years from now, they’ll have even more — and better — ways to collect and store it. The challenge for finance is to transform that data into valuable and actionable insights. To do so, CFOs will have to be more strategic in thinking about how they can help drive their organization’s own transformation to a more digitally oriented world. That includes developing the capital capacity and allocation plan to achieve digital strategic objectives, and identifying the metrics to measure the success of digital investments. That will likely require more focus on their roles as catalysts, as well as strategists.
CFOs can lead the way by first addressing several critical items. One is mapping out the issues and questions that business leaders want technologies like big data and data analytics to help answer. Another is figuring out how to collect and house the data in a manner that’s as easily accessible as possible. And, they should refocus the finance talent agenda to bring into the organization people who have the skill sets to retrieve the data, interpret it, and use tools such as data visualization to transform the insights into a story that’s strategic and easily understood.
Needed: Multidisciplinary Skills
Five years from now, I expect that a big differentiator separating highly successful CFOs from others will be the ability to operationalize and execute company strategy based on data-driven insights. Many CEOs and boards already expect the CFO to expand his or her role to that of strategic adviser on growing the organization, as well as serving as the steward of the bottom line. Come 2020, as that expectation increases, CFOs may need to bring a much more multidisciplinary skill set to the job as well as broader career experiences, from working overseas to holding positions in sales and marketing, and even running a business unit.
From a career development standpoint, that means people with primarily finance and accounting backgrounds or those coming directly from the controller’s office will need to acquire experiences and skills outside of finance in order to qualify for the CFO’s changing role. Aspiring CFOs should purposefully collect a more well-rounded set of career experiences that play across the broader spectrum of an enterprise. One way to gauge if someone aspiring to be a CFO is on the right career development track: if the person can’t write a good P&L statement, that probably indicates a need for more operational experience.
The rising regulatory tide in many countries suggests that by 2020 CFOs also will need to work more closely with regulators, to help them understand why their organization may want to take a particular course of action in response to shifting economic, policy, market, and technology forces.
From a risk management perspective, there will likely be risks not yet foreseen for CFOs to monitor and manage strategically. For example, accounting for geopolitical risk will be imperative not just for big multinationals firms, but for most companies, as so many become more dependent on the global economy, be it operating in new overseas markets, having crucial supply chain links around the world, or locating people and operations. CFOs will need to give even greater consideration to the appropriate balance between on- and offshore operations, put in place backups for their global supply chains, and consider risk mitigation strategies around foreign exchange exposure.
While 2020 may seem far off, the reality is that it’s less than 20 quarters away. It’s time to start preparing.
Frank Friedman is CFO and COO of Deloitte LLP and Global COO of Deloitte Touche Tohmatsu Limited.
