The global economic downturn has shone a bright spotlight on Chief Financial Officers (CFOs) and the finance organisations over which they reign. Their
CEOs no longer want mere number crunchers; they want CFOs to provide forecasts, manage risks and provide insight into issues ranging from pricing to production.
IBM's new 2010 Global CFO Study, based on input from more than 1,900 CFOs and senior finance leaders around the world, provides evidence of this shift. It indicates that they are seriously struggling to come to terms with the dramatically altered economic landscape, and only half of the respondents said they felt they were effective in giving their CEOs adequate business insight.
CEOs and Boards of Directors are counting on their CFOs to be fact-based voices of reason and insight, but those expectations are rising faster than the ability of CFOs to deliver. However, the study identified one group of finance organisations with a particular combination of capabilities that buck this trend.
We call them the "value integrators". Their businesses have outperformed their peers on every common financial measure we examined. These leaders have stepped up to their new roles of helping their businesses make all manner of enterprise-wide decisions better, faster and with more certainty about end results.
They have done it first, through efficiency. They have reduced complexity by moving to common processes and data - for example, using the same definitions across the organisation for financial budgeting, consolidation and performance management. That may sound like a small, obvious thing, but the impact is huge.
Many organisations use many terms to describe a single financial function, making reconciliation a nightmare. Common terms make it far easier to consolidate data from the local to the regional and global levels, allowing more time for analysis. Less efficient companies consider the reconciliation of all their information a victory in itself.
Value integrators also have far greater analytical capabilities, enabling them to generate business insights that can help them spot market opportunities, react faster and ultimately predict changes in the business environment. They've even figured out how to drive sustained business outcomes in times of market instability.
That will probably lead to other questions. For example, how can a CFO get started on this journey? Well, there's no one-size-fits-all method; it varies from organisation to organisation. But you can start by asking a few key questions:
Do I have all the information I need from all parts of the enterprise at all times?
Is the company focused on the right business metrics; the ones that truly drive business performance?
How accurate are our crucial forecasts, such as the ones for customer demand and unit costs?
Does the organisation have sufficient analytical skills?
The answers to these questions will start to point a CFO towards gaps in his or her finance organisation, and awareness of those gaps will guide the creation of an action plan. This is an absolutely crucial activity that must be undertaken with great care, as decisions made at this point will have great ramifications down the road.
One thing is certain: CFOs cannot return to the pre-crisis days when they were little more than clearinghouses for information. The era of the CFO as a key influencer in the C-Suite has arrived, and those who are ready for it will achieve increased competitiveness and greater profits for their organizations.
Meredith Angwin is country manager, global business services, IBM Thailand.