Thanks to their successful financial stewardship during the economic downturn, when aggressive cost-shedding helped keep profits at acceptable levels, many CFOs are now poised to leverage the full potential of their enhanced status and become leaders of broader strategic change.
The role of corporate strategist will be challenging, however — especially in a post-recession economy where revenue growth, not just profitability, will drive shareholder value.
Here are eight key considerations as we approach the New Year:
1. Avoid choking off revenue growth.
Corporate profit margins are close to a 50-year high. Yet the pace of U.S. GDP growth was only 2.8 percent for the third quarter of 2013, as reported by the Commerce Department’s Bureau of Economic Analysis.
Rigorous cost management and a disciplined drive for operational efficiencies helped fuel that profitability. But even as CFOs continue to drive the next iteration of cost take-out, to maximize revenue growth they also need to keep strategic reinvestment in the business on the table. That may require a shift in cash-allocation strategies. For example, strategic capital spending and market expansion may be needed in lieu of returning cash to shareholders or dipping into cash reserves to pay down debt.
2. Become a transformation agent.
CFOs’ cost-management successes have earned them the right to become transformation agents — and for many companies, a key to successful transformation will be finding the right balance between global and local operations that support the growth agenda.
To do that, companies should consider a globally integrated operating model that pulls back- and middle-office functions into a single organization agile enough to react swiftly in today’s volatile markets. Some are progressing rapidly toward such an integrated structure. Their efforts show that changing the operating model to balance local and global requires close collaboration between the CFO and an expanded ecosystem of peers, customers and suppliers.
3. Keep up with increasingly complex compliance requirements.
New markets can mean new compliance requirements. CFOs may need to ensure that their organizations are agile enough to respond to more complex government regulations, including management of the evolving International Financial Reporting Standards as well as mounting pressure to fulfill environmental and labor obligations across multiple geographies.
In the United States, as the implications of the Affordable Care Act become clearer, further standardization and streamlining of benefits enrollment and government reporting processes may be needed to boost efficiencies and reduce internal complexity.