Fat chance you’d ever catch a CEO publicly disparaging the company’s CFO — yet praise for the finance chief wouldn’t necessarily pass muster in a lie detector test.
In a worldwide survey of 549 chief executives by KPMG, 30% said their CFO doesn’t understand or assist them enough with the challenges they face in running the company. “One thing is clear: something has to change if CFOs are going to close the gap between the expectations of their CEOs and the reality on the ground,” KPMG said in its survey report, “The View from the Top.”
Apparently, one thing that’s not going to happen is a dial-back in those expectations. Among surveyed CEOs, 63% said they believe the finance-chief role is destined to increase in importance over the next three years.
KPMG, ticking off the weighty challenges before CFOs today, said, “Automation, shared services, and regulation are redefining the CFO role dramatically. Global experience is now regarded as the most important attribute a CFO can possess, while transformation and innovation are also highly valued [see chart]. The CFO needs to … have experience beyond the finance function, identifying areas for growth and operational excellence across all business domains. This requires a range of skills, from the foundation and basics of the finance function to a strategic level with a focus on the outside world.”
For some CEOs, the idea that any one CFO should be expected to “do it all” is a fallacy. KPMG quoted one chief executive, Fernando Gonzalez of Mexican cement maker CEMEX, as saying, “There is the financial CFO, the strategic CFO, and the operational CFO. There is no CFO with all these skills and capabilities at the same time. I think the one having the deepest knowledge of the business can make the greatest contribution.”
Still, CEOs are united in their views on how to best improve the finance function. A whopping 97% said talent management is the most important factor for that purpose, or at least equally important as another top factor. Unfortunately, just 33% said their CFO is performing that duty effectively.
The ongoing effort to change the role of finance from numbers producer to strategic contributor has a profound impact on finance staff and what constitutes able talent management, according to KPMG. “There needs to be a radical shift in the way finance talent is developed,” says Mark Spears, the firm’s global head of people and change. “The traditional career path of starting in a transactional role and progressing through the ranks no longer works.”
In large part that’s because, as more of the traditional work of finance is automated and offshored, those transactional roles are disappearing. To create a more strategic identity for finance, companies should take a planned approach to moving people in and out of the finance function and into line operations and different geographies, and working through succession planning across functions, Spears says.
Another gap between expectations for CFO performance and reality shows up in the technology arena. While 70% of CEOs at “top-performing organizations” said leveraging cloud-based ERP systems and other emerging technologies should be a top priority for finance chiefs over the next few years, only about half said their CFO is doing a good job of exploring and implementing the best new technology.
Many companies have focused relatively little attention on ERP in recent years, despite vast improvements in cloud-based technology, according to KPMG. Yet the cloud presents the possibility of an end-to-end ERP delivery system that can streamline IT infrastructure while alleviating some of the problems “that have given ERP systems a certain notoriety”: the disruption that implementation brings, the steep learning curve that follows, and “the customization that undermines the system.”
“There is some understandable hesitation,” says Patrick Fenton, KPMG’s head of corporate financial management. “Every CFO has at least one failed ERP project under his or her belt. They all hate the prospect of replacing their systems.” But hesitation may not be a good option for many CFOs, he adds, as internal business colleagues are sidestepping both finance and IT to buy their own cloud-based software-as-a-service and data storage.
It’s only a matter of time before most companies move their enterprise systems to the cloud, according to Fenton. “Salesforce began putting customer data on the public cloud, where it could be measured in detail and viewed broadly, a decade ago,” he says. “Human capital management followed. Now we are in the finance-ERP wave of cloud adoption.”
Like it or not, many CEOs are frustrated that they’re not getting from their finance leaders the kind of transparency and visibility they expect or the analytical insights they desire, the survey results suggest. But getting there is not a simple matter of plugging in newer technology. “Better technology can help, but it’s still going to take time, investment, and in some cases a restructuring of the finance function,” says Fenton.
Merely replacing in-house technology with cloud technology, he notes, could result in missed opportunities like rethinking shared services, deciding which skills and capabilities should be retained and which outsourced, and defining how finance can work alongside business to drive strategy.
“If you don’t change behavior, you just have cheaper technology,” Fenton says.