News Updates
It is no secret that the economic success of the world’s leading companies depends on the healthy marriage of strategic corporate initiatives and sound financial support. Experts say that’s probably why chief financial officers (CFOs) and other C-suite executives are being asked to be more innovative and collaborate with peers in other departments.
At Deloitte’s 17th Annual CFO Vision Conference, held in November 2013, 51 percent of the CFOs said they’ve been tasked by their chief executive officer (CEO) to play a key role in evaluating, financing and driving innovation in their company.
Of the remaining CFOs, 36 percent said their CEO expects them to “support and enable the execution of innovative decisions as companies continue to strive for bottom-line growth in the current economic environment.”
Change Gradual, Not Unexpected
“Looking back in time, most unbiased pundits would share that many CFOs simply lacked the business context to make good operating decisions—they had significant blind spots and leadership gaps,” said Mike Myatt, author of Hacking Leadership: The 11 Gaps Every Business Needs to Close and the Secrets to Closing Them Quickly (Wiley, 2013).
“Most … [executives] matriculated up through the accounting/finance ranks and did not possess any real practical experience in operations, sales, marketing, branding, nonfinancial strategy, etc.,” he told SHRM Online.
“Their primary skills were in cost containment and capital planning, but they often knew very little about the core business or, for that matter, the industry they were a part of. In recent times CFOs have been forced to expand their spheres of influence and their areas of contribution, and many now have had real-world operating experience. They are now considered more than just finance leaders; [they are] corporate leaders. CFOs must now possess a broader worldview to survive.”
What’s more, CFOs must fight the typecasting of their historic roles in corporate hierarchy so they can move from behind the calculator and into the boardroom. Deloitte’s recent third-quarter CFO Signals Survey pointed out that most CFOs, to date, have been involved in innovation only at a peripheral level, providing analysis or having a voice in the discussion of their company’s innovation program, rather than taking a more active, decisive role as a catalyst or strategist on innovation.
Wanted: Creative Leaders
“Innovation is a key source of growth in this economic environment, but the reality is that much of the time, organizations fail to return the cost of capital on it,” explained Sanford Cockrell III, global leader and U.S. national managing partner of Deloitte’s CFO Program. “CFOs have an opportunity to get more actively involved, injecting focus and discipline into the innovation process, managing the investment risk that innovation presents and evaluating innovation’s success.”
And, according to Myatt, CFOs welcome this opportunity.
“All C-level executives are asked to do more in the area of innovation these days, but particularly the CFO,” he said. “The reasons are many: It’s good business, it affords the CFO cross-functional exposure to the business and the external market, it brings financial discipline to a process not always tied to accountability, it humanizes the CFO, and, believe it or not, some CFOs actually have a creative streak.”
Experts say much of the creativity evidenced at the leading companies has focused on core business offerings, a strategy that makes sense but is shortsighted, Cockrell observed. “It is important to look beyond pure product or service innovation,” he said. “Driving innovation in the profit and pricing model and supply chain and production are often overlooked, but all are areas that CFOs are adept at bringing insight to and boosting returns on innovation investment.”
Additional Deloitte findings include:
• Top drivers of performance in 2014 and beyond. Excluding North American growth, CFOs identified industry-specific growth and company-specific innovation as the top two drivers of performance over the next few years, with 24 percent of CFOs identifying both of these. Economic growth and recovery in emerging markets (19 percent) and Europe (13 percent) were identified as the next most important performance indicator.
• Mixed view on international financial reporting. CFOs are split on whether to continue with the adoption of International Financial Reporting Standards, with 55 percent in favor of adoption and 41 percent against.
• Health care reform will remove companies from the employee health care equation. Nearly half of CFOs (48 percent) believe that employer-sponsored health care will be replaced within the next 10 years by public and private exchanges and that employers will not play a role in arranging, paying and providing health insurance for their workers. But 32 percent disagreed with this view.
• Few CFOs see tax reforms helping their company. Thirty-eight percent of CFOs believe that if Congress enacts tax reforms in 2014, it will hurt their company, while 27 percent believe it will help. For the remaining 35 percent, it is simply too soon to tell. In terms of Congress closing other loopholes beyond the current tax reforms, 40 percent think that potential international tax reforms would have the greatest effect.
CFOs aren’t the only executives responsible for aligning their business model with their company’s evolving culture. Payroll firm ADP believes that one of the growing trends in 2014 will be CEOs pushing their chief human resource officers and chief information officers to collaborate more before deciding on major investments in human capital management technology. In a recently released Accenture survey, more than half of corporate employees (52 percent) said they have pursued an entrepreneurial idea inside their company, but just 20 percent think their organization offers enough support to develop their vision.
Experts said that as companies make innovation a priority in 2014, they will find that its success rests in the collaboration of its business leaders and workforce.
Leonard Webb is a freelance writer in Wyncote, Pa.
To read the original article on SHRM.org, please click here.