Last article conveyed the importance of a chief financial officer (CFO) being active and eminent across the operator dimension. This is essential if an organization is to sustain a balance between the cost and service level capabilities within its finance operating model.
This week's article addresses the CFO's contributions as a catalyst, exploring the focus, roles, competencies and critical issues an organization and its constituents should expect from a CFO to address within the catalyst dimension.
The CFO acts as a catalyst by taking on a leadership role that drives behaviors across the organization to achieve strategic and financial objectives. It is not enough for an organization to formulate a strategy, communicate it in a planning meeting, document it, and then return back to "business as usual". The CFO should be leading the charge to ensure continuous alignment between the operational decision-making of the various functions and business units, and the organization's strategic objectives.
• The focus of the CFO as a catalyst is disciplined execution of strategic choices, changing organizational behavior and establishing a value culture. This is achieved by the CFO instilling a "value language and mindset" across the organization through framing and addressing discussions and analysis with functional and business unit leaders.
People cannot align their actions and decisions with the strategies and priorities of the organization if they lack an accurate understanding of the organization's strategy, its performance, the resulting priorities, and the ways in which their actions affect the performance of the organization.
• The roles a CFO undertakes as a catalyst are: Achieving business alignment to successfully identify, evaluate, and execute strategies by partnering with senior management and by being a business partner with other executives such as the CIO, COO, head of HR and head of tax.
To establish a value mindset and culture, a CFO should continuously address these five simple questions throughout the organization:
• How does our organization create value for our shareholders/stakeholders? (i.e. What do we provide, to whom, and on what competitive basis?)
• What do we have to be good at to be profitable? (i.e. Do we have the best products, the lowest prices, the best locations?)
• How are we doing? (i.e. Are we good at the things we need to be good at, are we on track from financial, customer, process and development perspectives?)
• What improvement areas matter the most? (i.e. What types of investment and improvement efforts are we /should we be pursuing?)
• Are our people pointed in the right direction? (i.e. Do we have the right people and are their incentives consistent with our needs?)
How much consensus is there among the executive leadership team around the answers to these questions? How far down in the organization does a CFO have to go before there is little or no clarity around the answers to these questions? At the outset, for most organizations, the answers to both questions are not much. However it is through this continuous process of inquiry and awareness-building led by the CFO that consensus is established and alignment begins to improve.
• A CFO demonstrates the following competencies as a catalyst: Business perspective, change and conflict management, organizational agility and facilitation.
The turnover rate for CFOs is very high due to increasing demands and pressures, especially in an organizational environment undergoing transformation. Those CFOs with the requisite skills, such as superior communication and listening, have an advantage in adeptly navigating the various challenges.
• A CFO actively addresses the following critical issues as a catalyst:
Establishing a structure of enterprise accountability for results and driving enterprise execution
Defining a set of key performance metrics or a balanced score card is a useful method of keeping the organization's focus on the most important performance needs. While these tools can be effective, their benefits can also be negligible if they are not preceded by an improvement in business awareness and understanding of the people involved. Management by metrics can markedly improve alignment and the performance of an organization, but the reach and sustainability of this approach will be limited if only those at the top understand the rationale for those metrics - i.e., if the workers deeper within the organization see the metrics without understanding the business variables driving them. Such a scenario can create misalignments that fail to benefit from the intelligence and motivation of large portions of an organization. It can also make it very difficult for people to work cohesively with colleagues across other functions or business units.
Gaining acceptance from the management team as the organization's catalyst
One of the most significant challenges to becoming a catalyst is often getting other executives to agree that this is a role finance should be playing. It's not something that a CFO can normally ask for, but rather something that is grown into as other leaders recognize the value of finance's contribution and increasingly turn to the CFO for assistance and support with execution. The following are four actions CFOs can take to establish themselves as catalysts in their organizations:
• Build a framework for disciplined execution. Understand what it takes to get things done within the organization and apply that knowledge consistently to drive execution.
• Promote financial literacy and a value mindset. Embed financial thinking and discipline throughout the organization.
• Export finance's talent. Hire qualified people and help them grow, and then let some of them transfer within the organization. This might seem counter-intuitive, but seeding the rest of the organization with talent you've developed can expand your influence and make it that much easier to do your job and be a catalyst.
• Lead by example. Drive accountability through personal leadership, measurement, and commitment.
By JAMES BABB
© Arab News 2010
