The CFO has become a key advisor to the board. With the introduction of big-data, top level management is drowning in information. CFOs need to deliver information effectively to be able to influence those around them. The CFO directly or indirectly deals with every department in an organization. With that said, there are some relationships on the modern board that CFOs will need to nurture.
Head of HR
The people that work within a company are its major asset. In the majority of companies, people are also the largest expense. An EY study found that companies with a high level of collaboration between HR and finance departments experience an increase of 10 percent or more in operational cash flow. Richard Branson states that “by putting the employee first, the customer effectively comes first by default, and in the end, the shareholder comes first by default as well.”
The relationship between the CFO and the CHRO (Chief Human Resources Officer) is the meeting of the ‘numbers-focused,’ and the ‘people-focused’ person. Traditionally, these two character types would not ‘mingle,’ but for today’s CFO, it is an essential relationship between cost and performance.
The CFO usually holds the responsibility of allocating resources within the finance team. However, it is often the role of the HR department to hire and nurture employees to ensure that they reach their full potential for the team and the organization as a whole.
While the relationship between the CFO and the Head of HR seems to be a logical and important one, the relationship was not previously always as strong. Human capital can be harder to measure and predict than a company’s physical assets as employees have their own character. Among the CFOs and CHROs surveyed for a study, 80% say that their relationship has become more collaborative over the past three years.
CEO
As business models are continuously adapting, the CFO is tasked with ensuring that the finances are available for the evolution. Where the CEO provides high-level strategy and vision, the CFO has to deliver the strategy and ensure that the correct resources are allocated. The CFO needs to work with peers and middle-level management who will then delegate ever further throughout the organization.
In a recent survey by Russel Reynolds Associates, 82% of CFOs surveyed gave their CEO high marks for overall effectiveness. Furthermore, the vast majority of CFOs said they trusted their CEOs. These stats prove that current relationships are strong which has positive impacts on a strategic and personal level. The CFO and CEO need to be strategically aligned and for this to happen there needs to be an open line of communication and a relationship that allows for healthy debate.
CIO
The CFO/CIO relationship is more modern than others. The explosion of big data has forced the two parties to grow closer and become more collaborative. A study by EY found that 61% of CFOs report increased collaboration in the last three years. Furthermore, 71% have had an increased involvement in the IT agenda in the last three years.
Technology offers opportunities for companies to improve processes and save costs and resources. However, investments in technology that enable the corporate strategy introduce major dangers to the organization. Dangers such as cyber security and data privacy concerns, are forcing CFOs and CIOs to work together more so than ever before.
CMO
A global research study into the changing role of the CMO found that 63% of CFOs report increased involvement in marketing.
There are a number of reasons for a CFO to collaborate with marketing, and in particular, the CMO. As an organization adapts its business model, their marketing strategy needs to reflect these changes. Similarly, when new products or services are being introduced to market, a marketing strategy will need to be implemented to enable a successful launch. Elements of these marketing strategies, including paid advertising, email and social media marketing will all need some budget to be allocated. This resource allocation requires collaboration between the CFO and CMO.
Conclusion
In today’s digital world it can be a lot easier for companies to take advantage of new markets/divisions. A strong finance-marketing relationship can ensure that businesses can capitalize on these opportunities and gain a first-mover advantage. Whereas a complex or poor relationship could lead to missed opportunities and the business being left behind by competitors.
The traditional ‘solely number-focused’ CFO is a thing of the past. The modern CFO needs to be a strong communicator and must be able to develop and maintain relationships with people throughout an organization. As the CFO becomes a key advisor to the CEO and the board, they need to influence those around them. Oracle’s ‘The CFO as Catalyst for Change’ report states that over 70% of CFOs say that their overall level of strategic influence has increased over the past three years.
“A savvy CFO will need to construct and test his or her own hypotheses of “wants” and “don’t wants” through a series of conversations directly with stakeholders or indirectly with his or her peers.”
Dr. Ajit Kambil, Global Research Director, Deloitte
