The traits of successful CFOs

Thack Brown, Global Head of Line of Business Finance at SAP, explains why findings from a new report  highlight collaboration as a deciding factor in the success of CFOs and their organisations.

The demands of the global and digital economy have transformed the role of the finance function. Finance teams are working harder than ever before with core responsibilities shifting from “crunching numbers” to supporting the business’s operational performance. In tandem, CFOs are expected to act as strategic business partners to their C-suite colleagues, shaping long-term business strategy and measuring the company’s overall performance.

To better understand the modern CFO and how the role of finance is changing, SAP partnered with Oxford Economics and surveyed over 1,500 CFOs and other senior executives from around the world on their strengths, weaknesses, challenges, and opportunities for growth.

The study identified six differentiating traits that set the most successful finance executives apart from the rest of the pack. When asked what set high performing finance ‘Leaders’ apart from their peers, the theme of collaboration rose to the top.

The study found that many of these traits are correlated with fast revenue growth and robust profitability. Among the most prominent, regular collaboration with other parts of an organization is a must to be a successful finance leader and can even lead to improved business performance.

Collaboration can lead to improved business performance   

Only a select percent of respondents (11.5%) qualified as ‘Leaders’ and surprisingly, very few CFOs gave themselves high marks for effectiveness.

Those who did qualify as finance ‘Leaders’ were those that embraced collaboration and worked closely with business units where finance may not traditionally have been highly visible.

These cross-collaboration opportunities include functions like marketing, sales, research and development (R&D), and customer service. Finance’s involvement in these areas could explain why, among survey respondents, Leaders were more than twice as likely as non-Leaders to report that their organization’s market share grew over the past year.

Effective collaboration between finance and other functions is a hallmark of successful businesses. In fact, the study showed a correlation between effectiveness of collaboration and rate of revenue growth. For example, 46% of companies with zero or negative revenue and profit growth say an isolated finance function is keeping them from achieving their business goals. That percentage shrinks to 28% among respondents whose revenues are growing by 5.1–10% a year.

Julian Whitehead, CFO of Airbus Defense and Space, told researchers collaboration is not a ‘nice to have’— it’s a requirement. “Clearly, if you want to be in the front end of the business, you’ve got to have a trusting relationship with sales and marketing, you’ve got to be involved with the engineering and operations teams, and you have to have some relationship with the human resources team,” Whitehead said.

Other CFOs would be wise to heed Whitehead’s advice. When collaborating effectively, finance departments can have a powerful impact on performance. A large majority of companies (87%) with 5.1 – 10% revenue growth reported that their finance departments collaborate regularly with IT. By contrast, 65% of companies with slower revenue growth (below 5%) also reported a 22% point gap behind their higher grossing counterparts when it comes to finance collaborating with IT. In addition, three-quarters of the fastest-growing companies reported regular collaboration between finance and R&D, compared with 54% in the 0.1 – 5% growth group.

According to Deloitte Consulting LLP’s managing director, Sam Parikh, who advises organizations on large-scale financial transformation projects, improvements in information technology, especially analytics, are helping finance executives work more closely with their internal customers.

CFOs are reaching out and becoming more client-facing, says Parikh. The relationship then becomes mutually beneficial: “Once the operating units see the power of analysis that finance can provide, they understand the value of the finance function, which in turn allows the CFO to play the strategy role more effectively,” Parikh explains. “It’s a win-win situation.”

Collaborating with the CIO to create a “live” business

The most respected and powerful CFOs aren’t just running cost comparison and reporting figures, they are providing in-the-moment insights that provide true value to the company.

In this, they must understand how to access real-time financial data. That is why one facet of collaboration which is particularly important in the digital age is the CIO/CFO relationship.

CFOs today need to be tech-savvy in order to provide real-time analysis that helps guide business strategy and facilitates informed decision making. This means finance departments need a dynamic IT infrastructure to support this model.

While CFOs of the past would only touch IT to approve budgets and spending, finance ‘Leaders’ are now learning to work collaboratively with IT. Since IT enables the digitalization of the finance function, CFOs now need to work closely with their CIO counterparts to understand how to provide and thrive in this modern business environment.

Working together and building a strong relationship removes the latency of a disconnected reporting process, not only to provide in-the-moment insight, but also to create an efficient and simplified process for the end user.

Utilizing HR to stay cost effective and drive business performance

Acquiring and keeping top talent has never been more important than in today’s business environment. Baby boomers are retiring and millennials are moving up the ranks quickly. For the finance department, this means in order to attract and keep the right type of talent, finance needs to collaborate with their human resource (HR) colleagues.

If finance ‘Leaders’ are more collaborative, it’s partly because their companies want them to be. More finance ‘Leaders’ than ‘non-Leaders’ reported that their organization provides business analytics and training programs to encourage different units to work together productively.

When finance and HR partner together, HR can provide insights into the programs, benefits, and strategies that today’s modern employees require to stay engaged on the job, while finance can ensure training programs are getting proper financial investment. From here, CFOs can build a plan that ensures finance teams are happy and focusing their energy on work that is strategic and collaborative, helping the company become more profitable.

In an era of morphing business models, and fundamental shifts in the way capitalism is practiced around the world, no universal formula can guarantee a CFO’s success. Every country, every sector, and every organization dictates its own parameters for how the finance function operates. Nevertheless, research demonstrates a clear correlation between strong financial leadership and strong business performance— regardless of geography, industry, or company size.

Thack Brown is Global Head of Line of Business Finance at SAP

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