The Augmentable CFO

When penning this piece, a Google search for the phrase 'Changing role of CFO' produced 35.6 million results in 0.67 seconds. Do we need a more extensive testimonial of how pertinent and in-demand this subject is? Maybe not.

The changing role of CFO is a favourite theme for content writers in product marketing teams, and a hot topic for webinar enthusiasts.

It is important to know what basically this change in the role means. From a commercial pursuit viewpoint, it is natural for consultants and product sales folks to attribute technology as the prime driver of this change, but a neutral assessment of the current business environment might have some new insights to offer. Let's take a shot at stretching the concept a bit to know more.

The opening question: Is the role really changing?

It is quite amusing how we all view history as an array of events that happened but have always considered our present moment reality, as a living one- evolving, every second. We fail to recognize growth and momentum, in the past moments, which led us to the current state. This past-to-present context is critically important to build a foundation for the future.

A very interesting and related reference here is the three waves of business transformation, articulated so well by Paul R. Daugherty and H. James Wilson, in the HBR bestseller 'Humans + Machines: Reimagining work in the age of AI' (ISBN-13:978-1-63369-386-9). The writers have called the first wave, dating back to Henry Ford's relentless focus on Automation, the second wave - starting in the 1990s with the entire Reengineering revolution which led to the application of desktop technology, and databases to business transformation.

In the words of Paul Daughterty, " The second wave did not really unlock any human capability. It only led to big inflexible information systems, developed static flowcharts of processes sandwiched between computers and processes."

The writers have argued in the book, that in the current times, we are standing at the starting point of the third wave of business transformations, which is about 'Reimagining Business', which is about thinking of a problem in a different way.

If we use this classification as a frame of reference, it becomes apparent that the role of CFO has always been changing- so change is not new to Finance as a function. To ride a wave of transformation successfully, and thrive in future -agility and resilience are fundamental.

Though it cannot be discounted that the quantum and scale of change - is much larger now.

The Static CFO

Before trajecting into 'How to build a framework to handle the change', it is necessary to understand 'what has changed. Let's call this 'past-to-present' context, the 'static CFO' for ease of understanding.

The illustration above lays out the typical span of management for a CFO role - the base common understanding that is seen in large organizations based on past experience.

The role has numerous dimensions- Strategic, External orientated and Functional (transactional), under which different activities and teams are organized to achieve defined outcomes, through well-structured processes and controls. This is just an illustrative view depending on the industry segment and size of the organization, there might be additions/deletions to this metamodel.

As one can see clearly- despite the fact, that all these activities are ultimately supporting the same business, they are still 'structured in silos'. Siloes create distortions and roadblocks for 'one version of the truth'. Remember the stories about reconciling accounts and spending weeks to make the numbers match each other across different sources?

Sequential processes with lots of handoffs and associated inefficiencies, create restrictions to scale - beyond a certain point. That point has already come for many organizations, indeed a select few are already past it, and struggling to deliver results. This indeed is the sweet spot - to lay the foundation for reimagining the finance function and redefine the role of the CFO. This change is not evolutionary - indeed it is revolutionary.

The Augmentable CFO

Augmentable CFO is an illustrative viewpoint, with an intent to elaborate on what revolutionary changes can be expected for the CFO of the future. The disruption of technology has offered phenomenal augmentation of capabilities for the CFO role, in a literally super-human way.

The depth, wisdom and insight of the traditional CFO role, can be applied to augment the human faculties of the incumbent, to extend beyond the traditional role and deliver growth, profitability and realisation of objectives, at an accelerated pace. The Augmentable CFO is a framework to help enterprises realise their vision.

In simple terms, the augmentable CFO plays three key roles, tied to certain responsibilities which help build long-term resilience, growth and focus for the enterprise. The three roles are:

I.Steward -as a steward of existing value, this role is the closest to the traditional CFO role, with some expandable objectives- some new and others old. The objectives are contemporary and are in line with the needs of a newly emerging world which is volatile, uncertain, complex and ambiguous. The asks even as a steward have moved beyond the traditional responsibilities of ensuring compliance, effective controls, and being the guardian of enterprise value.

Where the majority of the business value is created through digital interventions, the augmentable CFO is a steward of enterprise data and cybersecurity goals. Further, in a business model where numerous digital channels are interacting millions of times on a daily basis, the CFO has to own xP&A (Xtended Planning and Analysis) or more popularly called cloud-based EPM (Enterprise performance management). Enabling Zero-based budgeting also is included in it. As per a Gartner report by 2024, 70% of all new financial planning and analysis projects will become extended planning and analysis (xP&A) projects, extending their scope beyond the finance domain into other areas of enterprise planning and analysis.? The recent turn of global events including supply chain volatility, hybrid work models, demand turbulence has demonstrated the need for increased focus on Governance, risk and compliance.

A CFO being the custodian of enterprise data is structurally in the best position to be the steward of GRC objectives for the enterprise. Finally, the traditional hierarchy of finance operations, under the CFO also needs a refresh- a refresh that is intelligent, agile, predictive and autonomous. A refresh based on human and machines collaboration, handing over repetitive responsibilities to machines and assigning judgemental tasks for humans to take care of. For example, an AI algorithm determines the probability of a vendor master request originating from a malicious source, and a human agent decides on the logical step required for handling it. Predictive finance operations will provide the much-needed nimbleness, cost optimization, and business outcomes that the finance operations of the future so badly need. These objectives tie well with other objectives across different roles.

II. Catalyst- As a catalyst, the augmentable CFO has to build bridges for the future, by facilitating numerous enterprise aspects, many of which have not been a part of the traditional finance roles historically. Future of Finance is a topic that is directly within the purview of the CFO but to pull it off a lot of standardization, technology and policy changes are required, which are beyond the CFO scope. The CFO has to play the role of a focused catalyst, in partnership with CIO, CISO, CTO and Business function heads, to accelerate that change towards the Future of Finance, where data-driven decisions are the order of the day, and it doesn't cost much human effort to make those decisions. Technology plays a facilitating role for finance and becomes an enabler of business value, which is the CFO responsibility. This role complements, CFO's primordial role as a custodian of business value.

Further, in an ecosystem driven business environment, partners and partnerships play a crucial role in identifying, screening and harvesting sources of value spread across the ecosystem. The ecosystem is not just about suppliers, customers, it includes government agencies, regulatory authorities, shareholders, consultants, cloud partners, community- everything. Facilitating a move towards operating models, where these opportunities can be spotted and harvested, ahead of time is what an augmentable CFO contributes. Facilitating an ecosystem of value-generating 3rd party relationships becomes a CFO prerogative in a sense. In addition, as a leader, the augmentable CFO has to play the role of a cultural evangelist towards long-term thinking across the enterprise. This is elaborated through a streamlined framework of metrics and measures, which are backed up with rationale as to why these metrics exist and how the operational metrics are linked up with enterprise vision, mission and goals. For example, it is well known that duplicate payments are a drain on working capital and cost crucial resources and enterprise time in correcting them. The augmentable CFO has ownership for setting the goals for duplicates prevention, but also coordinating with suppliers, technology partners, CIO and IT teams, CISO, and payment solution providers, to build a framework where each player knows the KPIs they are responsible for to make the system work, along with overall vision, mission and rationale. This approach is not just full-proof but also helps build resilience at an enterprise ecosystem level.

There is one dimension of this catalyst role, which converges the traditional CFO and the augmentable CFO roles. It is the ownership of data. Facilitating on-demand data builds transparency, easiness of operations and effectiveness in decision making. But the way data existed in the past, and where it's headed now- needs multiple different stakeholders to play a part. For example, the role of customers and suppliers in providing the right level of access through to their systems, data, cloud and analytics consultants and service providers for helping the organization seek and secure the most rewarding opportunities, empowering of staff, which can lead to new opportunities and value streams emerging from within the business. CFO in the new normal can play an anchor for this data-led universe.

Audit effectiveness and Corporate governance will be influenced by technology but will have similar overtones as existed in the past. CFO being the final domain expert, will have to play an enabling role for the right use of technology for these areas.

III.Architect - as an architect of desired futures, for an enterprise the augmentable CFO owns up the blueprint of some strategic dimensions, which are diverse but still focused on the long-term sustainability of the company. There is a tremendous amount of research and PoVs available on the CFO's role as an architect of Digital strategy. But there are related dimensions that require special mention.

Operating model change is one of the core disruptions which almost all industries are facing today. The new customer wants multichannel, wants everything twice as fast, wants free stuff but is ready to pay for premium, and has a different mindset as per Gartner. The existing operating models are ill-equipped to respond to these expectations. Digital strategies are expected to totally transform industries in the near future. Due to the sheer access to data, insights and experience, there is no better leader to play an operating model architect than the CFO.

Further, stemming from the overall cost optimization, revenue growth and value generation responsibility of the CFO, Ecosystem Value Engineering becomes a key dimension to focus upon. There is tremendous value spread across the ecosystem, in diverse forms- how to tap it, is the question CFO has to answer. This is where being a catalyst of 3rd party relationships becomes crucial. Value engineering can be best done in collaboration with the right 3rd party experts. Each player has something unique and differentiating to offer and the CFO can leverage each component part to build a dynamic and robust whole. The list of providers is endless -CSP, Platform providers, Data and Analytics solutions, Advanced ML, NLP, Boutique firms, etc.

Integrated reporting/ ESG is another dimension that calls upon CFO's design thinking skills. The issue of ESG and Integrated reporting is all about balance, how do you ensure balance in the business, across stakeholders. For example, look at this excerpt from a Stanford University article, " So you shut down coal [mines] because of the carbon issue. And that really improves the ‘E’ in ESG. But the ‘S’ part becomes really important. You’ve got a bunch of people that are in their 50s, they've been coal miners, what will they do? There are really serious tradeoffs." CFO as an architect of ESG strategy has to think about these tradeoffs and come up with a balanced solution.

There is a lot of debate around whether GBS strategy is within the purview of a CFO role or is it something to be left with other executives like an SVP GBS or a CIO. It is worth noting, that with digital acceleration, GBS is expected to assume a primary position in harnessing revenue growth opportunities, along with the traditional cost-cutting role. Further, with more and more services being pushed to a GBS/ Shared services model, GBS as a strategic lever has started to create enterprise-level impacts. This is where it becomes worthy of the CFO ownership. Digital strategy and Analytics availability will be enablers in this dimension and whether the CFO is equipped to contribute will be dependent on these other aspects.

The Mergers, acquisitions and partnerships related responsibility of the augmentable CFO will be similar to what traditional CFOs have been performing, except for the enablement provided by 3rd party relationships, Ecosystem value engineering, and New operating model architecture responsibilities.

These three roles, along with the diverse responsibilities of the augmentable CFO are interrelated. The goal is enterprise value, resilience and long-term sustainability. This illustrative framework offers a perspective for finance executives, to think, plan, and decide how to make the most of the resources available to them, capturing value across the ecosystem and delegating basis the best options available to them. This is a descriptive, not a prescriptive viewpoint, and should not be considered as such.

The challenges of the last two years have shown to the business leaders worldwide, that unexpected change was and will remain the biggest challenge businesses worldwide face. Being proactive is the best recourse to executives in leadership positions. The words of US Army General Norman Schwarzkopf fits very aptly here, " The more you sweat in peace, the less you bleed in war."

- Mohit Sharma

Disclaimer: This write-up has been a result of the perspectives I developed in the last 10 years, advising, consulting large enterprises on Finance Transformation opportunities globally. This does not reflect the official views of any of the companies/clients I have worked for or currently working. The intent is just sharing of perspectives, for those curious to learn more. There is no marketing intent involved. I have tried my best to keep this piece of work as objective and unbiased as possible, and anybody referencing it must keep it as a diverse perspectives on Finance leadership and its changing role. It is just an expression of some well-formed perspectives and is purely information-sharing. I am open to receive viewpoints and comments on this.