THE CONTROL-FOCUSED VERSUS VALUE-FOCUSED CFO

Excerpt from AFP's new guide, Becoming a Value-Focused Finance Organization https://hubs.li/H0V-frG0

There is one critical question that will guide how financial leadership creates value within the company, and how we create value through our teams: What type of finance organization do we want to be?

Companies may choose to answer this question narrowly by defining finance as a base-level, control-focused organization that satisfies fiduciary duties — meeting the operational capital flows while completing the accounting, legal and compliance requirements that satisfy the board, auditors, shareholders and regulators. The costs incurred to deliver these services are overhead, frequently allocated to the business like a tax on their P&L statements.

Over the long-term, this limited scope often means control-focused CFOs are cost-focused CFOs. It is difficult to create a business case to invest in a cost center, so automation is justified as headcount reductions, investment in individuals is limited, and their organizations exhibit a limited ability to attract talent. Worst of all, missed opportunities to support the business.

Alternatively, value-focused CFOs expand opportunities for the enterprise. Finance can apply its expertise to create and service internal customers, bringing to business operations the quantitative methods, critical analysis, and even that skepticism inherent in finance DNA. Value-focused CFOs recognize that automation will continue to drive down costs on both the control side and value-creation side, but automation helps to gain new capabilities to unlock that value.

Most AFP members see this as exciting — a path that is creative, exploratory, and which prizes the finance skills we have honed for so many years. In fact, a focus on value over control has underpinned the call for finance to be a strategic business partner.

“‘Strategic partner’ is an over-used term. Does the business really want this, and is the CFO ready to deliver it?”?

The CFO of a Fortune 500 company shared this insight and question as he settled into his new role. In AFP’s research, the answer is a definitive “yes!” Business operating units are telling our members that they want more: bigger data, better insights, faster delivery, and more of everything.1

We also see that most CFOs want to deliver on this opportunity. A recent Oliver Wyman survey of chief financial officers showed that 70% described their role as “true strategic advisor to the business.”2 The experience of the coronavirus pandemic brought cash management, planning agility and positional reporting to the forefront for the entire management team. Still, a disconnect exists as finance functions struggle to step out from their traditional roles to become that value-added advisor.

Moving from a control-focused (cost) to a value-focused finance function starts with a vision of what is possible.

--Bryan Lapidus, FPAC, Director of the FP&A Practice, Association for Financial Professionals