Why CFOs should become Chief Value Officers
Anders Liu-Lindberg
Leading advisor to senior Finance and FP&A leaders on creating impact through business partnering | Interim | VP Finance | Business Finance
Teaser: Should CFOs be rebranded as chief value officers (CVO)? In this post, we’ll discover what it means, why it’s important, and how to achieve it.
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Whether it’s the rise of new technologies like artificial intelligence, machine learning, new and complex compliance rules, and regulations, or the continued evolution of the corporation into the corporate citizen, the corporate world continues to adapt and change.
And, so does the CFO role change along with it. That’s why we think Finance should be future-proofing itself by encouraging the rise of the chief value officer.
What is a chief value officer, and why is it important?
What is the traditional way of measuring success, income vs expenditure? The way organizations measure success is expanding to include more than simply the dual columns of the double-entry bookkeeping system.
The way value is calculated is changing with the times, and so the chief value officer role is about being able to measure success outside of pure monetary value.
What do we mean when we say “value"?
It’s important to distinguish between accounting for financial value as realized via transactions and thinking about how to capture the value and create value.
For example, the CFO–thinking like a CVO–might include “human capital” in their ledger.
Not simply the cost of labor, that’s a given, but perhaps they start thinking of staff wellbeing, physical and mental, or staff fulfillment at work; or even something like social capital where companies may get improved performance from more diverse groups of people.
The question to ask is, if staff were happier and healthier, might there be some benefit to the business, such as more productivity, or less costly turnover of staff that we could capture as a kind value add?
Other value-creation areas, outside of Finance, are intellectual capital, innovation, digitization, or environmental capital. What value can be created by thinking about sustainability and green impacts by the organization? Perhaps the reputation or attractiveness of the company to millennial job seekers.
Don’t look for a Finance chief, hire value-creation officers?
Technology is liberating the finance function to be more, do more, and influence more.
Less time is taken up, and fewer full-time employees’ time is taken up with labor-intensive manual processing of financial data.
To take advantage of these developments, the CFOs main purpose should then be to drive value creation by acting as a trusted partner to the board.
To do this effectively CFOs need to understand both the “big picture” when it comes to subjects like sustainability, staff well-being, or digitization; as well as a mastery when it comes to interrogating the minute details of their company which allows them to give practical, actionable, and well-reasoned insight to the board.
How CFOs can create, deliver, and sustain value
CFOs are already experts at defining value because they help to shape the company's purpose, strategy, KPIs, and benchmarks; creating value is another thing altogether.
Value creation comes as a result of making the right key strategic decisions on opportunities, risks, or products. But it is the investment in, or budget allocation to something, that allows these strategic imperatives to become value-creating.
By understanding and informing these strategic imperatives CFOs occupy prime real estate as the right-hand person to the CEO to help deliver value for both customers and the business.
CFOs need to create value by being trusted business partners
CFOs are the best-placed CXO role for operationalizing the company strategy because they sit between and are capable of integrating, operational, risk, and financial considerations to achieve the grand strategic objective.??
CFOs have an important role to play in balancing the short-term benefits of value creation with the long-term societal, environmental, or organizational impacts.
Should we rebrand the CFO to chief value officer?
In many ways, the CFO is already performing the role of a CVO. Does that mean we should change the job title?
A clear emphasis on value creation in the job title would certainly remove any doubt about what the CFOs responsibilities are.
Let’s be clear though, the chief financial officers’ strength is in their Finance specialism and expertise.
They are strategic partners to the CEO and other board members specifically because of the Finance perspective to value creation that their role brings.
It sets them apart and makes them unique. Rebranding as chief value officers would only water down this unique selling point, and make it more difficult to stay true to their Finance home.
Let’s not forget that CFOs are also responsible for financial reporting, risk management, and compliance. Those are also important parts of the job.
What’s more important, is that CFOs embrace their role as drivers of value creation, expand their role as drivers of business growth, and develop a mindset that allows them to think like a CVO.
What do you think, stick or switch? Should CFOs really be called chief value officers? Tell us in the comments.
领英推荐
This was the fourth article in our new series "Re-branding the CFO". You can read the previous article(s) below.
While you await future articles why don't you check out our most recent series "Future-proofing the finance professional" below?
Also, check out our latest series "The Finance Function of the Future". You can read all the articles below.
Continue reading below for more articles about trends in finance and accounting.
Anders Liu-Lindberg ?is the co-founder and a partner at?Business Partnering Institute ?and the owner of the largest?group dedicated to Finance Business Partnering ?on LinkedIn with more than 11,000 members. I have ten years of experience as a business partner at the global transport and logistics company?Maersk . I am the co-author of the book “Create Value as a Finance Business Partner ” and a?long-time Finance Blogger ?on LinkedIn with 220,000+ followers and more than 275,000+ subscribers to my blog. I am also an advisory board member at?Born Capital ?where I help identify and grow the next big thing in?#CFOTech . Finally, I'm a member of the board of directors at?PACE - Profitability Analytics Center of Excellence ?where I support the development of new analytics frameworks that can improve profitability in companies around the world.
QuickBooks Certified Pro-Advisor, XERO Advisor, MSS, M. Com (Accounting), CMA (Final),
1 年Follow me on LinkedIn: www.dhirubhai.net/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=m-shafiul-azam-6358b831
CFO @ ATOM (formerly Telenor) | Financial Planning, Resilience, CPA (Aust.)
1 年Thanks for the article
Finance | Strategic Business Partner | Venture Capital | Angel Investor | Startup Advisor & Mentor
1 年Definitely not only CFOs but any finance professional should think from a value creation perspective. Maybe during this mindset transition we could just add the "V" renaming CFO as CFVO.
Senior Manager at Bayat Rayan
1 年Measuring value is somehow better than income/expenses approach. However, with value we must be careful not to hoard assets just to brag that we have created value.