How do you bring more value to your role? For today’s CFO, the expectation is not only to provide counsel to the CEO, but also to identify strategic opportunities for the business that will produce evolution and growth and lead to new opportunities.
So what initiatives are CFOs at leading companies embracing to bring value to their business and shareholders? Two areas identified by cfo.com are business intelligence and social responsibility – key takeaways are outlined below.
Investing in business intelligence yields powerful insights
Data rules today’s business environment. To be a strategic partner to the business CFOs must embrace data science and the insights it provides. Business intelligence (BI) is an essential tool to master data – this technology combines software and services to help businesses organize, analyze, and contextualize the information they collect.
“In finance terms, BI takes financial and operational data to produce integrated dashboards, key performance indicators and, most critically, business insights,” say Srin Subra and Kristen Contreras in their article, Business intelligence: A life hack for today’s CFO. “As such, BI can be a CFO’s best friend – enabling the finance function to provide the business with automated data analytics for historical, current, and predictive views of operations.”
While some CFOs avoid adopting this technology because of concerns about implementation cost or failure, BI can provide powerful support to CFOs across the following three major areas:
1) Finance and operations reporting: Collection of financial and operational data across business units and its conversion into reports is laborious and resource draining. This situation is exacerbated because many CFOs operate in an Excel-focused world, with manual reports, siloed information, and data that is stored rather than studied.
BI provides CFOs with the ability to corral data from multiple siloed sources and make it manageable, cohesive, and consumable in reports and dashboards. Some benefits include BI’s ability to:
- automate financial statement preparation and distribution;
- enable operational reporting of core business drivers; and
- provide predictive analysis and benchmarking.
2) Transaction execution: For the private-equity backed CFO, BI can help optimize business diagnostics for transactions or, sometimes, uncover reasons to pause transactions. Using transaction data sets, BI tools can provide granular analysis that offers important insight on transaction targets and assessment. This granularity can help reveal, for example, whether a target will make for a good fit within the existing sales and operational footprint. BI also provides granular analysis quickly, which is critical given the urgency of transaction timelines.
3) Performance monitoring and improvement: With its powerful analytical capabilities, BI is useful in diagnosing and understanding almost all variables that can hinder corporate performance, including payroll trends, invoicing and collections, and procurement and spending. And unlike traditional finance function reporting, BI tools are responsive and measure in real-time. The targeted, timely reports BI can enable on product X, service division Y, or total company cash flow are invaluable in identifying the cause of financial abnormalities.
The bottom line is, BI supports the CFO in value creation by providing powerful monitoring and analysis capabilities that improve reporting, transaction execution, and organizational performance.
Social responsibility: Leveraging doing good and doing well
A piece of data CFOs are surely tracking, through BI or other means, is shareholder returns. While from a business perspective, it is essential for management teams to focus on long-term shareholder value, is it socially responsible?
The truth, according to surveys from Fortune and Forbes, companies that succeed for shareholders are also more socially impactful. Their conclusion resulted from tracking the total shareholder returns (TSR) of companies, the majority of which were in the S&P 500, that were recognized for their social impact and for their investments in stakeholders at large. The article, Companies that do well also do good explores the findings, summarized below.
Fortune identified 50 global “all-stars” by surveying executives on the companies they admire most based on social responsibility, quality of products and management, investment value, and the ability to attract talent.
Forbes, on the other hand, identified the top 100 organizations among America’s largest public companies that, alongside other criteria, pay workers fairly; produce quality products; minimize their environmental impact; and give back to the community.
While Fortune and Forbes used different criteria, if we examine the performance of the 23 companies that made both lists, the median cumulative TSR for this group was fully 41.5% higher than the median of the S&P 500 index over five years. These results show a positive correlation between shareholder value and the social benefits a company provides.
And these findings are robust. The median TSR was evaluated for the members of each ranking, and each was examined over the last one, three, and five years. In all cases, the median TSR of the ranked companies was always higher than the median of the index. Consistently, companies that achieve success for shareholders tend to also deliver more social benefits.
But beyond these direct benefits, there are indirect ones.
Job creation, talent retention: Companies that create value also create jobs. Total employment increased by 61% over the 10 years ending in 2018 among the S&P 500 companies that beat the median TSR. Compare this with the 2% increase in employees for those that underperformed for shareholders. Along with employing more workers, these companies also treated their employees well, and companies that treat their employees well tend to attract and retain better employees that work harder and smarter.
Reputation boost: Environmental and social initiatives can serve as the basis of marketing campaigns that differentiate a company with its employees and customers, thus providing a competitive advantage.
More innovation: Research showed that the listed companies also tended to spend more on innovation to differentiate their offerings, which delivers more valuable goods and services to customers.
All in all, it’s not just that financial success provides the resources to be a good corporate citizen. Delivering value to all stakeholders can also provide strategic advantages that make companies more successful.
The adaptive CFO adds value
BI and social responsibility are just two areas CFOs can champion to bring value to their organization.
Adaptable and change-ready executives – those willing to embrace new initiatives and learn new skills – are best positioned to identify new areas for innovation and growth. If you are seeking to enhance your current CFO role or round out your skills to take on a new challenge, CPABC’s Executive Programs, which include the upcoming online offerings of the CFO Leadership Program and the Controller’s Management Program, will support your growth.
- CFO as Navigator Program (Sept. 23-26, Whistler) takes you outside the traditional CFO box to build upon foundational skills and concepts that add value and enhance your role within the organization.
- CFO’s Operational Skills Program (October 18-21, Whistler) delivers core CFO operational competencies that organizations expect and demand while examining how strategy and risk-taking will help drive your organization’s success.
These programs have been converted to an online format, making it more convenient to attend and offering considerable savings. All programs include ample opportunities to connect with fellow attendees and presenters, with time devoted to:
- group work where you can get to know your peers and exchange ideas;
- opportunities to share your experiences and opinions;
- real-time engagement through chat sessions, Q&A sessions, and live polling.
These targeted and information-rich programs are an excellent way to invest in your career while working remotely.
Leah Giesbrecht is a communications specialist with the Chartered Professional Accountants of British Columbia.