Necessity is the mother of invention. Three years ago, when the world went into lockdown, businesses were forced to adapt to a world that went digital overnight. Finance leaders feel they’ve done a pretty good job at reacting to such a seismic shift in the working environment. Research we conducted with CFO Dive found that the majority of finance leaders are confident that they have addressed a number of foundational areas, such as centralizing financial data and reducing siloes.
Now they’re looking to push on. Having seen the benefits technology offers in terms of efficiency gains, they are now looking to build on that foundation and recast the role of the finance department along more strategic lines.
With a potential goldmine of data now at their disposal, how do finance leaders best capitalize on the opportunity to take their finance department to a new level? What challenges will they face along the way, and is the team around them equipped to take the step up to strategic value creation?
Rizwan Malik Head of Value Engineering, Tradeshift, asked L'Oréal’s CFO, Transformation in North America Yoana Land and Peloton Consulting’s Philip Peck these questions and more in a recent webinar hosted by CFO Dive. Here’s what we learned:
From bean counter to strategic advisor across the business, the role of the CFO and finance leader is changing. And that means their to-do list is getting longer. According to our research, barely half of finance leaders are achieving the right balance across an expanding list of priorities that includes compliance, cybersecurity, sustainability, and more.
As the role of the CFO changes, so too has the technology available to help them and their teams focus on the things that really matter. Automation is at the center of this shift, taking on an increasing number of low-value, manual tasks that would otherwise keep finance teams mired in tactical work. But the efficiencies technology is unlocking also bring a need for new skill sets in the finance team to turn new data sets into strategic insight.
Yoana Land: “The CFO used to be very tactical in nature. But that’s changed. The pandemic has ushered in a much more digital world. That’s unlocked a huge wealth of data that CFOs now need to harness and take back into the business.”
Philip Peck: “Automation has streamlined a lot of processes that used to be highly manual. Finance practitioners, freed from the lower value, manually intensive activities, can now focus on value-adding activities, whether that’s analyzing business performance or developing data-driven insight.”
CFOs are doubling down on their investments in technology designed to transform the finance department. The question they need to answer is how they make that investment stick and deliver the kind of value they are aiming for.
Respondents to our research said they were concerned about technical aspects of implementation, including integration with existing systems. Embedding relevant IT expertise into the finance department and prioritizing these skills can help teams meet such challenges head-on. But that’s only a part of the story, and technical issues are by no means the only concern CFOs have when it comes to realizing the full value of their transformation investments.
Technology is really only the catalyst and the enabler for change. The real transformation happens within the teams who are going to be using these technologies day-to-day. As automation performs more and more of the lower-value ‘back-office work, the role of the finance department is going to change at a fundamental level. Individuals within those teams will need to learn to look beyond the data in front of them and start to form an opinion they can then defend. That means focusing on elements like communication, intellectual curiosity, empathy, storytelling, negotiation, and collaboration. These aren’t necessarily skills that finance departments prioritized in the past, nor were they nurtured. Management has a significant role to play in making this transition as smooth and successful as possible.
Philip Peck: “For many organizations, the mind shift required to embrace, adapt, and adopt new capabilities available to them can be a 180-degree directional shift. Helping employees to cross that chasm often starts with a simple explanation of, ‘What’s in it for me?’”
Yoana Land: “For finance professionals today, knowing accounting and understanding finance is no longer enough. More and more, they’re going to have to possess strong digital skills and IT knowledge. There’s a lot more we should be doing to cross-pollinate the functions across finance, IT, and data intelligence.”
Linear thinking is the number one enemy of transformation. Finance leaders have to shake the mindset that if things aren’t broken, then they don’t warrant any attention. It’s a mindset that is fundamentally at odds with the environment in which businesses must now operate.
Events like the pandemic are thankfully rare. Nevertheless, these kinds of events are symptomatic of the world we live in, one of near-constant and seismic change that has the capacity to upend traditional norms. Businesses need to be thinking constantly about what they need to do today in order to be ready for tomorrow.
Our panelists felt that businesses are often guilty of spending too much time focusing on the technical aspects of transformation and too little time on the human side of change that will ultimately define whether projects are successful or not.
Getting individuals to see and understand the bigger picture is one of the most fundamental building blocks for any large-scale transformation initiative. Finance leaders need to be able to crystallize that vision and get people to embrace it at the 20,000 ft strategic level. They also need to ensure that this top-level vision cascades down effectively so that every individual impacted understands where they fit into the bigger picture, how they can contribute, and what the end goal will mean for them.
Not everyone will respond to change in the same way. Some individuals will be keen to embrace change. At the other end of the continuum, there are people whose instant reaction will be to repel change. For transformation to happen successfully, finance leaders need to have a clear understanding of where individuals sit on that scale and ensure that their approach to securing buy-in can be tailored to meet people where they are.
Philip Peck: “Never lose sight of your North Star vision; it guides decisions, it guides your change management programs, and it guides how you measure success.”
It’s well established that technologies like automation and AI can help businesses to reduce the costs associated with day-to-day operations. However, our panelists encouraged businesses to see pure cost savings as a by-product of transformation rather than the primary objective.
Instead, finance leaders should concentrate on success metrics that look at the amount of time and effort required to achieve outputs, whether that’s processing an invoice or pulling together a report.
Related to this, finance leaders should also evaluate the accuracy of data and information that is informing their decision-making. Time spent fixing errors and cleansing data is time wasted that employees could better spend elsewhere.
Finance leaders should also pay attention to metrics that point to the increased opportunities for value creation that come from reductions in time and effort. For example, businesses should be looking for evidence of increased collaboration between finance teams and other departments across the organization. They may also look at metrics that demonstrate regular and proactive engagement with suppliers.
Yoana Land: “Find KPIs that are simple and easy to measure. If change is constant, then you need to set KPIs that are going to be just as easy and relevant to measure in 5 years as they are today.”
Technologies like ChatGPT are going to fundamentally change what we do, how we do it, and when we do it. The ability of these technologies to function and deliver value relies heavily on rich and accurate data. If businesses want to leverage the benefits of automation and AI at scale, they need to start that journey now by investing in new approaches and new technologies that help them build a repository of clean, structured data.
One thing seems certain. The pace of change will only continue to accelerate. Emerging technologies like AI and automation are fuelling that acceleration. At the same time, they’re also triggering a debate over whether or not we need to start looking at a future beyond work. On this point, our panelists were united in agreeing that finance teams need to hold no fear of these technologies.
When it comes to gathering, sorting, and parsing information, automation and AI wins hands down. But there will always be a role for humans that are capable of looking beyond the data to derive genuine insight, especially if that insight extends beyond the confines of the finance department to deliver value to the wider business.
Yoana Land: “The finance department should be a one-stop-shop for information that executives and other parts of the business need for faster decision-making. Assessing the strength of the department is going to move much more to metrics aligned with a mindset that’s more focused on value creation.”
Dive deeper into the research conducted by CFO Dive and Tradeshift by taking a look at our research report here and make sure you didn’t miss out on a single insight by signing up to view the recorded webinar here.