The CFO’s role is broader and more complex than it was even two years ago, with greater responsibility and scope to drive change, according to the results of a survey by McKinsey. More functional areas now report to CFOs, with an increase from 4.5 in 2016 to an average of 6.2 today. This is according to McKinsey's latest global survey on the role of the CFO. And there have been large increases in responsibility, with more CFOs now saying they are responsible for board engagement (42 per cent in 2018 compared to 24 per cent in 2016) and twice as many (28 per cent) are now responsible for digital activities such as business process automation, use of Cloud computing and analytics.
McKinsey's interpretation of the results suggest there are three ways for CFOs to lead substantive change in their organisations:
- by actively heading up transformations,
- leading the charge toward digitisation, and
- building the talent and capabilities required to sustain complex transformations within and outside the finance function.
Here are six of the key findings from the survey:
1. Expanding responsibilities
The main functional areas that report to the CFO are risk management and internal audit (67 per cent and 58 per cent respectively), but CFOs are now far more likely than two years ago to be taking responsibility for digital activities and board engagement. Notably, CFOs are now less likely than two years ago to be responsible for areas such as regulatory compliance, M&A transactions and execution, IT, procurement and cybersecurity.
2. Diverging opinions on CFO contribution to value
CFOs believe they create most financial value for their organisation through their strategic leadership and performance management (such as use of metrics, value management and setting incentives/targets). However, other non-financial executives surveyed think that the CFO role contributes most in the areas of traditional finance roles (accounting, controlling, analysis and planning) and cost and productivity management across the organisation.
3. Providing value during organisational change
During organisational transformations, the three most common functions that are managed by the CFO are:
- measuring the performance of change initiatives,
- overseeing margin and cash-flow improvements, and
- establishing key performance indicators and a performance baseline before the transformation begins.
The survey's respondents also identified the same three areas as being the most valuable functions for CFOs in future transformations.
4. Room for a bigger role in transformations
CFOs could have a wider role as 'change leaders' according to McKinsey. The survey found that half of the organisational transformations initiated by CFOs in recent years were within the finance function, while 23 per cent of respondents said their CFOs initiated enterprise-wide transformations.
5. Championing digital processes
More than half (54 per cent) of the respondents reported that up to a quarter of their finance organisation's work has been digitalised or automated in the past year. And 70 per cent said that there were 'substantial' or 'modest' returns on investment generated in the past 12 months from the digitalisation or automation of the finance organisation. McKinsey notes that overall, the adoption of technology and automation within financial functions is too low and there is a big opportunity here for CFOs to push for more digital adoption.
6. Nurturing financial talent
The CFO's role in talent strategy and capability building is increasingly important and the survey's respondents said it is one of the CFO's most value-adding activities. Compared to 2016, the CFO is now considered to have far more influence over developing/recruiting/retaining employees with skills and capabilities across all key financial functions.
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