Unpublished research reveals that a handful of dynamic commercially minded CFOs are shaking up a once risk-averse profession, finds Ben Walker
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Finance departments are rarely renowned for their swashbuckling approach to business. More likely, their executives are regarded as cautious, compliant, risk-averse tacticians who are more focused on details and problems than opportunities. Yet this era could be coming to an end – the evidence is that a new breed of ‘big picture’ CFOs is starting to emerge. New research – seen exclusively by Dialogue – shows that a groundbreaking troop of commercially minded, dynamic, forward-thinking financial leaders are breathing new life into a once-retrospective profession.
The findings come from a study convened by US professional body The CFO Alliance and undertaken by experts using a leading edge organizational impact instrument, The GC Index. The study comprised in-depth analyses of 20 senior finance professionals from three US companies. The companies covered by the study operate in different sectors of the economy – housebuilding supplies, asset management and software.
Evidence from the GC Index database in part supports the stereotype of finance executives as pragmatic, task-focused tacticians whose attention is on detail and problems rather than ‘big picture’ commercial opportunities.
Yet results from the study also revealed a handful of dynamic, forward-thinking CFOs who have brought transformational change to their organizations. “These individuals have the potential to add a very different sort of commercial value to the businesses that they serve – if their capabilities are recognized and nurtured, and if given the scope to turn ideas into reality,” Dr John Mervyn-Smith, chief psychologist and director at The GC Index, says.
Strategic thinking in finance is crucial. Modern, forward-thinking finance chiefs use the data they analyse to recommend courses of action for the whole business, providing management advice for their chief executives as well as other departmental heads. The best finance leaders propose strategic courses of action for the business based on hard commercial data and their analysis of the numbers.
Yet there remains some way to go before the profession as a whole transforms itself. Among the five role preferences categorized by The GC Index – play maker, game changer, strategist, polisher and implementer (see graphic) – strategists were the most poorly represented among the finance executives assessed in The CFO Alliance study.
The findings were stark – not a single professional in the focus group exhibited a clear preference for the strategist role. And only one of the respondents demonstrated a strategist score of greater than seven out of ten. And that, says GC Index founder Nathan Ott, is not untypical of the profession.
“In a normal distribution of all professionals, we’d expect at least four or five out of 20 to record strategist scores of seven or greater,” Ott tells Dialogue. “Would another focus group of finance professionals of a similar standing yield more strategist types? Given what we can see from our data and work with organizations, I doubt there would be much difference. But the important question is what does this actually mean?”
If the dearth of strategists among finance professionals found in this focus group is normal, what does this say about the profession as a whole? Nick Araco Jr, chief executive of The CFO Alliance, says the challenge lies with an industry that is coming to terms with the need to play a more holistic role across business functions, and which may not, in the past, have promoted or nurtured strategic thinking. “I somewhat disagree with the inference that strategists are in short supply among finance executives,” says Araco Jr. “Rather, the advancement and opportunity for finance professionals to demonstrate their strategic mindset is just being brought to bear, as organizations come to realize that the principles and foundations that form the basis of financial analysis can be used to set – and execute – corporate growth strategies.
“It’s only because finance is now more proactively moving across what were once considered siloed functional lines that their strategic abilities are being brought to the forefront of corporate decision-making.”
There is certainly room for optimism that finance can identify and develop its professionals’ enthusiasm for company-wide thinking. The focus group revealed that, in two of the companies surveyed at least, employees’ preferences were diverse – pointing to potential for developing wider roles beyond the core competencies of traditional finance professionals.
The focus group’s preferences were something of a mixed bag (see case studies) but tended towards task-based roles – implementer and polisher – while several professionals exhibited play maker tendencies. Crucially, some exhibited strong game-changer preferences, showing that people with a preference for shaking things up and thinking of new ways to advance their company can be readily found within finance departments.
“It’s important to remember that The GC Index measures people’s current preferences – not their potential,” says Mervyn-Smith. “If chief financial officers can assure their teams that strategic thinking will be valued by the company, it is likely that finance teams’ profiles will change over time – as the market places a greater premium on a strategic approach.”