By Megan O’Brien, Brainyard Finance & Business Editor
2020 has posed unique challenges to financial executives. These leaders must not only address immediate concerns — like financial solvency, operational disruption and the wellbeing of staff — but also maintain a longer-term, strategic view.
As such, CFO Masterclass was the theme of the 10th annual CFO Leadership Conference, hosted in mid-November by the CFO Leadership Council and the MIT Sloan School of Management. The agenda included over 70 executive speakers from the likes of Robinhood, GetixHealth and the San Diego Padres.
Our original intent was to compile the most compelling — and likely disparate — findings from the conference. Yet, despite the varying session focuses and dissimilar speakers, one salient, overarching theme came to light repeatedly: The position of the CFO is changing as these execs embrace their role in technological adoption.
So instead, we tracked this trend, noting the conference’s most compelling insights, best practices and advice for finance executives and their evolving role in building out their company’s technological capabilities.
Brainyard’s Fall 2020 State of the CFO Role Survey found that the role of the CFO is shifting significantly: CFOs are juggling more responsibilities in recent years. They’re expected to have skills that were traditionally atypical of CFOs (hello, sales and marketing) and to participate in more areas beyond finance and accounting.
Indeed, CFOs are playing a pivotal role in both guiding their organizations through the current crisis and setting them up to thrive in the “next normal,” said Gina Mastantuono, CFO of software firm ServiceNow.
“CFOs are no longer just the bean counters looking backwards and holding the checkbook,” Mastantuono said. “The role is now really about leadership and about ensuring that you are strategically at the table when decisions are being made. It’s about being able to understand what the growth drivers are of the business. I think that finance leaders today have to really shift their mindset to being much more than just reporting out the numbers.”
Raul Vega, CEO of management consulting and outsourcing firm Auxis, corroborated the shift, noting finance execs’ role in the oft-touted “digital transformation.”
A quick aside: Phrases like “digital transformation” and “digitalization” are used often and tend to be purposely vague, which warrants some clarification. Because businesses differ in their respective technological needs, these terms serve as a catchall for all technology efforts within an organization, whether it be a change in business process, business model, domain or culture/organization. Thus, the “digitalization” of a company could involve a wide range of projects like implementing or enhancing online shopping options, installing virtual collaboration platforms for internal use, automating accounts payable or transitioning from snail mail to email campaigns. And CFOs are playing a bigger role in all of it.
“I think it’s a very different role than [CFOs] used to play when IT was more limited,” Vega said. “It comes down to [finance] being at the axis of strategy, information and business processes.”
CFOs are playing “a very different role than they used to when IT was more limited. It comes down to [finance] being at the axis of strategy, information and business processes.”
In a session on digitalization as a competitive advantage, Mastantuono emphasized that, finance leaders and their teams are uniquely positioned to aid in the technology adoption process because of their role and mindset Vega said, adding that many technology implementation initiatives struggle or fail when they go over budget and don’t deliver value because a “technology-focused” approach is taken. However, finance is more grounded in business processes, value and data, he said — focuses that can prove immensely beneficial to the technology research and integration processes.
CFOs “need to transform their departments to get out of being transaction-processing shops and get them to be much more commercially-oriented and more tech-savvy,” said Vega.
It’s clear that the CFO is moving out of the backroom and into the strategic spotlight — and it’s clear that strategy now involves more technology adoption and communication skills than ever.
Regarding this shift, the CFO Masterclass speakers have some practical advice:
When it comes to technology updates, the knee-jerk reaction is to delegate solely to the IT department — or to make updates in various departments without collaboration. However, when you do little technology upgrade projects in different pockets of the company, you end up having a bunch of different systems that don’t talk to or align with each other. And the business ends up spending copious amounts of money to maintain these separate, disparate systems.
“A clear path to ensuring that you’re not going to have success is thinking that it’s one person’s job: the CIO’s,” said Mastantuono. “It’s really a cross-functional collaboration, because it touches every single part [of the business].”
This highlights the importance of a technology strategy roadmap, which aligns both current and planned technology resources and programs to the business growth strategy and objectives of the firm.
Smaller companies, while less prone to operating in silos, can still fall victim if they don’t take steps to ensure cohesiveness. Prior to adopting new technology, executives need to think of the big picture across functions: Which systems do you/will you have in place in areas like marketing, sales, operations, HR, logistics, etc.? Will the new adoption fit into that ecosystem?
Mastantuono reiterated the need for companies to make the leap quickly. Equally important is implementing permanent systems, not just quick fixes with which to get through the immediate crisis.
“If we think that everything was going to go back to the way it was before, I think we are missing the boat and not managing risk appropriately,” she said.
Just as technology adoption isn’t a one-department job, it shouldn’t be a one-department budget. As technology comes to the forefront of executives’ agendas across functions, the way businesses think of IT cost models needs to shift.
Vega said most organizations that his firm works with are “underspending in IT. And the reason is that they tend to have outdated ways of looking at IT. They look toward IT’s budget [to fund all the] labor, hardware, software, etc. for the company. It’s essentially all on the IT department.”
That approach, said Vega, is fundamentally flawed. Instead, focus should fall upon the services that IT is providing to the business. Since the business is usually the one demanding those services, the specific department should handle the investment.
“For example, let’s say you’re investing in RPA [robotic process automation], and you look at it as an incremental IT investment,” he said. “But then you get this benefit in operations. Then they both should be going into operations: the benefit and the investment.”
Vega’s advice is solid for larger organizations in which years of budgets have institutionalized ideas about what IT systems should do and how they should be acquired and maintained. Smaller businesses, meanwhile, will think differently about new spending since such projects are less common and therefore higher in profile.
Overall, though, Vega’s suggestion will help businesses of any size plot their expanded technology use: Think beyond the obvious, core benefit of the project and onward toward which other benefits will accrue and which next steps or use cases might materialize.
As CFOs take on a more strategic role, some of their “techy” knowledge may need an upgrade. CFOs are expected to not only greenlight expense and investment but also hold the business accountable to the expected results. If they don’t understand the basic technology and concepts at play, it’s going to be much harder to be a part of strategic conversations with the CEO, boards, vendors and remainder of the C-suite.
“Don’t delegate down all the technology work,” said Mastantuono. “Instead, really spend some time learning it. You don’t need to get in the weeds on it, but spending some time learning it will go a long way.”
It’s usually nuances that separate highly successful projects from ones that could have done better. The more CFOs get the nuance, the better they can be good stewards of the company’s money.
CFOs can “get out of their comfort zone” and learn more about emerging technologies by attending IT conferences and webinars or reading technology-focused publications, suggested Joe Falcao, CFO of Thrashio, an acquirer of Amazon third-party brands.
Vega recommended that CFOs specifically focus on IT governance practices in their knowledge-gathering, recommending the book “Enterprise Architecture As Strategy” for its insight into the fundamental processes and the big picture. Secondly, he advised gathering technology-savvy advisors or colleagues that can serve as a sounding board. Cultivating professional relationships with CIOs and other technology professionals is mutually beneficial and doesn’t cost more than an occasional cup of coffee.
The Masterclass speakers agreed that while becoming expert in all emerging technologies is a fruitless goal, CFOs should be proficient in the area.
“You don’t need to be a 10 in terms of technology [knowledge],” Mastantuono said. “But you do need to be better than a five, so you should be spending some time in that area right now.”
CFOs are in a unique position: They are the ones who will eventually sign off on investments and ensure there’s a clear path to return on those investments. A common CFO mistake, though, is waiting to participate in the technology investment process until it has already been implemented — aside from writing the initial check, of course. Instead, the finance team should be involved from the beginning.
Many of the Masterclass’s CFO speakers detailed their involvement in both the adoption and implementation processes — and their respective best practices for each.
Technology projects don’t happen in a vacuum. Without buy-in from the rest of the ecosystem, the initiative will be significantly less likely to succeed and serve everyone’s needs. “If the team is not aligned, it’s the beginning of the end,” said Jonathan Speed, venture partner at Waterman Ventures.
As Speed put it, it’s easy to “drink the vendor Kool-Aid.” Everyone loves the big demos and the fancy technology. But just like the Kool-Aid Man comes crashing through, so will reality. When the glitz fades, your company will be stuck with the product — and the important questions that come with it.
This is where knowledge of technology will be particularly useful. That knowledge will help you ask smart questions of the IT team to identify any blind spots, biases or other issues that may be present. Are they in love with a certain vendor or system at the expense of finding the best solution?
Ultimately, it’s the employees who will be using the tool. Listen, learn, and vet with the team to find the right tool. Don’t find a tool and then force it onto the team.
Your network of professionals who have experience with the product and vendor in question is bigger than you might think. Colleagues, professional groups and other, perhaps unconventional, contacts can provide valuable insights. For instance, Speed cited engaging his bank, law firm and accounting firm as resources, as they can give great overviews, insight into what their companies and clients are using and the overall lay of the land. Think about it like verbal Yelp for emerging technologies.
It’s one thing to have the tool. It’s another to get everyone trained on the tool. In order to meet the measurable business objectives of the investment, ensure the team is trained to not only use but fully optimize the tool.
If employees don’t have any incentive to deploy or let others know when something’s going awry with implementation, the executive team is going to spend a lot of time revamping in order to meet the goals of the investment. Incentives could take the form of compensation, work perks, prizes, recognition or even just the ability to work and innovate faster. Some experts recommend experimenting with gamification to “make it fun and create a bit of buzz around the technology and motivate and engage people.” Employees might accumulate points, gain financial incentives or achieve new levels of “status.”
You need buy-in from the smart, respected people within the organization. If they believe the solution is the right way to solve your company’s issue — and express that — others will follow.
Ultimately, considerations from a procurement and implementation standpoint boil down to a simple question, according to Falcao: “Is this the right thing for your company? Or is this another shiny toy in your toolkit?”
Lastly, it’s time to overhaul the age-old stereotype of CFO as the fastidious bean counter.
“I think you can often find yourself with people assuming that because you’re the CFO, you’re gonna say ‘no,’” said Jill Woodworth, CFO of Peloton. “‘No, you can’t do this, no you can’t do that, no that’s above the budget.’”
Over the past several years, Woodworth has trained her finance team away from the risk-adverse, “no” mentality toward openness in innovation. Leaders in other departments have since approached her to compliment the finance team’s commitment to learning why a team needs an investment and creating customized models around that, vs. simply going through traditional, rigid finance processes.
Jason Warnick, CFO of the investing and trading app Robinhood, advocated a similar approach.
“[Instead of] being the team that says, ‘Slow down, we shouldn’t spend this much,’ be a real advocate for planting seeds of opportunity and doubling down investment when you see that you’re moving in the right direction,” said Warnick. That way, “you end up with business partners seeking you out because they don’t look at you as somebody who is more administrative; they look at you as somebody who can be a real advocate for investing and making improvements in the business that will deliver value over time.”
Ozan Kaya, CFO of ecommerce shipping service ShopRunner, cited a time when the company’s sales team wanted to try pushing subscription boxes as part of ShopRunner’s offerings. Instead of an automatic “no,” Kaya gave them a budget, resources and access to the company’s member base — as well as data and feedback — to play out the proposal with defined outcomes and boxed-in risk. When it became clear the investment would not work, it was a collective “no” from the organization, not just from the finance department. While acknowledging that not every investment proposal can go through a trial run, Kaya suggested that facilitating some helps promote innovation and creativity.
Instead of being a “no” CFO, consider becoming a “why” CFO. Ask questions about the investment proposal. Work to understand the goals behind it and facilitate innovation across the business.
Steve Schoch, CFO of 23andMe, summarized CFOs’ shift well:
“The aspirations of a CFO should certainly be to influence well beyond the walls of the finance function. [Finance leaders should aim to] be a part of the fabric of all decision-making – strategic and operational — at the company, because they have the best view of what’s going on.”
The role of finance is expanding, fast. Are you ready to fill it?