COMPANIES & STRATEGIES - FINANCE & LEGAL

The future-proofing role of CFO



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“CFOs are expecting their people to be more agile and able to work cross functionally within the organisation, embodying the role of business partner expected from them,” the PwC Luxembourg "CFOs Priorities Survey" authors wrote.Illustration: Salomé Jottreau 

Is the role of chief financial officer (CFO) changing? And are companies leveraging this role enough to boost financial acumen across organisations, especially when it’s most needed?

When the pandemic hit, some organisations had to quickly shift to e-commerce or accelerate digitally in other ways, and facing the crisis forced many to rethink value chains or processes. A challenge for any C-suite, including the CFO, who normally handles all financial activities, from budgeting to forecasting, tracking cash flow and providing strategic input to the CEO.

US consulting firm McKinsey & Company calls the CFO “uniquely suited to provide the necessary combination of insights” in the next normal, with capability building across organisations as being relevant in the coming months. In its 2018 survey, 40% of CFOs “said they created the most value for their organisations through their strategic leadership and performance management. But less than half of the CFOs surveyed reported having the time to focus on capability building,” across their organisations or directly within a finance department.

How does this stack up in Luxembourg?

On CFO function

Seasoned finance recruiter and co-owner of DO Recruitment Advisors, Sinead O’Donnell tells Delano that in her 20 years doing such work, she hasn’t seen many true CFO functions--something worth prefacing in this essay. “We have a lot of finance directors that have the CFO title, but they’re generally managing the finance of the holding,” she explains. “They are less involved in the financial operations and the strategic element.”

In her experience, the CFO title might be useful in attracting candidates, even if the actual role function is finance director. She more often sees senior accountants picking up treasury and tax throughout their career journeys--“all the elements that makes a finance director CFO, but in essence they don’t have that charismatic, influential skill to be able to pull people together and bring [them] along.”

The true CFO roles tend to be in the larger, homegrown companies--think SES or RTL--and lately also in smaller fintechs, O’Donnell adds.

Four main priorities

In its “CFOs’ Priorities Survey”, published in February 2021, PwC Luxembourg outlined four main priorities of 36 CFOs through interviews conducted in 2020, which included talent management, technology, process alignment and optimisation.

Topping these was driving performance with forward-looking insights. 80% of CFOs surveyed planned to use profitability analysis and business intelligence to contribute to growth.

PwC Luxembourg partner Anne-Sophie Preud’homme took over CFO responsibilities herself as of 1 January 2021 and says that since the pandemic began, there’s much more interaction between the CFO and board, particularly around cash management, but also a much more intense focus on forecasting models.

“We had to elaborate some scenarios based on what we earned last year in terms of possible economic scenarios, to see what the impact could be on our own organisation,” she says.

The evolution she witnessed was a more future-looking perspective with scenario planning, with the CFO “more involved in strategic decisions rather than observation of the past or current situation.”

Digital for dashboards any beyond

Such innovative tools and dashboards--which Preud’homme calls “crucial”--require the right tech tools, of course. 67% of CFOs ranked the use of emerging technologies as one of their top priorities in the PwC Luxembourg survey.

O’Donnell adds that, like plenty of other functions, data analytics skills are becoming increasingly important in making candidates more attractive to companies, and in the past two or three years she has noticed more demand for this technical capacity in CFOs as well.

Yet for François Masquelier--chairman of the Association of Corporate Treasurers of Luxembourg (ATEL) and CEO of Simple Treasury--there may still be a gap. “Enough companies forget that over the last year they should have modernised their CFO function, and they were not doing so,” he explains.

The crisis forced organisations to realise the importance of real-time information access and reporting. And he sees treasury in real time as critical. “Treasury is the most important function in finance [by] far [that] needs to be done immediately; if not, it could have a huge cost to a company. Bankruptcies do not come from accounting losses, it comes from a shortage in cash liquidity.”

The good news? “The new generations are coming, and for them it’s more natural to have easier, faster, smoother processes... maybe they will push for more simplification and automation, so it’s good to also welcome the new generation.”

One company that hopes to go even deeper in its digital transformation in the years ahead is Automobile Club du Luxembourg (ACL), according to its CFO, Christiaan Hoefhamer. He cites the company’s digital transformation as part of the reason ACL witnessed membership growth in 2020, despite it being a tough year which saw some of its departments having to resort to part-time unemployment measures, given the nature of their work. Hoefhamer sees digitalisation as key not just to meet needs of its 190,000 members but also for its B2B clients.

Employees as “business partners”?

For plenty of CFOs, however, it isn’t just about the numbers. “Overall, CFOs are expecting their people to be more agile and able to work cross-functionally within the organisation, embodying the role of business partner expected from them,” the PwC Luxembourg survey authors write. Upskilling, they argue, not only keeps transformation on track, but it “allows your people to understand the benefits of technological evolutions in their work, making their job more attractive and so they embrace changes instead of resisting them.”

This has been one of the goals at ACL as well. Over the last few years, the organisation “focused a lot on human capital... on the adequacy of the competencies and skills of our employees,” Hoefhamer says. The CFO adds that there has been talk about “global advisors” at the organisation. “It’s in our strategy to develop the competencies of our employees that they really become advisors to all our members, not only providing one document or another.” Developing what he calls a “club spirit” he believes will not only provide them confidence but also be beneficial to members.

Hoefhamer says there was another concerted effort: for finance and department managers to work closely together during the changing times. “What I noticed here was much more sensitivity for the operating costs, which has been shared with the managers of the departments effected...together with the department managers, we have really monitored the development of our activities, we can see how it develops during this difficult period more closely, and together we manage really to reduce operating costs on a more careful way.”

Strategy versus culture

Nick Yeates took on the role of Kneip CFO in October 2020, although he admits his route to the position is probably uncommon. He picked up a wide range of expertise in accounting, finance, sales and commercial strategy and beyond, having consciously built his career to learn such breadth through roles in large corporates but also startups. And he has that charisma O’Donnell speaks of, to boot.

Yeates says he and Enrique Sacau, Kneip CEO since 2020, “think alike, in terms of have a vision, build a plan, start to execute against the plan,” and then correct the course as necessary. But the CFO quotes management consultant Peter Drucker who famously said, “Culture eats strategy for breakfast.”

“The strategy is what will happen if you execute your plan, but the culture is what enables you to deliver against that plan,” Yeates adds. “For me, it’s super important that we focus on culture, on the employees and the talent, because that’s what enables you to deliver that plan. Your culture leads to strategy...one enables the other.”

For him, a focus on culture “significantly de-risks and enables you to control costs a lot better.”

Kneip had the advantage when covid-19 hit of already having a technological mindset, given its cornerstone being reporting solutions and data management for the asset management industry--all the more critical when travel restrictions were imposed, which impacted travel between Kneip’s Luxembourg and London offices.

Yeates says customer mindset is also changing. “The vast majority of people are very productive when they work from home, and it has opened employers’ eyes to the potential there,” also in terms of potential cost savings, given, for example, the need for less office space with remote working.

Similar to ACL’s Hoefhamer, Yeates sees customer focus as “paramount”. But he also sees business culture driven by a sort of “accounting literacy”, saying that many struggle with even the difference of costs versus cash, impacts on a P&L, etc. In his role, he wants the finance group “to become the trusted financial advisor to the business”, but it goes both ways.

“Finance should have a seat at the table, and the only way you do that is by the finance people understanding the business better, and the business understanding more about what finance does and its impact on the wider business.”

He uses an example of revenue forecasts for sales: even if the financial expert provides the data, it’s worth listening to the sales expert, who can provide context and validate those forecasts. “If you just leave it to either one of those departments on their own, you’ve probably come up with the wrong answer. But the two of them working together... give you a great chance of delivering what you expect to deliver.”

This article was originally printed in the Delano July 2021 print edition.