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Why CEOs Should Put CFOs At The Helm Of Digital Transformation

Many small and midsized businesses in the San Francisco Bay Area and Silicon Valley are at various stages in applying technologies such as cognitive computing, blockchain, robotics, and artificial intelligence (AI). Some are automating discrete manufacturing, service, and compliance processes; others are digitizing at the core of their business models. The far-reaching capability of today’s digital innovations is one reason why technology spending decisions are moving into the realm of corporate strategy, more so than ever before. There usually is some room for trial and error, but waste can be very costly.

For CEOs, it is critical to define and implement a digital strategy and allocate the resources needed to compete and deliver shareholder value. To effectively execute this, CEOs need a trusted ally in the C-suite, one who can help ensure sufficient capital and lead the organization through the digital journey. In addition, it can serve the CEO to have an arbiter among members of senior management and the board, one who can bring an enterprise-wide view to decisions. Altogether, these requirements point to an experienced Chief Financial Officer (CFO) for this essential and complex role.

For many CFOs, leading a digital transformation is a natural progression. During the last decade, the responsibilities of the CFO have expanded beyond traditional financial and accounting oversight into areas requiring the skills of a catalyst and strategist. In a recent Deloitte CFO Signals survey, 47 percent of 172 CFOs from large North American companies, most with more than $1 billion in revenue, said they had either direct responsibility for strategic planning (35 percent), or through someone who reports to them (12 percent). In addition, 36 percent of CFOs indicated they had responsibility for IT, with 30 percent citing direct reporting. CFOs also rated IT as the most likely function to be added to their responsibilities in the future.

Consider the following range of experiences that overall already define the CFO’s role:

Understanding the challenges of data governance and visibility — Organizations continue to struggle under the weight of too much data, and much of their companies’ data lacks integrity. Realistically, creating an organization that works together off of accurate view of their business requires a holistic understanding of the organization’s data needs and output from a strategic and operational standpoint. With CFOs central to information flowing not only from finance but also marketing, sales, research and development (R&D), and purchasing, CFOs have the broadest visibility into their organization’s data infrastructures. Such visibility position CFOs to serve as their CEOs’ eyes and ears when determining future data needs for digital transformation and resource requirements.

Aligning budgets with strategies — CFOs already play the principal role in strategic financial analysis and planning, in addition to capital and resource allocation processes. That experience can be even more critical in an environment of mounting requests for investments in innovation and new technologies, all competing for limited resources. Working with others in the C-suite, CFOs can provide a balanced and measured view in determining what digital and other IT investments best align with the organization’s strategic priorities. As the owner of the capital allocation process and steward of the organization’s assets, CFOs have a duty to help ensure IT and all other resources are allocated efficiently, and that their organizations have the capital necessary for investments to drive business performance and growth.

Telling the story to stakeholders, including the Board— Boards increasingly need to understand technology priorities and key decisions, from a strategic, investment, and risk standpoint. For example, with cybersecurity a board-level priority, it is critical that directors be involved at the outset to understand how a digital transformation could protect the organization’s core assets while creating a pathway for growth opportunities. It already is the CFO’s responsibility to communicate financial priorities to the board. Having the CFO’s oversight of a digital transformation can provide directors added assurance that they are kept informed of decisions that can impact their own governance duties.

In addition, the CFO can be instrumental in shaping opinions about the organization’s digital plans and priorities among investors and other external parties. For example, the CFO can support the CEO in addressing questions on how a digital transformation could support the organization’s long-term business strategy. The CFO also can be helpful in answering questions about the costs of digital efforts and how those could be managed.

What CFOs Need From Their CEOs

CEOs can help CFOs be more effective in spearheading a digital transformation in a number of ways. It is important for CFOs to have access to resources to keep current on digital infrastructure needs beyond finance, as well as the state of the market. CEOs may consider having some segment of IT report directly to the CFO. Whether the CIO reports directly to the CEO or CFO varies by industry and organizational structure; however, having IT specialists in areas such as data analytics or robotics process automation integrated into the finance team can give CFOs direct access to employees who can help finance understand how new technologies can be adopted and utilized. It can also bring down the silos that often separate IT and finance.

Similarly, the finance function should be encouraged to embed finance professionals within the IT organization. Such coordination can go further in giving CFOs and their teams a deeper understanding of how digital technologies can drive the business, with insights into what is working well and what isn’t. It can also give the CFO a clearer view of technology investments and how they are generating value.

When CFOs lead an important initiative or a complete transformation, they have the opportunity, with the support of their CEOs, to act as a catalyst for change. We know that change can be difficult, and employees at the business unit level, as well as in corporate, can resist new processes and technologies in favor of what’s familiar. CFOs, particularly in the case of large-scale undertakings, are often the ones tasked with catalyzing cultural change in their organizations, using financial and other levers to drive the shift.

Communicating new priorities can be that much more effective when the CEO visibly supports the CFO’s leadership and priorities. Longer term, a shift in the organization’s culture will likely require changes to the talent model to attract the needed skillsets to utilize emerging technologies. On this point, the CEO and CFO should coordinate closely with HR and other functions. Having the right model for the workforce of the future is critical to success.

Getting the Right CFO for the Job

It is the job of the CEO to hire the right individual for the CFO’s role, and someone who not only can manage finance and operations, but also work with others in the C-suite and the businesses to create and execute opportunities that emerging technologies can provide the enterprise.

When recruiting a new CFO, CEOs might consider what experience in leading a major transformation the candidate can bring to the table. CFOs who are fluent in digital technologies and have experience leading transformational initiatives are increasingly sought after by boards and CEOs. Successfully overseeing an ERP implementation, and even more so a digital expansion, can be an important indicator that a CFO candidate is a proven leader.

At so many levels, CEOs and CFOs are already partners in driving initiatives to improve top- and bottom-line results. Digital transformation is yet another opportunity for them to work together to drive business and shareholder value.

If you are a business owner or CEO within the San Francisco Bay Area or Silicon Valley, in need of an experienced part-time CFO to help your company implement new technologies, improve operational processes, cash flow, accounting and billing process management, as well as profit margins, our highly skilled outsourced CFO services provide direct access to high-quality expertise in a cost-effective manner.

CFO Growth Advisors (CGA) specializes in unique and highly effective growth strategies that are tailored to help companies grow more quickly and efficiently while improving sales & profit growth. Contact us to learn more.

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