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Reshaping the Role of the CFO

According to a recent survey, conducted in two parts, by Grant Thornton LLP, the current pandemic has forced chief financial officers (CFOs) to become “change agents” and “strategists” — while still overseeing their day-to-day finance responsibilities.

The initial survey questionnaire was conducted in February 2020, when most U.S. workplaces were still open. Unemployment was at a record low and the economy was on a positive trajectory; it then came a second questionnaire in May 2020 after the COVID-19 pandemic was in full swing.

Besides the changing focus of CFOs, the survey revealed widescale delays for innovation projects, a renewed appreciation for business strategy skills, cybersecurity expense increases, and love for advanced analytics.

The survey also showed that the role of the CFO shifted when the pandemic hit. In both surveys, participants were asked how much of the CFOs’ time would be spent in these four roles: strategist (crafting corporate strategy); change agent (generating business value); producer (standardizing and automating transactional processes); and guardian (standardizing control and compliance processes).

Survey respondents in February reported that CFOs’ time was divided relatively equally across the four roles. But by May that balance had shifted in response to the COVID-19 crisis: strategist and change agent roles were taking more of CFOs’ time compared with the producer and guardian roles.

Despite the apparent shift to more forward-looking tasks, the pandemic forced a large majority of CFOs to put off or change their plans for innovation projects. Eight out of 10 surveyed CFOs had delayed or reshaped innovation projects in May. Sixty-two percent of the respondents reported that the COVID-19 crisis had delayed their transformational projects while 19 percent said the crisis had reshaped their projects and they were pursuing a different approach. The remaining 19 percent reported that the crisis had accelerated transformation projects.

Delaying and reshaping innovation projects doesn’t mean they are extinguished. More than 90 percent of 335 CFOs polled during a Grant Thornton webinar in June said they planned to continue to innovate, even during the COVID-19 downturn.

Advanced analytics and artificial intelligence were favored categories of automation technology in both the February and May surveys.

A majority of the CFOs in the May survey reported that their plans for implementing automation technologies had not been delayed by the pandemic. More executives, 29 percent, slated advanced analytics for accelerated implementation than they did any other category of technology.

The February survey had asked CFOs when they expected to implement a list of specified automation technologies. The majority of respondents, 55 percent, had already implemented advanced analytics.

In a December 2019 recession preparedness survey by Grant Thornton, 70 percent of respondents reported plans to increase their digital investments in innovation/technology, digital transformation, and/or cybersecurity, even amid growing signs of a slowdown. In the February CFO survey, about 70 percent of the senior finance executives reported they had either implemented key emerging technologies or they would be implementing them within two years.

When asked in May about how expenses would change over the next year because of COVID-19, cybersecurity had the highest percentage of executives projecting increases, 44 percent, followed by IT/digital transformation, 40 percent, training and development, 22 percent, operations, 21 percent, and marketing, 19 percent. Not surprisingly, the categories with the lowest projections for expense increases were travel, 4 percent, real estate, 6 percent, recruiting, 7 percent and workforce, 7 percent. Ninety percent of the CFOs projected their travel expenses would decrease.

Fitting with the finding of CFOs seeing themselves in more strategic roles during the pandemic, the finance executives surveyed held business strategy skills in high regard.

Surveyed CFOs saw business strategy as an important skillset both before and after the onset of the pandemic. Operations management skills were nearly as valued as business strategy skills in the pandemic crisis environment. When finance executives were asked which important skill they had leveraged because of the COVID crisis, the most-cited answer was business strategy, chosen by 34 percent of the CFOs, followed by operations management at 29 percent. Data analytics and innovation/entrepreneurship were tied as the third-most-cited top skills drawn on during the pandemic, at 10 percent.

The February survey asked a related question — what were the most important skillsets within CFOs finance function? Data analytics and business strategy were the most-cited answers, by 23 percent and 22 percent of the respondents, respectively, followed by application development, 17 percent and customer experience management at 11 percent.

There’s no doubt that business strategy development was not the only added responsibility for CFOs arising from the pandemic-induced recession.

Among the short-term priorities and lasting impacts of the pandemic, the CFOs in the May survey individually listed:

• reduced capex • the potential to purchase less-well-capitalized companies • reduced cash flow impacting debt covenants • resource prioritization in the face of constrained supply chains • long-term implications of an increasingly mobile workforce on office space, recruiting, and travel.

Most of those impacts will continue to have a large influence on what CFOs spend their time on in the coming months. Respondents said they were seeing CFOs branching out into new areas of organizational leadership, such as leading production and processes, managing layoffs and shuttering operations, working with business units to establish multiple manufacturing sources, managing remote workforces, partnering with the community, and interacting with investors.

Within the traditional scope of finance, new areas of focus for some finance chiefs included acquisitions and divestitures, moves to preserve cash and resources, pandemic financial-impact models, investment risk, forecasting and budgeting, payments and cash flow management, risk mitigation, liquidity management, revenue development, and cost reduction. Paycheck Protection Program documentation and analysis also appeared on the list.

Among the new areas of focus within technology leadership, finance executives listed moving all functions to paperless, implementing work-from-home technologies, and overseeing IT and security. And one executive listed a-not-unfamiliar CFO role: therapist.

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

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