With technology and the role of the CFO evolving quickly, it’s important for senior financial executives to monitor trends, enhance their skills, and collaborate with their operational peers.
Financial Executives International Daily spoke with Arlen Shenkman, senior vice president and CFO at SAP North America, at the SAPPHIRE NOW and Americas’ SAP Users’ Group (ASUG) Annual Conference in Orlando, FL, about the digital transformation of finance, the key challenges facing CFOs today, and how the role of the CFO is evolving.
FEI Daily: CFOs are doing things they never could before, thanks to digital technologies, but it’s extremely difficult to keep up with the constant changes. How do CFOs keep a firm grasp on new trends and technologies?
Arlen Shenkman: I think CFOs not only need to understand the current technology their business relies on, they need to be really attuned to what their competitors are doing and with new offerings are in the marketplace. Because not only do they have an opportunity to help them change the way they operate their business, they also have the opportunity to make their job easier and give them more insight into what’s happening. I spend a lot of time thinking about how we can gain better controls of the company, and how can we get better insights into the business we’re doing.
FEI Daily: How can a CFO work more strategically with their business’s finance organization?
Arlen Shenkman: I think that it’s really important to be proactive in what the strategy is for a business unit. Great finance people are seen as partners of the business. And they go beyond being a partner, they really help drive change. It’s not just about the numbers for the finance organization, it has to be about how the numbers fit in the strategy and how the strategy can be shaped by the performance of the business.
FEI Daily: How does the CFO become more digitally engaged while also simplifying their daily processes?
Arlen Shenkman: The more you use digital technology, sometimes the more you find it can be challenging. And particularly for people who didn’t grow up using Facebook and LinkedIn and Twitter. It does require a bit of effort. But I think until you really fully embrace the power of network technology and the way you can shape how your company is seen and the way you’re seen within your organization as leader, it’s really hard to understand the impact of the digital transformation.
It starts at a personal level and morphs into a professional level, and then ultimately it’s “how can digital processes affect the perception of your business but also affect its operations and its performance?” There’s really an enormous amount of value that you can find in your company, whether that’s changing the processes, changing your business model, or simply changing the way you can understand your business through Big Data or through other analytical solutions. It can have a major impact on your long-term success and I think some of that is driven by the acceleration and the change in business we’ve been seeing continually over the past 10 years.
FEI Daily: Which technologies do you see influencing the finance function over the next two or three years?
Arlen Shenkman: There are three main trends that we see, not only in our own business, but also in our customers’ businesses. One is, and this has been around a long time, but new technology has given us additional power to control it, which is the quality of our data. Having the ability to have one set of data and a repository we can access that we know is essentially a version of the truth for our company is really important. It’s important for the CFO role but it’s also important for a number of other opportunities you have to control the business.
Two is analytics. Having that repository of information and then having the ability to drill down into that information and to set up for yourself or for your management team either KPIs or a dashboard, a way for you to be able to monitor what’s happening, can change the way you operate the business. It can change the way you talk to your business team and your management.
And then finally, and we’re not going to get rid of this for a long time, the concept of security and compliance around our data and our business processes falls more and more in the office of the CFO. And understanding our ability to protect our data, our processes and our trade secrets and our intellectual property is going to become more and more pertinent to CFOs and more and more important to the overall value of the business.
FEI Daily: What would you say are the biggest hurdles facing CFOs in the modern world of finance?
Arlen Shenkman: Issues that affect CFOs actually tend to affect a fair portion of the business, which is a concern about change. We’re all human beings and we all prefer to do things the way that we’ve done them. We all tend to worry more about the risks than we do about what the potential rewards will be. So, marrying the concept of not wanting to change and wanting to protect the downside puts us in a situation where we don’t necessarily take the risks we need to take in the business to gain upside. And that complacency in a business oftentimes can be very dangerous, particularly in an environment where we have seen such major radical changes in the way business is done and the way competition is being undertaken in the marketplace.
FEI Daily: That’s a great point. Does the digital transformation change the types of skills CFOs should bring to their roles?
Arlen Shenkman: Yes. I think that as we, within SAP, have had the ability to radically change the way finance operates. And that started with our ability to have less reconciliations and close the books quicker. These are just some fundamental financial activities, but that really puts you in a situation where you say to yourself, “If I can automate some of my activities, what role can I play and what role can my team play in helping shape the business?”
And what we’re finding in SAP is that being a steward for your business is the price of admission to being a CFO, and that’s never going to go away. Frankly, most of us have seen the evolution in the last few years of the CFO and their organization as a true partner in the business. Not just telling people you can’t do something, but explaining to them why they can’t do it and how it impacts the business.
Now we’re moving into “how can I help transform the business? Where do I see myself in my organization serving as an agent of transformation? How can I help the business understand that if it doesn’t take these risks, here’s what can happen? If we don’t change our business model, here’s where we’ll be in five years. If our marginal profile is going down, how should we be rethinking our business and our strategy?” And that’s the ultimate role of business in its basic form: to make a profit for your shareholders, and ultimately that stems from your financial statements and your financial performance.
It’s incumbent upon the finance organization and the CFO to ensure that their business understands the ramifications of a business model and their strategy and how that will affect the overall return to their shareholders.
FEI Daily: As a CFO yourself, how have you seen your role at SAP change over the years?
Arlen Shenkman: Finance has always been the key organization in SAP, but it’s become much more strategic in terms of where we’re going to deploy capital to either invest organically, to make investments or to buy businesses. And so, I look at our role as one of an agent for growth. How can we help the business continue to expand and achieve its results? Our CEO regularly says if a business is not growing, it’s not a healthy business. And it’s our goal in finance to ensure that our business is healthy — that we’re continuing to make the return for our shareholders, and that we’re growing the business for all the constituents in the company, whether that’s employees, shareholders, the public service, the public sector, but any other constituents we have in the business. We want to ensure that we have the healthiest business we can possibly have while continuing to serve our customers.
This article originally appeared in Financial Executives International Daily, and is republished with permission.
For more on the evolving role of the CFO, see Leading CFOs Share Experiences In Shifting To The Digital Economy.