The impact of the digital era on the role of CFO has been swift and far-reaching.
New technologies such as digital marketing and Big Data analytics are leading to the creation of new business models and processes. This rapid change is raising expectations across organisations for greater flexibility and agility. Externally, the favourable environment for startups has destabilised many market sectors by giving birth to well-funded, high-growth competitors that are joining the fray with new ways of thinking and no requirement to protect legacy business models.
This has led to a period of rapid learning for CFOs, as they seek to understand the changing role of finance and its contribution to the organisation in this new digital landscape. Their challenge is to expand the range of skills within the finance function to harness the possibilities of new technology and new ways of thinking, while ensuring they continue to deliver for their organisation with the same rigour and discipline that has been their trademark.
In 2016 SAP & The Australia Financial Review gathered a group of fellow CFOs as part of the CFO Executive Community, to discuss the role we play in the digital transformation of their organisation. We talked at length about the challenges of managing a modern finance function and the need to develop and recruit new talent to meet changing requirements and ensure finance plays a lead role in shaping their organisations’ future.
New skill sets for new services
One of the most common challenges of the digital era has been the acceleration of business cycles, and the requirement to swiftly respond to changing market conditions. Cloud computing has delivered new flexibility to how business processes are supported from an IT perspective, and this in turn has put pressure on the finance function to ensure it can fund and monitor faster implementation cycles. No longer are we looking at a 2- to 3-year implementation cycle.
If finance functions are to truly play a key role in the digital transformation of their organisation, we must rapidly reskill their teams to work in this new digital landscape. Part of this can come through recruitment, but there is also a strong need for organisations to reskill and develop existing talent to work in this new era.
At SAP, transformation in the finance function has been supported through a professional development program called Transformation Agent Methodology. Although originally developed to train SAP’s sales teams, based on Challenger Methodology, its key emphasis is on helping teams adapt to working with all parts of an organisation and develop strong empathy towards the customer problem.
The training has four key components:
Awareness: Analysing a live business case
Analysis: Identifying the root cause of the problem and the case for change
Solution: Devising a solution that works for the customer and including the customer in this process
Communication: Communicating the solution to the customer
This methodology has helped SAP’s finance function determine how it can increase what it does for the business whilst keeping the compliance aspect in focus (compliance is like breathing).
It is about identifying the root cause, managing the risk, and then making sure we are held to a tight timeline. So I have embraced this methodology and put all of my finance team through that.
Changing team composition
The core skills of financial accounting remain critical, but now these are being supplemented by new disciplines as the function looks to deliver new services beyond its traditional domain.
A key driver has been the adoption of analytics technologies, such as those within SAP S/4HANA Finance, which enable vast amounts of data across multiple sources to be brought together into a single source of truth.
According to the CFO at media company Sensis, Joanna Hands, her requirement is for people who can make sense of the vast troves of data generated by digital processes, and use that insight to increase the value that finance delivers back to her organisation.
“When I look at my finance team and I think about where I want to invest, I want to invest in analytics to deliver analytical insight around what our customers are doing and what they want.”
The CFO at Deloitte Australia, Andrew Griffiths, says changing technologies within the business are creating a need to bring more technical skill sets into the finance function, especially if the function is to reap the benefits of newer technologies such as artificial intelligence and robotics.
“We as finance executives are going to have to figure out how to use artificial intelligence and robotics, and how to we combine that in a way that enables us to get insights and add value to the organisation. You have to rage ‘with’ the machines, not against them. It requires an inquisitive mind and a much more open way of thinking.”
As a result, Griffiths believes the future composition of finance teams will include fewer members from traditional accounting backgrounds and more employees with backgrounds in so-called STEM (Science, Technology, Engineering, Mathematics) disciplines.
But utilising such tools presents a challenge for finance in needing to recruit in new skill sets and blend them with the traditional roles of a finance function. Griffiths says that in turn presents a cultural challenge for many organisations.
“We are going to have to learn how we work with people from diverse backgrounds who don’t necessarily think the way the traditional finance professional does. So we are going to have to encourage diversity of thought within our teams. Leading a team like that requires different skills that are not traditional from a finance perspective.”
A new generation
This desire to bring new skills into the finance function can already be seen at ALH Group, where CFO Siobhan Hammer says an accounting background and related professional qualifications are no longer as mandatory for new recruits.
“Progressive organisations are changing to broaden the professional skill set of the people coming through. We are looking at where we can hire people from an analytics or technology background and bring them into our finance team to increase our capability. Gone are the days when we write every finance job ad with CPA qualifications as mandatory, and sometimes it is not every necessary or even desirable if we want them in the commercial teams where they are doing analytics.”
Two factors are making the challenge of recruiting new skill sets more difficult. Firstly, the technologies and processes themselves are relatively new, meaning there is no ready pool of experienced professionals to choose from. And the rapid evolution of these technologies can mean that skills rapidly become outdated. Secondly, traditional organisations find themselves in competition from startup businesses that also demand these skills, which is further diluting the talent pool while pushing up costs.
The result is that finance functions are having to hire a younger group of workers. While much has been written about the so-called millennial generation, CFOs report they are making an increasingly large contribution.
The CFO at the online fashion retailer THE ICONIC, Anna Lee, says that any negative reputation assigned to millennial workers is undeserved, although they do present a different set of challenges from older workers.
“I have a very hard-working team, and the average age of a team member in our organisation is 29. They have put a lot of pressure on us from a people and culture side of things to push ourselves to come up with innovative ways to keep them engaged and passionate. But once you offer development opportunities, they are very committed and very loyal.”
Having grown up with digital disruption, millennial workers also have a better understanding of the new business landscape. According to the CFO of Jetstar Group, Race Strauss, bringing in a younger workforce therefore opens up new thinking.
“I am very passionate about diversity and flexibility in the workplace, and millennials are the driving force behind that. These old school mindsets don’t exist at Jetstar, and it is actually really refreshing and helps drive the business.”
While the adoption of new technology is in part fuelling he need for new skills, it also provides part of the solution. Many younger workers seek the opportunity to work with the latest tools, and by making these tools a core part of the finance function, it can in turn become a more attractive workplace for the next generation. In the ongoing war for talent, traditional organisations that develop a reputation for flexibility and the use of cutting-edge technologies may find themselves elevated in the minds of top candidates.
Ultimately, the finance function will never be able to step away from the requirements for rigour and discipline that organisations have come to depend on. But for finance to retain and strengthen its position through digital transformation, managers must seek to not just adapt their own mindset, but actively work to surround themselves with team members who bring new skills and thinking to the function.
If you have any questions, don’t hesitate in reaching out to me or join the CFO Executive Community to learn more and be kept up to date with future peer-to-peer events.