New Research Proves Finance Leadership Pays Off

Joan Warner

Part 1 in a series. Read Part 2, Part 3, and Part 4.

A new survey of 1,500 finance executives across four global regions and a broad range of industries, conducted by Oxford Economics and SAP, confirms what CFOs have long suspected: Their role has expanded beyond traditional finance activities into strategic planning. And when they do their jobs well, they have a powerful impact on corporate performance.

The overwhelming majority of survey respondents — 88% — report that at their organization, the CFO is increasingly involved in strategic decision-making outside finance. And 77% say the finance function is more visible and influential across their company than it used to be.

But some finance executives are better than others at driving growth and performance, and our respondents show remarkable candor in assessing their own effectiveness. Just 40% say their organization is “very effective” in governance, risk management, and compliance (GRC), and only 33% give that grade to its financial planning and analysis — both critical elements of long-term, sustainable success. In the areas of performance management and cost control, the “very effective” responses dwindle to 19%.

Six leadership traits

To explore what the high-performing minority do differently, we identified six traits that make a “finance leader.” Our results show that these practices boost business performance, increase efficiency, and improve risk management and compliance across the organization.

Finance leaders:

  • Drive strategic growth initiatives
  • Have strong influence beyond the finance function
  • Collaborate regularly with other business units
  • Are very effective at core finance processes
  • Work closely with GRC and are well equipped to handle regulatory change
  • Improve efficiency with automation

Only 11.5% of our survey sample qualified as finance leaders. Yet our results show that these actions pay off in growing market share, better cost control and, in many cases, improved revenue and profit growth. For example, 83% of respondent companies expecting revenue growth of more than 5% in 2017–18 say the finance function is increasingly visible and influential across their organization. The percentage dips to 79% among those expecting revenue growth of 0.1% to 5%, and it falls to 70% for those expecting zero or negative growth.

A straight line from finance effectiveness to profitability

Perhaps not surprisingly, we found a direct correlation between profitability and core finance effectiveness—one of the six key traits of finance leadership. Nearly three-quarters (73%) of companies that posted 5.1% to 10% profit margin growth over the past year rate themselves “very effective” at core accounting and closing. By comparison, 40% of those with 0% to 5% profit margin growth score themselves as “very effective” in those areas.

The full study, “How Finance Leadership Pays Off: Six Ways CFOs Stay Ahead of the Pack,” will be published in early June. Click here to request a copy, and please stay tuned to the Digitalist Magazine for more results.

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Joan Warner

About Joan Warner

Joan Warner is managing editor and senior analyst for Financial Services at Oxford Economics. Joanie joined Oxford in February 2016 from The Financial Times, where she managed subsidiary publications covering the wealth management industry and corporate governance. Prior to that, she covered international finance and European business for BusinessWeek magazine, where she worked for nearly 20 years. Joanie was also a contributing editor at Institutional Investor and has written and edited reports for Morgan Stanley, McKinsey, PwC, and former hedge fund FrontPoint Partners. She holds an MA in Comparative Literature and a BA in Classics, both from Harvard University.