Part 1 of the 4-part CFO Strategy Playbook series
In my first blog, “Seven Finance Strategy Questions That Can Start the Paradigm Shift in the CFO Domain,” I discussed the reasons why many CFOs are starting to look at their finance team’s functional strategy. They revisit the way the finance teams are set up, what values and vision the team stands for, how to better serve the “customers” of the CFO team, and what changes are needed to implement this transformation.
In this article, I will explore which key content elements should be part of a functional finance strategy. The article can be used as a finance strategy playbook.
The elements provide a framework for the CFO team’s strategic organizational development. The focus of this post will be on strategic content and less on approach. In working with my customers’ finance teams, I do sense a growing interest in reviewing or fine-tuning their functional finance strategies, combined with a willingness toward more experimentation and smaller initiatives to try out innovation options. This frame of mind provides a good starting point for starting any finance transformation. The finance strategy creates the foundation and framework for transformation of the finance function.
Let’s explore what questions should be addressed in developing a company’s finance strategy:
- How does the overall company strategy inform and impact the CFO team’s functional strategy?
- Which megatrends and innovations are relevant for the company at large and for the finance team in particular?
- What are the requirements of the business and of capital market stakeholders or investors, which the finance team needs to address in three to five years?
- Which finance activities provide the most value and need to be strengthened—for example, decision support, capital allocation, active business partnering?
- What should be the vision and mission for the finance team looking at the needs of the rest of the company and the finance team for the next three to five years?
- Which are the topics of strategic focus for the CFO team, what are “strategic thrust areas”?
- How does finance define its role relative to the business, and what operating model and governance are needed to sustain that role?
- What people and cultural aspects should be considered, and what changes for job profiles are required?
- What is the status quo of the finance team and what initiatives are needed?
- How can we track and measure success?
- What is the roadmap and implementation plan to operationalize and execute the strategy?
Finance strategy – a definition
On a more abstract level, functional finance strategies deal with external and internal requirements for the finance team. They consider external megatrends and innovation and make specific what the vision and mission should be and what strategic thrust areas are relevant. The strategic thrust areas make transparent what areas the finance team will create value for the business. They also address how business insight is generated and made available to the operative business. In addition, there is typically an organizational update of roles and responsibilities.
Ideally, the finance strategy also covers the operating model (team structures and in- and outsourcing decisions), at team governance, and at ways of working and required skill profiles and cultural aspects. Finally, the finance strategy should include actionable initiatives and tasks, showing what is needed to master the transformation and how the change will be implemented.
The seven finance strategy elements
Let’s assume that a CFO together with a team wants to start the definition of their functional finance strategy. The structure might look like this:
- The context
- The objectives
- Design principles
- Strategy development process
- Status quo and requirements
- Megatrends and innovation relevant for finance
- Status quo of the CFO team (as-is state)
- Requirements for the finance team
- Finance strategy dimensions*
- Finance strategic thrust areas
- Finance strategy vision and mission statements
- Finance strategy details (by strategic thrust area)
- Impact on the Finance operating model and organizational structure
- Summary to-be state
- The finance strategy gap (as-is state vs. to-be state)
- Implementation road gap
- Initiative summaries
- Finance initiative portfolio and prioritization
- Roadmap and implementation plan
In upcoming posts, I will delve into more detail.
*Please note that the various aspects of a company’s financing strategy, which frequently is also viewed as part of the overall finance strategy, warrant a separate article.
For more insight on financial leadership, see Why Complacency Is An Expensive Mindset For The CFO.