CFO Study: Strategic Intelligence
CFOs as architects of action and champions of change

CFO Study: Strategic Intelligence

CFOs as architects of action and champions of change



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Guardians of stability and transformation

When change is at its most intense, people long for certainty. For enterprises, this traditionally has meant turning to an officer charged with maintaining stability, fiscal soundness, and adherence to standards: the Chief Financial Officer (CFO).

In this role, the CFO brings calm, perspective, and a comprehensive understanding of the big picture by being grounded in specific details and tangible realities. CFOs are equipped with a toolbox of levers that they can use to deliver outcomes. And reliable outcomes are exactly what executives want in a time of change.

For this study, IBM’s Institute for Business Value (IBV) surveyed 2,000 C-suite finance leaders across 28 industries and 43 locations during 2021, in-depth qualitative interviews with a select group of executives, revealing insights about their on-the-ground experiences.

CFO Study: Strategic Intelligence
CFOs as architects of action and champions of change


Bookmark this report  

Guardians of stability and transformation

When change is at its most intense, people long for certainty. For enterprises, this traditionally has meant turning to an officer charged with maintaining stability, fiscal soundness, and adherence to standards: the Chief Financial Officer (CFO).

In this role, the CFO brings calm, perspective, and a comprehensive understanding of the big picture by being grounded in specific details and tangible realities. CFOs are equipped with a toolbox of levers that they can use to deliver outcomes. And reliable outcomes are exactly what executives want in a time of change.

For this study, IBM’s Institute for Business Value (IBV) surveyed 2,000 C-suite finance leaders across 28 industries and 43 locations during 2021, in-depth qualitative interviews with a select group of executives, revealing insights about their on-the-ground experiences.

CFO Study: Strategic Intelligence
CFOs as architects of action and champions of change

“Strip away distractions, then invest all of your energy and resources in only the things that will make you most successful.”

— Jeff McElfresh, CEO, AT&T Communications

Driving value in new, innovative ways

In the modern tech-fueled economy, a premium has been placed on organizational agility and transformation. Both these capabilities took on heightened importance as the pandemic swept the globe and disrupted systems—not just for weeks and months, but for the foreseeable future. CFOs have again been thrust into the spotlight to help here, turned to by Chief Executive Officers (CEOs), Boards, and investors more than any other C-suite role for guidance, insight, and action. According to our most recent CEO Study, CEOs view the CFO as playing the most crucial role in their organizations over the next 2 to 3 years.

The expectation to be both the guardian of stability and agent of transformation has elevated the stakes and the opportunity for the CFO and the finance function. To tackle this paradox of responsibilities and drive value through the organization, CFOs need to optimize their own potential and that of their teams. To excel will require new approaches, new tools, new perspective, new organizational constructs, skills— especially related to data—and discipline in using them.

Explore key insights from global CFOs

01

Leading with
discipline

How and why the role of the CFO is being recast on enterprise strategy, and why this requires active rethinking.

Read

02

Meeting the
moment

Explore the 4 discrete CFO archetypes and how they’ve performed when faced with uncertainty.

Read

03

Extend your
impact

Learn about the 5 key factors that help organizations reach efficiency and effectiveness outcomes.

Read
01Leading with discipline

CEOs and CFOs—the value of different perspectives

How the key differences in their outlooks help organizations optimize ambition, capability, and discipline.

Learn more

Instrumental in enterprise leadership


After the uncertainty of 2020, the future, while murkier than ever, presents both new opportunities and new risks. To succeed in this environment requires purposeful agility, rapid innovation, and the right kinds of platforms and ecosystems. CFOs are instrumental in providing the leadership and insights to help steer and iterate the strategic direction of the enterprise.

But the things that define business strategy and value have changed, both externally and internally. Also, whether assessing investments in new areas or re-examining existing initiatives, the pace has increased while predictability has evaporated. Organizations need CFOs to provide both the means and the discipline to navigate this new territory.

The pandemic underscored the CFO role as more essential than ever. In fact, CEOs cite the CFO and the Chief Operating Officer (COO) as their most crucial C-suite partners over the next 3 years, according to the IBV 2021 CEO Study. CFOs concur, with the COO role selected first and the CFO role selected second.

What’s more, CEOs and CFOs are aligned on the top priorities for the organization, both ranking improved efficiency and improved customer experience at the top of their to-do lists, followed closely by improved business-model innovation. These priorities match well with the decision-support areas that CFOs told us their finance organizations were most effective in: identifying enterprise cost reduction opportunities, managing enterprise risk, evaluating organic growth opportunities, optimizing pricing, and responding to changes in strategy/business model.

  • The pandemic underscored the CFO role as more essential than ever. In fact, CEOs cite the CFO and the Chief Operating Officer (COO) as their most crucial C-suite partners over the next 3 years, according to the IBV 2021 CEO Study. CFOs concur, with the COO role selected first and the CFO role selected second.

    What’s more, CEOs and CFOs are aligned on the top priorities for the organization, both ranking improved efficiency and improved customer experience at the top of their to-do lists, followed closely by improved business-model innovation. These priorities match well with the decision-support areas that CFOs told us their finance organizations were most effective in: identifying enterprise cost reduction opportunities, managing enterprise risk, evaluating organic growth opportunities, optimizing pricing, and responding to changes in strategy/business model.

  • A CFO in the headlines is usually not good news, so it’s no surprise the finance function is rarely attention-grabbing. An effective CFO, in fact, is the unsung force in providing the necessary discipline to conceive and execute strategy. But unsung can, at times, mean unrecognized.

    “Our finance organization is shifting from being viewed as a controller to a value advisor who partners with business leaders to shape, influence, and realize strategic objectives,” says Sean Berrington, Chief Value Officer, Engineering and CFO of Technology and Digital Innovation for South Africa’s Standard Bank Group. “This is a hard journey. We are moving from being stuck in day-to-day journal entry to actively engaged in running the business.”

    The CFOs in our study recognize the finance function must be more effective in helping their enterprises with strategy. “The challenge is balancing traditional metrics like ROI with those associated with new market models,” says CFO José Ricardo Fagonde Forni at Banco de Brasil.

    The top 4 activities cited by CFOs are those of the disciplined innovator:

    • Redeploying capital from underperforming projects to those with greater promise
    • Measuring the performance of critical processes
    • Recommending specific actions to close gaps
    • Modeling scenarios, associated outcomes, and impact on enterprise strategy
    25%

    decrease in finance’s
    function in strategy planning
    and execution from 2013 to 2021.

  • According to our recent IBV “Digital acceleration” report, enterprises recognize the necessity and opportunity to transform—both to address their priorities and make the right strategic choices. In fact, 60 percent of executives plan to accelerate their enterprises’ digital transformations to reinvent and improve business.

    The CFO is uniquely situated to influence the organization’s digital transformation: setting the financial baseline, building the business case, helping to determine the value of each initiative, and tracking benefit realization. Nearly three-quarters of CFOs we surveyed confirm that they play a key role in transformation across the enterprise.

    Not surprisingly, CFOs identify their top responsibilities for enterprise digital transformation as financial-related: managing the budget and obtaining financing. Yet, CFO responsibilities extend beyond budget and finance. More than 4 in 10 say they are tasked with nurturing a corporate culture that embraces all things digital.

    Case study: Volkswagen Sachsen

    Volkswagen Sachsen, a subsidiary of Volkswagen Group, wanted to fine tune its sustainable manufacturing. To guide the transition to more eco-friendly e-mobility, the organization needed new and better information. It turned to the finance function to provide deeper manufacturing analysis, to better guide efficiency improvements and the minimizing of environmental impact.

    To meet these goals, Volkswagen Sachsen implemented new, standardized financial processes using an enterprise resource planning (ERP) system. The upgrade brought a 20% improvement in decision-making efficiency, as well as deeper insights. Staff involvement in order-input processes was reduced by 50%, freeing up time for higher-value tasks like business development.

02Meeting the moment

Indispensable business partner


For CFOs to meet the ambition of this moment and satisfy rising expectations across the enterprise, the finance function must become an indispensable business partner. That means supporting effective decision making across the organization.

Yet, nearly half of finance’s time is still spent on transactional activities, which has remained relatively consistent for 18 years of research. Fewer than 10% of activities are dedicated to analysis and action in support of decision making. Freeing up the time to work on strategic challenges is an issue for finance organizations—especially if finance doesn’t have the right tools and systems needed to automate traditional work: making payments, closing the books, and the like.

We measured CFOs’ progress in effective decision-making based on 4 core dimensions:

  • Efficiency—Devoting effort that is appropriate to the stakes
  • Speed—Deciding faster than the competition
  • Bias-to-action—Converting decisions to concrete steps
  • Accuracy—Generating positive outcomes from the decisions made

We then grouped finance organizations into 4 discrete CFO archetypes:

  • Make up 15% of our surveyed organizations
  • Rate their function highly across all 4 of the decision-making dimensions
  • Financial outperformance and effectiveness at decision support is reflective of their strengths
    • Make up 15% of our surveyed organizations
    • Rate their function highly across all 4 of the decision-making dimensions
    • Financial outperformance and effectiveness at decision support is reflective of their strengths
    • Make up 35% of our surveyed organizations
    • Excellent at matching the appropriate effort to the decision at hand
    • Lag at speedy decision-making, hurting this group during the pandemic year of 2020 in terms of revenue growth
    • Make up 20% of our surveyed organizations
    • Strong at converting decisions into actions
    • Action taking helped them in 2020 as indicated by revenue growth outperformance
    • Make up 29% of our surveyed organizations
    • Rate their function low in all 4 dimensions
    • Poorer performance in both efficiency and effectiveness
03Extend your impact

Enhancing decision-making


By focusing on the 5 key success factors below, organizations can dramatically extend the reach and impact of finance for both efficiency and effectiveness outcomes. However, it is important to recognize a CFO’s need to address all 5 factors as opposed to success in 1 or 2. Based on our survey data, finance leaders tapping all these factors can experience:

8%

lower cost of finance as a percent of revenues.

3x to 4x

more effectiveness in developing and executing strategy.

CFOs and finance provide the means and discipline to help their enterprises with strategy. This includes embracing and implementing new technologies and advanced analytics; using ecosystems and open innovation to drive new business models; and collaborating within the C-suite and across partners to develop metrics and tactics and align on them as they evolve.

Success requires laser-like focus on developing and executing enterprise strategy supported by C-suite collaboration and AI-identified key performance indicators (KPIs). This means disentangling CFOs from competing priorities, such as primary or shared ownership of enterprise digital transformation efforts. The best outcomes—emphasizing decision making and translating decisions into actions—emerge when finance leaders support and influence transformation, rather than own it.

CFO insights accelerate cost containment, guide capital investment in new opportunities, unlock new revenue streams, and iteratively steer the enterprise’s strategic direction. The 4 archetypes differ in their effectiveness at decision-support activities.

Our data strongly implies that the varying levels of effectiveness can be associated with higher implementation levels of AI in these decision-support areas. 30% more Strategic Advisors have implemented AI for evaluating organic growth opportunities than the next highest archetype.

Finance effectiveness in decision support areas
Decision support effectiveness helps the enterprise with strategic direction, profitable growth and risk management
  • CFOs and finance provide the means and discipline to help their enterprises with strategy. This includes embracing and implementing new technologies and advanced analytics; using ecosystems and open innovation to drive new business models; and collaborating within the C-suite and across partners to develop metrics and tactics and align on them as they evolve.

    Success requires laser-like focus on developing and executing enterprise strategy supported by C-suite collaboration and AI-identified key performance indicators (KPIs). This means disentangling CFOs from competing priorities, such as primary or shared ownership of enterprise digital transformation efforts. The best outcomes—emphasizing decision making and translating decisions into actions—emerge when finance leaders support and influence transformation, rather than own it.

    CFO insights accelerate cost containment, guide capital investment in new opportunities, unlock new revenue streams, and iteratively steer the enterprise’s strategic direction. The 4 archetypes differ in their effectiveness at decision-support activities.

    Our data strongly implies that the varying levels of effectiveness can be associated with higher implementation levels of AI in these decision-support areas. 30% more Strategic Advisors have implemented AI for evaluating organic growth opportunities than the next highest archetype.

    Finance effectiveness in decision support areas
    Decision support effectiveness helps the enterprise with strategic direction, profitable growth and risk management
  • Organizational agility enables finance to be the true guardians of stability and transformation by managing resources, providing governance for decisions, and managing performance. It is about flatter, faster, and more flexible structures with decision-making accountabilities and economies of scale.

    “We want to move away from our historical silos and work in a more collaborative way in an agile environment,” says CFO Fagonde Forni of Banco de Brasil. “We desire greater speed in allocating resources to drive initiatives forward.” Such an agile environment prioritizes collaboration over hierarchy, promotes nimbleness, and enables effective real-time decision making. Finance staff can move among initiatives and priorities with a substitutable workforce.

    Applying agile techniques to specific finance areas enhances clarity and speed in decision making. More work can be automated. Hand-offs are eliminated. And time spent on analysis and action is increased.

    “We run our month end finance processes in agile ways,” explains Sean Berrington, Chief Value Officer and CFO of technology and digital innovation for South Africa’s Standard Bank Group, “and have formulated teams that focus on planning and analysis. We treat every day as a month-end, and our objectives are to reduce complexity and simplify, creating opportunities for work to be directed to value-add activities.”

    Finance effectiveness in decision support areas
  • Making it easier to access, integrate, and evaluate data helps decision making by clarifying where and how to advance value creation. Modernizing finance IT and data capabilities makes achieving those objectives possible. Cloud core enterprise resource planning (ERP) allows finance to access data remotely and store large amounts of data. Empowered finance staffs can use data visualization tools to dive into data, process information faster, and take advantage of insights to improve performance.

    A standardized data architecture provides transparency surrounding data and makes it a lot easier to apply AI to a data set at scale. Rather than discussing whether data is correct, finance can, instead, make decisions using that data.

    Extent of implementation
    Modernization of finance IT and data capabilities makes it easier to access, integrate and evaluate data
  • Talent is the key to finance’s decision-making success. We’ve already seen that executives have invested in agility-focused skills. But talent initiatives go even further. They continuously assess employee performance and reward employees who possess high-value skills. They also use AI to identify new leaders and create personalized learning experiences.

    Within the finance function specifically, communication of evolving goals, priorities, and practices must be robust. A well-defined finance transformation strategy sets the blueprint for employees. This strategy includes investing in digital technologies to support more intelligent processes, extracting value from data, and constructing deep business partner relationships.

    Change management provides transparency into expectations for finance transformation, human-machine interactions, and ways of working. Employee input into transformation efforts promotes buy-in. Both Strategic Advisors and Action Architects stand out from their peers in these last 2 areas.

    Backing all of this is future-focused skill-building in evolving areas: data management, cybersecurity, machine learning, robotic process automation, and others. Around two-thirds of Strategic Advisors invested in data curation and statistics skills that increase data usefulness. Constrained Operators lag in these investments which may be reflective of their lack of data commonality—it makes little sense to add skills to analyze bad data.

    Decision-making is enhanced with investment in key skills
  • Intelligent workflows help build new value and enable new processes to operate smoothly. To enhance decision making, both investing in and building out intelligent workflows are priorities. These span process mining, advanced analytics and, of course, AI—all of which allow greater monitoring and reporting in real time, and thus better, faster, real-time decision making.

    In fact, 60% of Strategic Advisors and 53% of Deliberate Deciders already report using real-time tracking of standardized performance metrics, compared to only a third of Action Architects and a quarter of Constrained Operators. An up-to-date picture of the enterprise’s position shows progress on strategy execution and shifts in supply, demand, materials, and products.

    Benchmarks can showcase gaps in financial and operational performance that can be adjusted quickly. While the Deliberate Deciders have this real-time data, they don’t appear to be taking advantage of it with their lower effectiveness at speedy decision making. By contrast, the lack of real-time data doesn’t stop Action Architects from making decisions and taking actions.

    8

    fewer days-to-close for record-to-analyze
    when decision-making capabilities are
    enhanced with intelligent workflows.

    “My goal is to have financial reporting automated and ‘lights out,’ so instead we are helping and advising the business.”— Richard Lyon, CFO, Alviva Holdings
“The major role of the CFO is to make sure that our business is on the right track to increase corporate value.”
— Hideki Hanazawa, CFO, Kioxia
Planning for the road ahead
“Finance facilitates decision making, [and] finance is a key link between strategy and execution, monitoring implementation and controlling risks.”
— Ai Ying Wang, General Manager of Finance, Yili Dairy

CFOs play an instrumental role in leading their enterprises and are increasingly central to developing and executing enterprise strategy. Other C-suite roles are looking to CFOs for guidance, perspective, maturity, and discipline. However, not all finance leaders have the tools and system—methods, governance, and the like—to fully embrace the opportunity.

“We are now undertaking a culture shift to reconsider our attitude, breaking out of a defensive mindset.”
— Narunobu Ota, CFO, Resona Holdings

To match a CFO’s ambitions with the enterprise’s expectations, becoming an indispensable business partner is critical. Effectiveness at supporting decision making is finance’s most important means to be an essential partner. 5 factors enable success: strategic focus, organizational agility, data-centricity, redefined talent, and intelligent workflows. The moment has never been so ripe with potential to approach the future differently.

To embrace this new reality with energy and openness, all CFOs should start with these guiding principles:
Focus on strategy and elevate support for decision making
Champion a more agile finance function
Put data at the center of the enterprise
Invest in your workforce
Increase intelligence through technology
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