ESSENTIALS FOR LEADERS AND THOSE THEY LEAD

Like almost every other leadership role, the job of CFO has undergone profound changes in the past few years. Our research shows that a growing number of functions report to the finance chief, who may also be at the forefront of digitization and, increasingly, at the hub of value creation. Finance leaders are also playing prominent roles in talent development, innovation, and capability building. This week, we explore what’s new about the CFO role and how both new and experienced leaders can tackle its many complexities.

AN IDEA

Shift into a higher gear

If you’ve been a finance leader for a few years, you may be in danger of falling into complacency. That’s why it’s critical for midtenure CFOs to become prime movers of change, suggest McKinsey senior partners Cristina Catania and John Kelleher and colleagues in an article. “Midtenure is when the best finance leaders get bold,” the authors say. In their interviews with eight former CFOs, four priorities emerge; an essential one may be to expand your horizons beyond finance. For example, some executives recommend joining the board of a noncompeting company to understand how other leaders manage digitizations, expansions, or transformations. Or you may try breaking down silos between corporate functions and business units in your own organization. One executive spoke up when he saw issues in other functions. “When we saw problems with R&D budgets, for example, I met with the CTO [chief technology officer] once a month, just the two of us,” he says. “We made sure that we were aligned and not fighting against each other.”

A BIG NUMBER

19%

That’s the increase in the amount of time that today’s finance leaders spend on value-added activities compared with the average company ten years ago. As a proportion of total finance time, business partnering and financial planning and analysis are up by 9 percent; time spent on other value-added functions such as tax, treasury, and policy setting has increased by 36 percent. “Finance leaders deliver far more than core financial skills: their work guides the functioning of the entire organization every day,” note McKinsey partners Ankur Agrawal and Steven Eklund and colleagues. They cite four imperatives for finance departments in the next decade, including looking beyond transactional activities and helping define the primary data strategy for the enterprise.

A QUOTE

“The only forecast you can make for sure is that your next earnings statement will be different. Sometimes, it will differ by a lot.”

That’s McKinsey senior partners Michael Birshan and Andy West and colleagues in an article on the seven key mindsets and practices that new CFOs can adopt right from the start. Being proactive about risk is a critical practice to consider: “While no one can predict the future, it is essential to recognize the elements of your business that are most at stake should major disruptions arise,” note the authors. During the financial crisis of 2008, the most effective CFOs focused on cutting costs but did not lose sight of growth—with their organizations becoming more resilient as a result. “Being proactive before and through the downturn helped put their companies in the lead as the economy recovered,” the McKinsey experts say.

A SPOTLIGHT INTERVIEW

“The CFO has become the pivot point for understanding what stakeholders are looking for and how to deliver it,” says Palo Alto Networks CFO Dipak Golechha. In a discussion with McKinsey senior partner and CFO Eric Kutcher, Golechha describes how the finance function has evolved—“[it] has a much broader mandate now than it had before”—and why finance leaders need to be agile, flexible, and perhaps most important, well versed in corporate cybersecurity. “Technology has become the foundation of how every company operates, innovates, and differentiates,” he says. “CFOs, in their stewardship role, have oversight over cybersecurity from an audit and ERM [enterprise risk management] perspective, so I would recommend that if you are not an expert on cybersecurity, get trained.”

— Edited by Rama Ramaswami, senior editor, New York

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