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The Adaptive CFO

The Adaptive CFO

The role of the CFO as a bean counter or number-cruncher is a faded image from the past. Contemporary CFOs, more than ever before, play a key role in building the adaptive capacity of organisations. They shape the corporate agenda andinfluence the C-suite by informing strategic decision-making, and challenging performance. Public sector CFOs also influence strategic policy making. This emerging role, however, is not free from challenges and requires a new set of capabilities.

Strategic foresight

The current context is one of major disruption caused by new technologies and other megatrends (e.g. globalisation, demographic shifts, environmental challenges, digitisation, artificial intelligence and robotics, and convergence of technologies). To craft a winning strategy that realises true value requires more than thorough planning and managing financial performance. It also requires alignment with, and congruence between, the firm’s financial imperatives and strategic foresight – planning under conditions of uncertainty by using scanned inputs, forecasts, analysis, and feedback to explore future scenarios that will enable to develop or adjust the plans of the firm. This is best way to articulate possible, plausible, probable and preferable futures of what might happen, could happen, is likely to happen, and what is desired to happen, to strategically manage risk, leverage from the impact of emerging technologies, and lead sustainable change. From this perspective, the CFO is a catalyst for change and displays change leadership.

Change leadership through reporting and sense-making

In times of uncertainty and rapid change, stakeholders ask themselves, what’s the story?
The CFOs change leadership capability is critical to inform the ‘black box’ of strategy development and provide sense-making. Firstly, this entails collecting reliable data in shorter timeframes – agility. Secondly, interpreting the data by making sense of it. And thirdly, being able to tell a credible and persuasive story that address current needs and future concerns to all stakeholders (boards, share markets, banks, media, suppliers, distributors and retailers, tax authorities, and external auditors).

Convincing reporting is the channel that tells the firm’s story and provides sense-making. This includes articulating the future investment strategy, risk management approach, opportunities, and how performance will be monitored.

AGL’s CFO, Brett Redman’s announcement of the development of a $295 million power station in South Australia in June 2017 is a good example of this. He explained that investing in South Australia was consistent with AGL’s agenda for growth by anticipating the continued use of a strong balance sheet to invest in development opportunities as the energy market evolves.

But having a good strategy without a strong execution capability is worthless.

Execution – collaboration, teamwork, empowerment and leadership

Successful strategy execution is key to success, and people are key to successful execution.
It is not without reason that human capital costs on average around 70% of a firm’s operating expenses.

Successful execution requires high levels of collaboration with all key internal and external stakeholders. This includes having the right people with the right set of technical skills, and the collaboration and teamwork that builds high performing teams who are able to engage in coordinated action that delivers extraordinary results. Knowledge sharing and collaboration are also the precursors of innovation.

CFOs need to put in place a people development strategy that integrates talented people with high levels of interpersonal and social competency – including emotional intelligence – who are able to collaborate effectively. Hence, CFOs need to empower their teams by setting flatter organisational structures that enable swift decision-making so that they can focus on their high-level responsibilities. This is perhaps one of the most challenging new capabilities for CFOs to adopt. Unlike managing physical assets, which CFOs are proficient at, leading people and leveraging from their intellectual capital is a completely different ball game.

Claude Changarnier, former Vice President of Finance at Microsoft International, used to lead 85 CFOs around the world. In an interview featured in the 2016 Ernst & Young ‘The DNA of the CFO’ report, he explains: “I have to have smart people, not monkeys. The people component is fundamental in a job like mine. That’s not something you learn in school. You learn accounting, you learn marketing. You don’t learn how to manage people. You don’t learn how to be a leader”.

The CFO role continues to evolve into one of being a strategic change agent
that builds the adaptive capacity of the firm to ensure its success.

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Sebastian Salicru is a leadership development expert and author of Leadership Results: How to Create Adaptive Leaders and High-performing Organisations for an Uncertain World (Wiley, 2017). He is a business psychologist, Director of PTS Pty Ltd – a Sydney-based leadership consultancy, and an Associate of Melbourne Business School – Executive Education. To take the leadership capacity of your organisation to the next level visit www.leadershipresults.com.au

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