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Empowering the Modern Finance Organization

John O'Rouke and Karen Dale Torre


In the past the finance function was viewed as a custodian of corporate assets, a financial steward, and manager of financial transactions and reporting processes. In recent years this popular image has given way to a much more strategic role. In addition to viewing finance in its historic role, the C-suite has increasingly turned to its finance professionals for strategy development, process excellence, and performance management across the enterprise. What has brought about this shift, and is the finance function empowered to deliver?

The Broadening Role of the CFO

CFOs live in a pressure cooker environment subject to the relentlessness of reporting cycles. They are vulnerable to the whims of multiple stakeholders and have to respond to unexpected events created by the most volatile and uncertain trading conditions of the past two generations. Yet, where others may have wilted under the strain, the finance function has thrived, adding to its influence and reach, despite increasing business complexity. The CFO is now more likely to be seen as a business catalyst, that is, an agent of change and a valuable source of experience and ideas. And it is to the CFO that businesses turn as they seek to leverage technology for competitive advantage—whether that's using big data and analytics to identify profitable new markets or products, deploying new mobile and cloud applications to deliver the latest functionality to business users, or analyzing sales or social media trends to maximize customer profitability and satisfaction.

Low-growth economies are forcing organizations to focus more keenly on managing customer relationships. But the basis on which organizations engage with their customers is changing rapidly, as increases in the number of channels to market, as well as new business models—informed by big data, social analytics, micro-segmentation, and new technologies-displace historic ways of doing business.

Industry-Specific Change

Nowhere is the change more marked than in the retail sector. Even the fundamental purpose of the retail store is being challenged, as pioneering organizations move to stores which no longer hold inventory, but instead foster information sharing and communities. This allows consumers to make informed product choices over the internet, while still having in-store access with same-day home delivery. No industry is untouched by the profound changes that are taking place. Meanwhile, customer-centricity has risen to the top of the pile as businesses seek to extract every last drop of competitive advantage.

However, customer-facing activities cannot be viewed in a vacuum. Changes in the customer-facing front end of the business have significant impact on the volume, speed, and variety of transactions being recorded in the back office. This creates potential imbalances between the demands on the business and its ability to respond. CFOs, CIOs, and CMOs are working ever-more closely to ensure that equilibrium is maintained.

Technology = Change + Innovation

In fact, technology is driving change and innovation at a pace not seen for a couple of decades. Whereas previous waves of technology had largely automated existing processes, the current generation of technology represents a fundamental shake-up in the way that businesses operate and go to market. Take, for example, the Internet of Things, in which devices, sensors, and chips are embedded in previously unconnected objects. In essence, separate physical processes are becoming inseparable from information processes. Supply chains, manufacturing, and health services will be transformed in numerous ways as products are traced seamlessly from grower to the consumer's plate; household devices warn of impending component failure and order a replacement themselves; and patient monitoring brings just-in-time intervention by medical staff and automatically triggers medical insurance claims.

Change is Continuous

Technology is not only changing our relationships with objects, it is also changing the basis of long-established relationships within business. For example, the inexorable rise of cloud computing, mobile computing, and millions of business apps has shifted decision-making from the IT function to line-of-business functions, challenging the traditional role of the IT function as guardian of group standards and IT governance.

All these trends point to the inescapable conclusion that people, know-how, and knowledge transfer will become the prime determinants of organizational success or failure. And yet, analytical skills are already in short supply. No wonder shareholders and investors are more interested in the way that so-called human capital is nurtured and reported on. The CFO is increasingly being drawn into the debate. The challenge is to choose metrics that accurately reflect shareholder value created by the workforce, and are also useful to investors. CFOs must work hand in glove with CHROs to ensure that human capital management is included in strategic business planning, and that its performance against objectives is as closely tracked as any other capital asset.

In the next three CFO Market Watch articles, we'll take a closer look at customer-centricity, technology innovation, and the latest thinking in human capital management to describe how empowered finance functions can help their organizations confront the challenges of a rapidly changing world.