Prepare to migrate risk
New CFOs must understand the contextual factors that can impact their performance and proactively plan to address them or account for them.
Preparing for your new challenge includes:
- Mitigating team change resistance
- Reducing team disruption
- Encouraging team alignment
Managing team change resistance
The greater the level of change required by the new CFO or finance leader, the higher the probability that finance team performance targets will be missed. However, not everything related to change is negative: If the incoming CFO joins a team that is comfortable with risk and open to change, the chances that the new leader will succeed increase. In fact, the higher the team’s risk tolerance or openness to change, the larger the positive impact on new leaders’ performance.
The right way to accomplish this is through an “transparent change” approach. This harnesses the power of the broader finance team to collaborate, create and implement change — ultimately driving employee excitement and buy-in. This means involving employees in the change strategy process so they can feel part of the change and understand what this means not just for them but for the business.
Minimising team change
CFOs must help their teams navigate change uncertainty, which negatively affects engagement and productivity. The best way to do this is by making their teams feel empowered by providing support and listening to feedback. Foster an environment of change and development so employees feel confident about sharing new ideas and strategies for better business planning.
Encouraging team alignment
The finance industry relies heavily on collaboration and coordination with others. To succeed, new leaders must consider the relationship between their teams and other stakeholders, and understand the trade-off between agility and alignment.This needs to be a priority for any new leader or CFO when starting their new position.
Agile teams are capable of quickly understanding new business contexts and transforming how finance works to provide maximum value. While CFOs can make a number of changes to improve their function’s agility, these are the most common and successful approaches:
Control transactional, day-to-day activities and processes
Break down silos by integrating finance teams
Rethink talent strategy to continuously adapt to changing internal and external environments
Boost analytics capabilities and responses to new requests
Improve processes to more flexible
Nurture and build relationships
Develop trusted stakeholder relationships
Building relationships, trust, and credibility are key to a successful CFO transition. It is important to do this with your peers, C-suite members and the board.
Connecting during your new appointment includes:
- Relationships with stakeholders
- Building trust in your team
- Establishing your personal brand
Building stakeholder trust
New executives’ success is more dependent on their colleagues as the work becomes increasingly complex and collaborative. Relationships with the CEO, board and other executives are essential to influence employees who do not report directly to the executive.
Relationship building is not an instinctive process for incoming CFOs. They need to be intentional. New CFOs and finance leaders should focus on creating an internal network within their team to gain a positive impact on their performance:
- Prioritise stakeholder relations
- Credibility is the foundation of all relationships
- Clarify expectations and boundaries
Building Team Trust
The team that new CFOs manage is a key component to their success. CFO’s Direct reports can provide them with valuable information on the inner workings and finances. They can also act as a sounding-board and help them to understand the strengths, weaknesses and opportunities in finance.
The team must be comfortable with providing feedback and information to the new CFOs. To build trust in a team, CFOs should follow these principles:
- Find out about employees motivations and challenges and their opinions about the team
- Advise of your expectations and the value they should bring
- Include the team when appropriate in key decisions, assessments and goal-setting
- Encourage a team-oriented environment
Establishing your own personal brand
Your personal brand is what people know you for, and what they think of you. What kind of CFO do you consider yourself to be? What type of CFO are you? The CFO who is disruptive? The growth-guru? Brands communicate your purpose, establish credibility and create hype – allowing you to connect with stakeholders within the new company.
Think of some prompts about who you would like to be as a successful CFO; How would you describe your current reputation in terms of leadership, execution, vision, and innovation?
Assess the current finance function
Establish clear initial priorities by reviewing performance data, benchmarks, and feedback surveys to understand and analyse the key issues. Avoid analysis paralysis. Gain insight, and refine over time.
We suggest the following insights and data analysis:
Assessing finance performance
A lack of understanding of finance’s effectiveness leaves finance leaders with unfocused investments, unsupported initiatives, and the wrong priorities. To avoid this, new CFOs should evaluate their organisation to identify opportunities to improve performance and efficiency in these four categories:
Performance: Understand how major facets of the finance function are performing.
Costs: Analyse personnel, technology, overheads and any other costs necessary to the operation of the finance function.
Process: Determine how advanced the finance function’s capabilities are relative to other organisations. With finite resources, CFOs have to prioritise the capabilities that matter most.
Alignment: Understand which activities matter most to internal stakeholders and stakeholders’ perception of the value of finance’s support for those activities.
Assessing your talent pool
Knowing how well the organisation’s current talent pool can meet current and future business needs is a priority for most transitioning CFOs. New leaders should start regular assessments of their finance function’s skills and competencies as part of updating the talent plan and investing in the development of the team.
Keep these five recommendations in mind to assess current and potential talent:
- Align talent expectations with business objectives.
- Identify appropriate competencies to evaluate finance talent.
- Clearly articulate competencies.
- Identify proficiency and growth potential of current talent.
- Proactively account for possible skill shortages.
Assessing organisation structure
Even seasoned CFOs struggle with organising finance in a manner that is efficient and supports the value creation mandate. Finance organisations that are most successful choose their structures according to how the work is actually performed, rather than using standard templates. To help achieve this, new CFOs can consider the following:
- Centralisation or decentralisation? Assess the models of finance service delivery, including COEs, Shared Services Organisations (SSOs), BU-aligned finance, and regionally aligned finance, based on objectives.
- Outsourcing: When determining an outsourcing strategy, take into account factors like the contribution to competitive edge and impact on daily operational performance.
- Structure of the finance subfunction: Identify and categorise subfunctions in terms of their scope, specialisation opportunities, responsiveness and agility, as well as customer experience.
Face problems and plan for the future
Update the roadmap and establish strategic vision
The new CFO should establish a vision that is clear and forward-looking for the role early on to help the team see where it’s going and what each individual will do to contribute to the team and the business. The team will lose focus if they don’t have a vision, because employees’ actions and mental energy may not match the ambitions of the new CFO. This can lead to a reduction in productivity.
The new CFO should also be clear on how to achieve the vision. Create a road map that mobilises the executive leadership and employee resources to support initiatives that drive execution.
A useful road map should at least address these four challenges:
- How can the finance function achieve its vision? Is the finance function in need of new skills?
- Does the current finance process and policies need to be changed to achieve your vision?
- Which IT changes are required to succeed? Is it necessary to eliminate data silos?
- Who are finance’s partners in business?
Identifying potential functional risks
To meet finance’s goals, it is important to identify and address risks as soon as possible. Although the risks that can affect a CFO’s vision are varied, these common ones should be kept in mind.
- New business requirements
- Technological disruption
- Risk and compliance
The new CFO must support this vision by setting aspirational, but realistic, performance targets and defining KPIs that will measure these. Set functional efficiency and effectiveness goals that will drive desired outcomes when they are executed effectively.
Measurement is key to any CFO’s success, as unless you know how you were performing before you started, how can you gain recognition for the improvements you’ve made within the business.
Source of information from this article is Gartner. For more information or insights please visit their website.