The book provides explanation, context and, where applicable, analytic framework for the essential skills found in Chapter Three. Many will be familiar with this type of soft skill—a mix of personal characteristics and learned behaviors. But they can be hard to master, and mastering the wrong skill can come at the expense of developing the right one. Consequently, there is much room for misstep in developing the softer skill set. The book lays out the dos and don’ts for each skill and provides a roadmap for progress and assessment.
Success in the mid-twenty-first century work setting will certainly require solid knowledge of finance, accounting and management—all evidence-based fields ripe with established hard skills. In these areas, one cannot escape from how things have been done for decades. But personal experience of many CFOs and recent academic research each suggest that it is the set of softer, adaptive skills that are more critical in the new environment. With the rate of disruptive changes in technology, business models and regulations, the very nature of how finance work gets done will keep evolving. And the finance function itself will be constantly aligned and re-aligned to best support the business. Under these circumstances, there is significant obsolescence risk for skill sets just a decade old.
The role of the CFO is rapidly evolving beyond the traditional, numbers-focused executor of the company’s financial plan. Although CFOs must possess a solid understanding of finance and accounting, today’s dynamic, digital environment demands that they provide innovative, strategic leadership to drive performance and growth, even to the point of assuming the CEO’s duties in his absence. Essentially, they are being asked to help shape and execute the company’s business strategy. This means providing keen insight on the financial implications of operational and strategic decisions, and ensuring that goals and tactics are aligned with the company’s financial and operational aspirations. At the same time, many are being asked to transform the finance function itself: to create efficiencies and cost savings, to support growth and expansion, and to enhance its analytic capabilities. This book is about the skill set needed to succeed in this new environment. It is intended for current and prospective CFOs and for other senior executives who are financial leaders for their companies.
- Financial Reporting and Forecasting Financial reporting and forecasting are foundational skills for any CFO. The widespread adoption of Software as a Service (SaaS) and cloud-based solutions has simplified and lowered the cost of deploying robust accounting systems throughout an organization. A proficient CFO ensures comprehensive onboarding and usage of these systems by all relevant stakeholders. Moreover, a strategic CFO goes beyond basic usage, leveraging these systems to uncover valuable insights that drive actionable decisions across the organization
To illustrate the importance of fully onboarding a team, I can share a concrete example from my experience at an early-stage healthcare services company. When I joined this company, the CEO was managing corporate financials using an Excel worksheet saved on his desktop, updating it during evenings and weekends. This approach led to several challenges. Firstly, the financial records were often incomplete and not reflective of real-time data. Secondly, it created a disconnect within the finance team, hindering their ability to provide timely and useful insights for the CEO’s decision-making on sales and profitability.
To address this, I spearheaded the standardization of accounting, operational, and financial reporting templates, along with the chart of accounts. We implemented a reporting calendar, ensuring that the finance team delivered updated income statements, balance sheets, cash flow statements, and customer- and product-level segmentation reports to the CEO and board on schedule. These reports included comparisons with budget, forecast, and prior-year figures for each department, offering comprehensive insights into performance.
Beyond standardizing reporting, we utilized this data to recommend operational improvements to enhance financial performance. This streamlined the CEO’s workload, provided strategic operational insights, and alleviated stress among the management team compared to the previous fragmented reporting system.
- Strategic Financial Planning and Analysis Transitioning from standardized reporting, a strategic CFO emphasizes leveraging databases and quantitative skills for financial planning and analysis (FP&A). FP&A involves data-driven analyses to address financial and operational performance queries across all aspects of the company. While routine analyses compare current and prior period performance, ad hoc analyses might evaluate ROI for new sales technology.
In a strategic CFO role, the focus extends beyond routine FP&A to proactively address critical questions. This approach harnesses standardized processes to optimize decision-making and drive continuous improvement across the organization.
When I joined a pharmaceutical manufacturer as CFO, I found that few of the company’s senior leaders knew which customer, product, or geography generated the highest growth or revenue. This became a problem when the company had to quickly increase profitability. After implementing basic reporting improvements, I conducted a comprehensive profitability analysis of the company’s multiple business and customer segments to begin to answer broader strategic questions.
Using FP&A business intelligence tools like Microsoft Power BI, we pinpointed the sources of the highest growth and the greatest profits and losses. We then broke them down by product category, product SKU, customer, business unit, and geography. But we didn’t just produce a report that sat in colleagues’ inboxes. We looped in cross-functional teams to help us design, develop, and glean insights from the reports, and hosted in-depth conversations with executive leaders of each functional area about commercial and operational changes that would maximize financial performance.
Within a short time, the company had a holistic understanding of which segments contributed profits. Just as important, we had complete alignment among senior leaders that we should focus on the most profitable segments. This strategy allowed us to nearly double the company’s profitability in less than a year.
3. Risk Management and Mitigation
If finance leaders thought risk management was just an administrative footnote to financial oversight, then the COVID-19 pandemic and breakdowns in global supply chains upended that misconception. Today, CFOs must take a role in pushing teams across the organization to make risk assessments and regularly address questions of mitigation. At the same time, they need to see risk management through the prism of opportunity, looking for where it creates potential commercial openings.
During my tenure from 2017 to 2020 overseeing a group of companies that imported critical components for medical products into China or assembled them there, we capitalized on cross-border arbitrage to lower costs and consistently improve gross margins over the years. However, upon joining, I identified operational, regulatory, and macroeconomic risks looming on the horizon. To proactively address these challenges, we initiated quarterly discussions with senior leaders to anticipate potential hazards, allocate resources, and implement strategies to mitigate the most significant risks.
Our risk planning proved invaluable when a trade war erupted between the US and China in 2018. Thanks to our preparedness, we minimized supply chain disruptions by tapping into alternative component sources across Asia and Europe. By integrating risk management into our company culture, we not only mitigated risks but also seized commercial opportunities for our sales and marketing teams to expand market share. While competitors struggled with disruptions, we maintained a steady delivery of products and solutions.
- Embracing Digital Transformation It’s customary for CFOs to urge department heads to enhance productivity with limited resources. As finance chiefs, we can lead by example by exploring ways to automate back-office operations, liberating employees from repetitive tasks while saving time and reducing costs. Automation is particularly beneficial for the finance department, which faces periodic spikes in workload during monthly closings, urgent analysis requests, and the intense periods surrounding mergers and acquisitions. Chronic understaffing and time constraints contribute to elevated stress levels.
I learned how necessary this transition was firsthand. After a reorganization at a global manufacturing firm, my finance team was staffed with just two business analysts. This lean team was responsible for reporting and analyzing financial results for 25 portfolio companies every month within two business days. It simply wasn’t feasible for two people to complete this spreadsheet-based copy-and-paste project within 48 hours. Automation was the only solution.
We invested a small amount into robotic process automation to handle routine reporting processes and restructured the team’s approach, helping the two analysts become experts in business intelligence and visualization programming. Using these technologies, the two were able to complete the reporting tasks in one working day. They used the time they saved to undertake analysis and work with business leaders to complement the reporting with actionable insights.
Seizing on these learnings, our corporate development teams took a similar approach: They automated their monthly outreach, allowing them to contact 10 times the number of prospective acquisition targets and thus cultivate a larger partner pipeline.
5. Talent and Culture
One valuable way a CFO can take a more strategic role is by becoming more directly involved in recruiting and cultivating talent. Instead of just advising HR on staffing requirements, a strategic CFO will partner with HR to create opportunities to bring high-performing financial talent into the organization.
For instance, I once helped recruit a very talented executive to a small healthcare device manufacturing company that my firm owned, even though I knew we were going to sell it within the next year. We asked this person to join as the vice president of finance, stabilize the company, and successfully complete the sale—even though we didn’t have a specific role lined up for him afterward. This would have been a hard sell had we not approached this candidate with transparency, honesty, and a commitment to retaining him in a senior role.
A year after the sale, we delivered on the commitment and he became CFO of our largest portfolio business. Three years later, he was promoted to be the holding company finance chief, overseeing all portfolio companies.
As CFO, taking an active role in developing a high-potential finance leader meant I was contributing to the company’s long-term strategy by helping to secure an employee who could steer the company in a post-sale future. While all of this transpired in the finance department, others in different functional areas noticed and adopted similar approaches to recruiting and cultivating high-potential talent in sales, marketing, operations, and technology.
6. Strategic Planning
Companies value the hard data and empirical mindset that a finance chief lends to strategic planning. The CFO can use this as an opportunity to contribute to the transformation of a company’s commercial goals or capabilities, for instance, by championing acquisitions or introducing partnerships to extend competitive advantages.
I had the opportunity to put this into action while working with an emerging markets cardiovascular diagnostic company that made heart monitors. The company had aggregated terabytes of heart rhythm data through the thousands of devices it had sold. This data was a unique asset, but the company didn’t use the information for any commercial purposes. As CFO, I considered any large source of unique data as a potential opportunity in a world where SaaS business models can be commercialized quickly.
I challenged the team to use that data as the basis of an analytics service while protecting patient confidentiality. After months of development with local software partners, the team unveiled a new service to hospitals to provide real-time monitoring, analysis, and alerts if the software detected abnormal rhythms in a patient. The service deepened customer relationships and added a highly profitable revenue stream.
With greater visibility and deeper insights about the company, the strategic CFO develops a point of view about what products, capabilities, and M&A opportunities can create transformative value for their company. Yet it’s important to keep in mind that what truly elevates your contribution to a growth company comes down to leadership.
The demand on firms to meet targets is immense, especially as macroeconomic pressures rise and venture capital, private equity, and public market expectations for financial performance continue to climb. Companies need leadership, and leaders must deliver growth. The strategic CFO is uniquely empowered in this respect. When the modern CFO rises above their functional responsibilities and provides valuable strategic insights, they can help their company transform and grow for the future.