In common with other senior functional positions, the CFO’s role in the past few years has been extended to include oversight of projects, teams, and disciplines that don’t fall into the traditional finance remit.
CFOs are often asked to help craft the corporate strategic vision, take responsibility for firm-wide strategic initiatives, and are also being asked to play a leading role in the corporate strategic planning process.
This is especially true of “midsized companies” – those with annual revenues of under $1 billion – where senior executives are more likely to take on a range of projects that full-time specialists would typically run at a bigger firm.
Challenged Financial Officer
In fact, 81% of CEOs at midsized firms expect CFOs to act as a “strategic business partner.” But the ability to innovate and influence decisions at the highest echelons of the firm are hard for many finance leaders. CEB data show that three out of four CFOs are unsure that any strategy they’ve championed has actually put the company in a position to achieve its long-term profitable growth goals.
Although CFOs excel at directing their teams to build a financial plan, they struggle to collaborate with senior line managers to assess the company’s strategic position, select growth priorities, and design a plan that aligns with these priorities.
The Importance of Strategic Priorities
One of the major causes of companies’ failure to achieve strategic objectives is poor prioritization. Most companies define priorities upfront during the strategic planning process, but then fail to align decisions throughout the year with these priorities in two ways.
Spread themselves too thin: Companies tend to overlook capacity and capabilities when pursuing strategic goals. Therefore, they underinvest in internal resources, leaving them adequate everywhere but excellent nowhere.
Distracted by shiny objects: Managers and teams tend to be distracted by exciting product ideas or internal politics and make external investments that do not align with the growth plan priorities.
CFOs can and should take charge of this process to avoid poor prioritization mistakes by helping to build a strategic plan that integrates priorities across all growth management activities. This process requires CFOs to play three strategic roles:
Advisor: Guide business leaders to clarify and commit to a defined plan of action for achieving a small set of growth priorities.
Architect: Force resource tradeoffs to build the teams and capabilities necessary to execute against growth priorities.
Engineer: Design and oversee a structure that encourages the behaviors and decisions that will lead to success against growth priorities.
And they also shouldn’t neglect the budgeting process, over which they have a lot of control. To ensure decisions align with growth priorities, CFOs can redesign the operational budgeting process to force tradeoffs that protect strategic investments.
Learn more about the CFO’s role in implementing strategic growth.