Transformation is all the rage these days. Finance Transformation, Digital Transformation, Business Transformation—whatever its nature, change is constantly afoot, and C-suites across the land are regularly putting their best feet forward. Or trying to. Transformation is a journey, and sometimes we stumble; that's life. But it's better to stumble than to fall, and if you're trying to fly, you first have to stand and walk.
Regardless of the specific nature of, or reason for, the agenda, similarities are often masked by the critical role that the senior executive who champions the change must play. This commitment and sponsorship cannot be dismissed: it is the most daunting and underrated characteristic required to enact genuine transformation. Typically, sponsorship within the C-suite is derived from the functional role or competency of the leader driving the transformation. However, the complexity of most transformations today increasingly requires cross-functional skill sets and competencies—the better to sustain momentum and keep the initiative moving forward.
The best way to ensure your transformation journey maintains the firmest footing possible is to pay more attention to the often-overlooked role of the Chief Financial Officer, who is increasingly critical in shaping and enacting transformation agendas wherever they can be found—and wherever they're going.
When undertaking any kind of formal transformation, the procedure is usually as follows: the organization sets corporate objectives, declares them part of the business strategy, and eventually moves forward with an implementation mandate assigned to an executive sponsor in the C-suite—the core assumption being that the executive sponsor has the domain knowledge and skillset necessary to navigate the journey. Again, regardless of the specific agenda, the unifying principle is to deliver tangible, measurable business results.
Enter the CFO—a key member of any C-suite widely understood to be their organization's financial steward. The CFO has the fiscal and fiduciary responsibility to operate, guide and invest the organization's resources optimally and wisely, to realize tangible benefits and optimal returns on those investment. Every good CFO is keenly attuned to their organization's financial health, which is why they can be ideal business partners playing very active roles in the journey.
Even though the finance function is often looked upon as the more traditional bookkeeping or budgeting and forecasting role in most organizations, a strategy-minded CFO can lead them to much more. Take the example of a digital transformation agenda built on an imperative to adopt new technology. The burden of change in these cases is often placed on leaders who have led traditional information technology practices. But while driving digital transformation and technology innovation requires careful planning, it's not just in IT—financial support to assess and guide the feasibility of processes and outcomes is every bit as important.
Moreover, the know-how required to implement and execute the various legs of a transformation's journey is multi-faceted. It's not just technology skills, vision and roadmap—you have to understand the process and enable feasible implementation. For example, moving to the cloud might be of strategic importance, but it's nevertheless critical to consider the financial implications of the effort. How will the cost structure be supported and built over time? Can the organization afford a shift in its financial operating model from, say, a capital cost structure to operating costs impacting profitability? How long will the journey take? One year? Three? Ten? Can the transformation be sequenced and, if so, how will you prioritize the steps? By its very nature, transformation implies an eventual end (there's a reason I call it a "journey"), but it must be carefully planned, built into appropriate forecast models and readjusted on an iterative basis.
Yet another reason the CFO should be intimately involved.
Steady as we go
I like to think about it this way: it's probably unrealistic to expect a single person to exhibit every ounce of skill, knowledge and influence required to pull off a legitimately transformational exercise. However, the work of a collective group of subject matter experts, even at a high-performing C-suite level, where each member is responsible for driving different goals and objectives, can lead to misalignment, and therefore become 'un-transformational.'
That's why it's imperative that the CFO and the finance function play more than a facilitator's role. True transformation depends on leveraging core elements of finance, everything from cost considerations and return on investment to capital requirements for technology deployment. And all of this demands careful analysis, detailed planning and strategic fortitude—not just for financial statements in the short term, but also for long-term assessment with appropriate checks and balances.
Don't call me old-fashioned, but that is a job for the CFO.