Don’t be fooled by the notion that traditional CFO skills will translate to today’s world. From paper ledgers to spreadsheets, to ERP systems, to the cloud infused with AI. The financial needs went from a slow rate of change to an ever-evolving rapid-paced economy.
As such, CFOs need to be equipped with a different set of capabilities than their predecessors. So, what essential skills should be at the core?
Technical Savviness
A recent survey conducted by Deloitte of CFOs found that there has been an uptick in the level of knowledge and skills needed for digital tools.
This doesn’t mean you have to obtain a degree in technology. But, it does mean that the skillset of the CFO requires a high degree of technical acumen.
Traditionally, the only tech skills needed were for whatever ERP system was being used. Now, data resides across the company in many different forms. The CFO has to be cognizant of this to ensure their decisions aren’t based on one variation of truth.
The driver of the decisions needs to be balanced by experience, tools, and data. While experienced CFOs can spot internal trends and anomalies, the experience alone isn’t enough anymore. Experience infused with data creates a solid foundation for decision-making.
- Building Queries:
- This might seem like an “IT thing”, but querying the data from a CFO’s point of view is critical. IT won’t understand the way data needs to be viewed and could make incorrect assumptions. This is where the CFOs experience can define how to query the data to create a forecast model.
- Another tool that can help CFOs build the queries is Natural Language Processing (NLP). Many analytical systems have NLP built-in to “ask the data” using everyday terms. For example, you could type in “What were the top 10 products sold last quarter”.
- Data Visualization:
- Spreadsheets still have their place for viewing and understanding data. However, spreadsheets don’t “tell the story” of the data. Multidimensional views of data are needed.
- Once queries are constructed, you can take the result set and turn it into data visualizations. These allow you to truly “see” the data.
- Dashboard Creation:
- A combination of data visualizations is the basis of creating compelling dashboards. Dashboards aren’t just pretty forms of data. Current visualization tools such as Power BI or Tableau allow you to interact with the dashboard. No longer is a dashboard a snapshot that is outdated the moment it’s emailed to you. Now a dashboard is a real-time aggregate of critical data that can tell multiple stories of the data.
- Again, the CFO’s experience can aid here. The correct combination of data visualizations put together will create the narrative for the data story.
CFOs can’t be a barrier to technology within an organization. Their own adoption and use of technology will go a long way and showcases leading by example. Strategic investment in technology is crucial to the long-term success of not only finance, but operations, lines of business, and, of course, IT.
Behavioral Skills
The behavior of a CFO is a reflection of the C-suite and the organization internally and externally. Perceptions of employees by a CFO’s behavior can directly impact morale and performance. The perceptions of consumers can impact brand loyalty due to their collective purchasing power.
In the 1970s, several behavioral skills were outlined to assess performance and attitude. The intent was to provide a guide to a person’s overall maturity, common sense, and character.
Out of these skills, there are a couple that deserves closer attention
Communication
All professional roles today require effective communication. However, for CFOs, there are general communication skills that apply across all areas of life such as:
- Active listening
- Body language
- Clarity
- Tone
- Confidence
Outside of those critical areas of communication, there is another that requires a different approach. Communicating data impacts the strategy, vision, and processes that the CFO is looking to define.
But, what does the process look like for effective data communication?
The CFOs translation of the data will shape decisions and the trajectory of the organization.
Decision-Making
Everybody makes decisions every day. On a smaller scale, we decide what to wear and where to eat, for example. On a large scale, deciding if an acquisition should be made, or to invest in technology and people.
The differentiator is how quickly, efficiently, and effectively those decisions can be made. CFOs today set the pace for the company and curate transparency internally and externally.
What are the key steps involved in the decision-making process?
Identify the decision
You realize that you need to make a decision. Try to clearly define the nature of the decision you must make. This first step is very important.
Gather information
Collect some pertinent information before you make your decision: what information is needed, the best sources of information, and how to get it. This step involves both internal and external “work.” Some information is internal: you’ll seek it through a process of self-assessment. Other information is external: you’ll and it online, in books, from other people, and from other sources.
Identify alternatives
As you collect information, you will probably identify several possible paths of action or alternatives. You can also use your imagination and additional information to construct new alternatives. In this step, you will list all possible and desirable alternatives.
Weigh the evidence
Draw on your information and emotions to imagine what it would be like if you carried out each of the alternatives to the end. Evaluate whether the need identified in Step 1 would be met or resolved through the use of each alternative. As you go through this difficult internal process, you’ll begin to favor certain alternatives: those that seem to have a higher potential for reaching your goal. Finally, place the alternatives in priority order, based upon your own value system.
Choose among alternatives
Once you have weighed all the evidence, you are ready to select the alternative that seems to be the best one for you. You may even choose a combination of alternatives. Your choice in Step 5 may very likely be the same or similar to the alternative you placed at the top of your list at the end of Step 4.
Take action
You’re now ready to take some positive action by beginning to implement the alternative you chose in Step 5.
Review your decision
In this final step, consider the results of your decision and evaluate whether or not it has resolved the need you identified in Step 1. If the decision has not met the identified need, you may want to repeat certain steps of the process to make a new decision. For example, you might want to gather more detailed or somewhat different information or explore additional alternatives.
Business Acumen
Business Acumen is defined as a combination of knowledge and skill informed by experience: knowledge about key business issues, the skill to apply that knowledge, and the confidence to take action informed by past experiences.
While others can handle the what, how, and why of business, the true measure of business acumen is the competency to prove it.
The CFO needs the combination of technical savviness and behavioral skills to provide the leadership necessary.
What areas make up the business acumen skillset?
According to the Elgood management and business learning site, business acumen is made up of 7 characteristics:
Financial Literacy
The ability to understand how an organization uses its resources to achieve its desired outcome. In a commercial context, this is often measured in terms of profit or revenue, in other organizations the key measure of success might be improved capacity or measurable social benefits.
Organizational Knowledge
Knowledge about the organization in which the individual works.
- What are the relevant procedures and processes?
- How can they get things done?
Ability to deal with ambiguity
In many cases, it is impossible to know everything relevant to a situation. Each individual must decide when the information available is sufficient to move forward.
Ability to link cause and effect
Both in a financial sense (e.g. 10% discount means we will not make a profit), and in a personal sense (e.g. if we don’t complete this forecast accurately, our boss will not secure the resources we need next year).
Self Awareness
How will an individual’s actions and decisions impact the organization and the other people in it?
Stakeholder Awareness
What are the stakeholder’s interests and needs, and how do decisions made within the organization impact them?
Contextual Knowledge
The ability to relate what happens outside an individual’s immediate environment to situations in the workplace.
- For senior managers, this will involve looking at the wider external landscape.
- For supervisors, it means knowing about the changes happening within their own organization.
Final Thoughts
Being a successful CFO is a long-term process that doesn’t happen overnight. Reaching success as a CFO is the result of years of hard work and dedication. How one skill is honed impacts the adjacent skill in a good or bad way. It’s important to create a balance in these skillsets.
Humility would state that anytime is the perfect time to improve upon these skills for anyone with a desire to be an effective CFO. One last thing, learning from others is important to keep from forming siloed thoughts and making decisions.
