Succeeding as a New CFO...One new CFO in every three struggles most with business partnership...

Succeedingas a New CFOKeys to the first 100 days

© 2020 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. This presentation, including all supporting materials, is proprietary to Gartner, Inc. and/or its affiliates and is for the sole internal use of the intended recipients. Because this presentation may contain information that is confidential, proprietary or otherwise legally protected, it may not be further copied, distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates.

Tenure

One in three CFOs is new to the role. Forty percent have more than 10 years of experience.

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CFOs with 1 – 5 years of experience



CFOs with more than 15years of experience

34%

25% 24%

16%

91%

Onboarding challenges

9%

Yes

No

CFO orientation programs exist at only 9% of companiesIncoming executives are not formally onboarded to their new role.


Onboarding challenges (continued)

One new CFO in every three struggles most with business partnershipIncoming executives face similar obstacles.

26% 26%16%

5%Building a working

relationship withleadership team

Getting up to speed on operations

Communicating with externalstakeholders

Managing the financefunction

Managing difficultfinancial orgovernancesituations

37%


New CFO checklist

1. Mastering the role and managing key relationshipsExpected time frame: First 30 days

• Develop intimacy with operations to understand the value chain, business model and internal power structures; build rapport with senior executives and meet with key shareholders to discuss organization’s strategic and long-term growth prospects

• Map organization and industry value chains • Identify internal stakeholders’ expectations • Maintain regular meetings with leadership • Maintain proximity with strategic investors

2. Focusing on critical activitiesExpected time frame: After 60 days

• Make difficult time allocation trade-offs to ensure focus on the activities that will add the most value

• Evaluate personal time allocation across all responsibilities• Aggressively delegate less-value-added activities

3. Defining a vision for the functionExpected time frame: After 15 days

• Review functional best practices to define end states forchanges in key functional capabilities

• Determine finance function’s capabilities• Establish finance’s critical mission statement

4. Assessing staff capabilitiesExpected time frame: After 30 days• Analyze finance skills gaps to identify readiness for change

and an optimal change management style• Conduct skills gap analysis• Identify direct report role expectations


Roadmap

Mastering therole and

managing keyrelationships

Focusing on criticalactivities

Defining avision for

the function

Assessingstaff

capabilities


Internal sources

Interviews with senior executivesExpertise:• The organization’s current and future

strategic direction• Expectations about the CFO’s role

Line/BU visitsExpertise:• Project-specific knowledge• Practical view of business process• Understanding of organization value drivers

Gain a better picture of the business

External sources

Engaged consultantsExpertise:• Existing business execution problems• Components of the organization’s new strategy• Management style of the CEO and other

senior executives

Line/BU visitsExpertise:• Brand image• Corporate commitment to quality and service• Organization’s technical and operational capabilities

Potential sources of information


CEO

HR Sales Operations R&D Quality Marketing

Gain a better picture of the business (continued)

Strategic opportunities identification

Review environmental intelligence and current capabilities to identify innovative growth opportunities

Sales support

Collaborate with sales teams to identify areas of best leverage (e.g., contract terms, pricing) for finance’s involvement and where decision support tools are needed

Complexity and experience management

• Review current product offerings to identify opportunities for streamlining and creating product platforms

• Collaborate with frontline operations to deliver finance decision support

Business case creation and

ROI measurement

• Provide detailed sales forecast data and assess project and/or product risk profile

• Collaborate with marketing to measure marketing ROI

To serve as a strategic partner

across the organization, CFOs

must gain critical business

insight and on-the-ground

perspectives of the

organization’s value drivers.

Finance’s involvement in selected functionsIllustrative


Build internal relationships

CFOs must focus on developing their internal network of colleagues in order to gain operational intimacy.

Most important development area: New CFOs

25%Internal relationshipmanagement

35%Operational business knowledge

5%External relationshipmanagement

35%Finance functionmanagement

Most important development area: Tenured CFOs

15%Finance function management

45%Internal relationshipmanagement

6%External relationshipmanagement

34%Operational business knowledge


Strengthen finance’s partnership with the line

CFOs should focus on supportinggeneral managers to drive growth and incent and institutionalize value-creating finance practices at theline.

Finance vs. line responsibilities at a big data organizationIllustrative

Unique finance roles

• Budget preparation

• Management

reporting

• Decision support

for the line

Joint responsibilities• Sales growth ofXX%

• EPS growth ofXX%

• EBIT improvement of

XX%

Unique line roles• Improved efficiency

• Market share

improvement

• Identifying acquisition

targets

The organization’s approachTraditional finance challenge Solution

CFO meetings with general managers limited to

review of financial performance

Initiate strategy-centered meetings

with general managers

Finance provides input to line reviews but does

not take ownership of follow-up execution steps

Finance assumes responsibility for actual

implementation steps arising from the strategy

meetings


Build intimacy with operations

Exceptional* CFOs set asidemore structured time to meet withtheir general managers and are more likely to be sought for advice.

To maintain a positive tone with general managers early on in their tenures, new CFOs should maintain mutually beneficial interactions with the business on a regular basis.

*"Exceptional” CFOs were selected based on: tenure of >10 years; delivery of positive relative industry TSR during their tenure; nomination by their peers.

Meet weekly or biweekly with general managers to discuss performancePercentage of global CFOs

n = 17

Other CFOs Exceptional CFOs

19%

41%

General managers proactively seek CFO’s advice on business issuesPercentage of global CFOs

n = 17

Other CFOs Exceptional CFOs

65%82%


Build intimacy with operations (continued)

Practices from exceptional CFOs• Capture the cross-functional perceptions of finance support to the organization to help:

– Understand internal customers’ priorities for the finance function– Assess corporate finance’s performance in serving internal customers– Target areas of misalignment for improvement

• Elevate your interactions with BUs beyond performance appraisal, to facilitating identification of, and execution against, the BUs’ most pressing opportunities

• Leverage your “seat at the table” and avoid adding complexity and duplication of efforts by clearly understanding how finance can add value when interacting with the BUs

• Create occasions to help general managers identify opportunities in each other's businesses

• Beyond identifying opportunities for stretch, help BUs establish action plans to execute against performance opportunities


Set the agenda for CEO interactions

New CFOs who have less time with CEOs (in comparison withtenured CFOs) must maximize the value of their meetings.

New CFOs must proactively drive conversations with the CEO to strategic issues by outlining and proposing key topics they wish to discuss prior to regularly scheduled meetings.

Number of hours per monthwith CEO

Tenured CFOs New CFOs

5

22

1510

Formal

13Formal

9Informal

5Informal

Most commonly discussedtopics with CEOPercentage of respondents selecting the top 3

n = 16 tenured CFOs; 9 new CFOs

Tenured

New

89%78%

70%33%

66%50%

23%28%

23%50%

Businessperformancereviews

Strategicplanning

Corporatefinancialposition

Corporategovernanceissues

Board of directorissues


Set the agenda for CEO interactions (continued)

Practices from exceptional CFOs

• Set formal agendas for your regular CEO meetings that always include time reserved for discussing nonfinance business issues

• Meet regularly with general managers to discuss their strategy and business outlook, and provide different perspectives to your CEO

• If your CEO is looking to delegate, ask for responsibility for things that are more operational in nature, such as strategy, corporate development — or a BU — rather than more administrative functions such as IT or procurement


Bridge information gaps

CFOs’ proximity to investors provides an informationadvantage, while their distance from customers creates an information disadvantage.

Key observations:• CFOscompete for CEO mindshare

with many constituents who have different points of view onperformance.

• CFOs bringa unique perspectivebecause of their proximity toinvestors and thefinancial markets.

• CFOs are further from customers, hindering their ability to connect trends with operational realities without partnership from other executives.

Performance information flows

Board

What choiceswill driveshareholdervalue?

Leadershipaction

Provide avaluation-drivenperformanceviewpoint

Bolster yourrelationships withline executives to get real-timeaccess to trends

Informationinputs

• Investor preferences• Financial market trends• Financial perspective

on risk vs. return

• Market trends• Execution risks• Customer needs

• Customer needs• Competitive intelligence

Performanceviewpoint

How will investors valueour choices? What risk-vs.-return trade-offsshould we make?

What are the growthbets and performancerisks in the business?

Where are our salestrending?

Investors

Customers

CFO

Generalmanagers

Head of sales

CEO


Manage critical relationships

Exceptional CFOsspend moretime with the CEO, general managers and investors.

Average percentage of CFO time allocation toeach constituency

Exceptional CFOs

Other CFOs

CEO Operations Investors

20%

15%18%

12%9%

n = 70 CFOs

16%


Roadmap





the function

Assessingstaff

capabilities


A crowded agenda

CFOs spend the greatest share of their time on core finance function activitiesand the least on investor-and customer-related activities.


5%Customer-related activities 21%

Finance function activities

18%Corporate strategy activities

18%Finance strategy activities

17%Business-unit-related activities

13%Board-related activities

8%Investor-related activities

n = 135 organizations

1. Focus your time on high-variability, high-impact decisions

While administrative process improvements certainly provide cost and efficiency gains, operational execution is a greater determinant of long-term competitive success. Furthermore, the cost of failure for bad operational decisions is high, but for administrative decisions is low.

2. Execute the change, then hand it over

CFOs may need to lead nonfinance departments during periods of centralization and streamlining, but should not do so permanently. Develop a long-term plan for the function that includes a handoff to a capable new owner.

3. Task specialization matters

Organizations should consider investing in a COO/CAO position, rather than dilute the effectiveness of the CFO by increasing administrative span. Build the business case for a COO or CAO by measuring the opportunity cost of your time spent on administrative activities.

Decision rules for managing the span of control


Finance executives must make principled choices about where to invest their time and energy to create the most value for the organization.

Proactively guard your priorities

Exceptional CFOs redirect administrative responsibilities and regularly review the effectiveness of the span of control with the CEO.

1. Set firm guardrails around your responsibilities

2. Continually review your span ofcontrol with the CEO

ActionCFO agreed to have procurement report to him for a set period of time, but refused full-time responsibility for both procurement and facilities.

ActionThe CFO and CEO meet every three months to review the CFO’s top 10 priorities and discuss whether the CFO’s span of control is limiting his ability to focus on these priorities.

OutcomeThe organization created a director position responsible for procurement, facilities and small-country operations.

OutcomeThe CEO has agreed to continually revisit IT reporting to determine if it interferes with the CFO’s priorities.


View of the finance function

CFO

1. Corporate center technical expertise

2. Distributed judgment-based activities

3. Standardizablerules-based processes

• Treasury• Tax• Accounting

• Decision support• Planning and analysis• Strategy evaluation• Performance diagnosis

• Accounts payable• Accounts receivable• Payroll• Management reporting

Process-focused staff(increasingly) in shared-service centers

Embedded senior staff* selected for critical thinking, influence skillsand business acumen

Technical finance practitioners in corporate center

Activities

Staff characteristics

Provide assurance

(Centralize, recruit experts, provide oversight)

Finance goal

Drive value

(Invest, train, improve impact)

Reduce cost

(Centralize, streamline, digitize, outsource)

*Finance staff in dedicated roles who provide finance analytical support to managers in BUs, other functional areas or product lines


Seek a more leveraged role for the CFO

The CFO at a software company deliberately structures his involvement to capitalize on his expertise and to optimize his impact on growth.

CFO involvement in selected activities

Own• Daily dialogues with CEO• Barometer of capital

markets’ reactions

• Prioritizing andsequencing projects

• Ensuring alignmentbetween initiative andregular planning

• Scorecard-creatingframework for measuringand monitoring

• Killing underperformingprojects

Contribute• Growth opportunity

identification

• Press releases

• Communication strategies

• Customer relationshipstrategies

• Product development• Employee development

Delegate• Project sponsorship to

various senior executives

• Meeting• Agenda• Active management

of planning processalignment to SVP,strategic finance planning

• Committee participation

• IT operations

Ignore• Excessively

detailed initiative planning

• Creating standardized,comparable scorecards for all projects

• Memo staffing personnelcoordination

• Blind inquiries


Leave finance to finance

Exceptional CFOs delegate fewer value-added activities and spend less time with finance than their counterparts.

Average percentage of CFO time allocation to each constituency

Exceptional CFOs

Other CFOs30%

38%

Finance organization

Controller Treasurer Tax director Head of IR Head of FP&A BU CFO

10%9%

4%5%

2%3% 3%

4%

6%

8%

6%

8%


Roadmap





the function

Assessingstaff

capabilities


Align finance’s mandate

While the CFO role has evolved to valuecreation, the finance team lags behind this evolution.

To ensure that finance effectively supports its mandate, new CFOs must begin by defining a clear vision and direction for the finance organization.

Divergence between the expectations for CFOs and their finance teams

Low

High

Time

CFOs maintaining expectations for finance staff

CEOs and boards raisin

g expecta

tions for C

FOs

Expectationsfor driving

value creation

CFO as financial steward CFO as chief performance officer

Finance as accountants Finance as process improvers and data analyzers

CFO’s mandate• Inflecting performance

• Influencing strategy

• Providing strategic support for the board and CEO

Finance staff tasks• Conducting data

analysis

• Implementing process improvements

• Providing internal customer support


Define finance’s vision

New CFOs should ensure that their finance organization’s existing mission statement captures their strategic vision and provides direction for thefunction.

Sample value-added finance missionstatements“We are leaders and financial business partners that power decisions and drive value for the organizationthrough the successful execution of our strategies.”

“Influence the right business decisions to exceed competitors’ growth in shareholder value and cash flow:• By providing innovative and actionable information and performance reporting and quality financial and

information services; and• By being a good business partner.”

“To be a value-added partner to our business customers by assuming responsibility for corporategovernance and risk matters and for the delivery of strategic, performance management, andtransaction processing services at both the corporate and BU level.”

“Our mission is to positively contribute to business development. By ensuring relevant and reliable information on a timely basis and through the realistic assessment of opportunities and risks, we are committed to securing the organization’s integrity. In order to achieve this:• We focus our activities on those issues promoting the organization’s future success. We give business

recommendations by our own initiative;• We increasingly work with and in projects rather than adhere to fixed organizational structures; and• We implement the consistent comprehension of project management and train the necessary skills.”


Roadmap





the function

Assessingstaff

capabilities


• Tax• Treasury• SEC reporting• Internal controls

Finance function

Specialized servicesPlanning and performance management

Shared services centers Decision support

Deliver on critical finance skills

Finance’s mandate highlights the need for both technical and soft skills across financestaff.

Decision support roles typically require greater business acumen, as well as negotiation, communication and critical thinking skills.

New CFOs should also emphasize technical skills development to avoid skills gaps in staff that are in traditional roles such as accounting and audit.

Finance function organization activities and competenciesIllustrative

Sam

ple

activ

ityR

equi

red

com

pete

ncie

s• Enterprisewide

planning• Accounting• Budgeting• Forecasting

• Accounts payable• Billing• Payroll• Inventory management

• Business development• Competitor analysis• M&A support• Pricing strategy• Product development

• Accounting• Auditing• Financial reporting• Cash management• Corporate finance

• Operational reporting• P&L analysis• Customer profitability• Statistics and modeling

• Cost and management accounting

• IT management• Process excellence

(e.g., Six Sigma)

• Critical thinking• Communicating• Enterprisewide analysis• Negotiating• Operational knowledge

Technical skills Soft skills


Assess finance bench strength

To determine organizational skill level within finance, a large company maps the existing and required skill set to execute the CFO’s stated mission for finance.

This exercise focuses on assessing the talent base across the entire finance function rather than the development needs of individual employees.

Finance bench strength assessment

Leadership skills: Rating(0 – 10) Business skills: Rating(0 – 10)

Visionary leadership Growing thebusiness

Delegation/sharing responsibility Strategic thinking andexecution

Coaching/helping others grow Business/financial acumen

Building an effectiveorganization Operational decision making

Change leadership Managing multiplepriorities

Interpersonal skills/personal attributes: Rating(0 – 10) Technical/professional skills: Rating(0 – 10)

Building business partnerships Applying technical/professional knowledge

Communicating with impact Proficiency within discipline

Championing diversity Level of formaleducation

Drive for results Work experience withindiscipline

Skills evaluated move beyond traditional finance competencies and emphasize“impact” skills.

The bench strength assessment evaluates the leadership skills and potential of all finance staff at the manager level and above. Each form is completed by the individual’s direct manager based on15 standard criteria that evaluate staff’s technical and soft skills. HR then compiles individual survey results and presents a total picture of skills strengths and development areas for the finance organization.


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© 2020 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. This presentation, including all supporting materials, is proprietary to Gartner, Inc. and/or its affiliates and is for the sole internal use of the intended recipients. Because this presentation may contain information that is confidential, proprietary or otherwise legally protected, it may not be further copied, distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates.

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Succeeding as a New CFO...One new CFO in every three struggles most with business partnership...

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