The Evolution of the CFO - Martin Pilkington, Rh Environmental Ltd.

© 2016 RH Environmental Ltd. www.rhenvironmental.co.uk

The Evolution of the CFO

23rd June 2016

Martin PilkingtonFinance DirectorRH Environmental Ltd

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CFOMacro Evolutionary Drivers

The economic cycle : Boom or Doom pending?

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CFOMacro Evolutionary Drivers

The speed of technological change: Papal Inauguration 2005-13

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The Origin of the Species.. Does nature or nurture define a CFO?

AuditFin Acctg

TreasuryTax

Budgeting

Commercial

M&A

Strategy

Leader

Consulting

Corporate development

CFO

Business Partner/Sales/Pricing

Division controller

Tax structures/Capex

Audit foundation + Fin Accountant

• Global / SME experience• X sector/function experience• Portfolio management• Treasury management• Insource/outsource• Technology insights• Value creation• Process engineering

• Leadership • Deal experience• HR knowledge• People skills• Delegation• Communication skills

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What stage of CFO evolution to target? An IT based perspective

Standardize Procedures

Capitalize and optimize through IT systems

Automate and Predict using real time analytics

Automated self servicefinance model

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Automating tasksFrees the CFO to initiate and participate

Does not replace the X Factor of strategic decision making

But do you have the X factor or is it self driven IT based extinction?

Source:Unit4

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The evolutionary ladder

Scorekeepers

•Source : IBM CFO study 2010 and IBM CFO insights from the Global C Suite Study 2014** of 576 CFOs

Disciplined Operators

Constrained Advisers

Value Integrators

Performance Accelerator**

Homer Cartoon Source: http://www.thecollapsedwavefunction.com/2012/08/arguments-against-evolution.html

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Politics of transformation to value driver

• Understand and drive change in the business->Performance targets and strategic goals

• Build relationships based on mutual benefits ->Work with key power brokers

• Network with key influencers

• Build strong recognized track record of success

• Be the ‘vizier’ not the crown prince->Indispensible but not a ‘threat’ refers to ‘Shogun’ by James Clavell

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Divisional PortfolioAs a source of financial political power

• Insert your choice of Divisional FD/Controller into each division• Give them the ability to foster a BP relationship with the Divisional Head(Delegation)• Make them invaluable to the Divisional Head by giving them your ear(approval process)• Hold their career cards in your hands

• You have a ready made intelligence network and point of leverage…..

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Key genes in the evolutionary code

The evolving CFO understands value creation is about the future not the past

The future CFO:

•Understands the value drivers and processes of the business•Masters the portfolio and initiates entries and exits•Has commercial acumen and a track record of success•Masters politics and communication skills•Provides leadership and hires competent staff to perform key tasks•Makes balanced decisions•Can network and build relationships•Has and displays integrity•Has business insight into digital technology/business trends•Embodies wide career experience – global/sectors/functions•Has financial ability and knowledge as a tool, not the only tool•Automates processes and digitizes to focus on high added value

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The risk of an extinction event…. Could CFOs drop off the Board?

• COO absorbs CFO role

• MBAs / Strategists downgrade accountants

• The Corporate robot and the march of AI->Digitization as an extinction event

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Evolution in progress……

25% of FTSE 100 CEOs are qualified accountants*•The 2015 annual Robert Half FTSE 100 CEO Tracker found that more than half of Britain's top bosses have a financial background, while one in four CEOs are qualified chartered accountants.

•By comparison, 21% come from careers in retail/hospitality, 17% in engineering/natural resources, 14% in marketing and 11% in technology..

•"Professionals with an education or background in finance are highly sought after by organizations and demand continues to outweigh supply in today's job market.

•The climb to the top job can take different paths, but specific industry experience has proven to be a key consideration for businesses when appointing their chief executive.

•Combining strong functional and technical knowledge with a deep understanding of the industry and competitive landscape is a sound strategy for motivated professionals looking to advance their careers,” R Sheridan from Robert Half added.

*Source : Finance Director 19/5/2015 http://www.financialdirector.co.uk/financial-director/news/2409128/quarter-of-ftse-100-bosses-are-qualified-accountants


A Back to the Future role model….?

Henry VII strengthened the power of the monarchy by using traditional methods of government to tighten royal administration and increase revenues (reportedly including a daily examination of accounts).

Henry had Tudor genetics and could claim ancestry back to King Arthur’s family and right back to Brutus…..

SOURCE: http://www.royal.gov.uk/HistoryoftheMonarchy/KingsandQueensofEngland/TheTudors/HenryVII.aspx

Government LEADER AND AMATEUR ACCOUNTANT …the Winter King…..


Three CFO takeaways !

1.Those executives who drive (value creation) will survive

2. Keep your eyes on the road ahead and on the rear view mirror

3.Financial expertise is the engine but business insight delivers the X factor

The Evolution of the CFO - Martin Pilkington, Rh Environmental Ltd.

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