Thinking back on it, conversations with CFOs in the 1990s never addressed the issues of technology other than the significant costs it was having on their businesses. There was certainly no mention of the strategic value or the role it would play in the development of business models and processes.
That said, however, twenty years ago computing and communication technology was still in its infancy and not an area the CFOs would be heavily involved in. Additionally, they had other more important issues that were irrevocably changing their role within the organisation.
Today, the IT/Finance alliance is firmly rooted within most organisations and, in many cases, falls under the control of the CFO. More often than not, we find that the Chief Technology Officer (CTO) reports directly to the CFO, and where the CTO is not a board position the CFO is the voice of the IT division in the boardroom.
So what has changed in the intervening years that the CFOï¿½s position now encompasses IT? Some commentators have suggested that from the early 1970s through to the mid 90s, we experienced the first digital revolution. Business technology was regarded as tactical or operational, a back-office function that was incorporated in virtually every organisation.
It certainly wasnï¿½t developed enough to provide a strategic function; or if it was, it was certainly never understood or embraced as such. In the mid to late 1990s, organisations were only just coming to grips with the Internet and developing their websites.
Then the so-called second digital revolution commenced. Whereas the ability to reach customers 24/7 was only a pipe dream a few years earlier, creative thinking was rapidly making it a reality. Pierre Omidyar's eBay and Jeff Bezos' Amazon took the world by storm and suddenly the e-business model became almost obligatory for marketing and sales personnel. Business technology changed from being just tactical to being tactical and strategic. And so, too, did the role of the CFO.
The demands being placed on CFOs are now extending well beyond the boundaries of traditional financial management. Chief Executive Officers are recruiting CFOs who have a much broader range of expertise that includes a deep understanding of business processes, competitor and customer environments, and technology.
They must also be adept at problem solving and be excellent communicators and strategic thinkers; very different from their antecedents. CEOs also expect them to examine in detail the financial impact of the organisation's objectives and strategies while they're still in the planning stages, not after the event as was traditionally the case. This is one area that can be something of a minefield for CFOs.
Accurately evaluating the Return on Investment (ROI) of business technology, particularly social media, can be complex and very challenging. Today, social media is used by many people within an organisation. HR uses it in recruitment and internal communications, and Sales, Marketing and Public Relations use social media platforms to reach and retain customers, monitor campaigns and audit competitor activity. Legal, R&D and logistics also have their use of social media.
The difficulty in clearly defining the ROI results from the multiple data points that occur; metrics such as retweets, likes, follows, comments, shares, website visits, and others. Yet CFOs are expected to make definitive judgements on the returns made on their company's investment in social media.
There have been many articles written on this point, most suggesting that with the rapidly growing use of social media networks by companies and brands, ROI methodology needs to be reevaluated. One of the reasons is that conventional methods of evaluating ROI, particularly from the sales & marketing point of view, could result in the strategic emphasis being placed on the wrong activities.
For similar reasons as with R&D, the new generation of CFOs are adopting a broader view of the business opportunities afforded by digital investments, taking into account a longer-term corporate growth strategy rather than viewing their organisation's digital contributions just in the short term.
Within most organisations there are people whose responsibility is to improve business processes such as marketing, customer relationship management, supply chain management and so on. And there are others whose responsibility is business technology; data acquisition, network and computer maintenance, keeping people connected and so on.
If CFOs can encourage the collaboration and integration of business processes and business technologies, as some I know are able to achieve, optimising the relationship between their business (strategic) and computing/communications technologies (tactical), then efficiencies, growth and profitability will surely follow. This is a marked change in what CFOs of the past were expected to achieve.
In many organisations today, although I'm hoping the number is declining, I still find that CFOs are often not in the front row when it comes to discussions on business technology convergence. One of the reasons is that there remains a tendency to view CFOs as defensive rather than offensive, tactical rather than strategic.
This attitude must change, as indeed CFOs themselves must change, if businesses are going to be successful when global markets recover from the current economic situation. Why should they be in the front row? Because their inherent nature is to ask the right questions! Furthermore, they are often the ones communicating with market analysts and equity research firms so they know how those on the outside are looking in.
Today's CFOs are not only expected to maximise financial performance (in the traditional way), they are also expected to use non-financial indicators to measure the performance of intangible assets such as customer loyalty, intellectual capital and digital technology. Financial methodologies currently used may not capture the long-term benefits of investments in areas such social media.
The digital era will certainly be a defining point for many organisations, so CFOs who have the ability to take a strategic and lateral view of digital investments will be best placed to lead their companies in achieving sustained growth and profitability. Career prospects for those aspiring to be at the top have never been better!
David Chancellor is partner at executive search firm Tyzack Partners.
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