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How the finance function can harness the power of AI
In this episode of The Better Finance podcast, Noah Barsky, Professor at Villanova University, joins host Myles Corson to explore the impact of AI across finance function.
Related topics
Host Myles Corson talks to Noah Barsky, a professor at Villanova University, about the use of artificial intelligence (AI) in the finance function. Noah brings his insights from an article he wrote for Forbes and a survey conducted by EY teams.
Noah dives into the exciting opportunities and challenges that AI presents in finance. He highlights why senior leaders in the C-suite and boards should have meaningful discussions about incorporating AI into their operations. However, many organizations can struggle with this because of distractions and ineffective leadership.
Noah explains what can make a true leader — someone with the ability to think critically, communicate clearly and have a strong sense of purpose. He emphasizes the importance of leaders who can guide their teams, make informed decisions and build trust. He also warns against being dependent on specialized knowledge, as it can hinder decision-making and hold back progress.
Noah stresses that successful AI adoption can require not only understanding the business, but also anticipating future outcomes. He emphasizes the role of bold leadership in setting clear goals and creating a practical plan to achieve them. Additionally, Noah underlines the need for a culture that encourages open discussions about effectively integrating AI into company practices.
Key takeaways:
- Understand the importance of meaningful discussions among senior leaders in incorporating AI into financial operations
- Identify the key qualities of future finance leaders
- Recognize the importance of guiding teams, making informed decisions, and building trust as a leader in the finance function
- Understand the potential drawbacks of relying solely on specialized knowledge and the impact it can have on decision-making and progress
- Appreciate the significance of setting clear goals, creating practical plans and fostering a culture of open discussion to successfully adopt AI in financial practices
For your convenience, full text transcript of this podcast is also available.
Podcast transcript: How the finance function can harness the power of AI
46 mins 36 secs | 4 December 2023
Noah Barsky
“An organization that is healthy asks a lot of questions. And in fact, AI, properly implemented and deployed, improves our ability to ask better questions.”Myles Corson
That was Noah Barsky, a professor in graduate and executive business programs at the Villanova University School of Business and a Cutter Consortium Fellow. I’m Myles Corson from Ernst & Young, host of the EY Better Finance podcast, a series that explores the changing dynamics of the business world and what it means for finance leaders of today and tomorrow by sharing insights from global leaders on key topics affecting the world of corporate finance.In this episode, Dr. Barsky, among other things, discusses artificial intelligence or AI and its impact on finance, the “say-do gap” for CFOs, and the role of the board.
It’s a fascinating and wide-ranging conversation, which I hope you enjoy!
Corson
Thank you so much for joining us on the Better Finance podcast. It is an honor to have you here.Barsky
Likewise, Myles, it is an honor to be with you. I follow your work with EY. So, it is a pleasure to have this conversation today.Corson
As we kick off, perhaps you could tell us a little bit about your role and how you got to where you are today?Barsky
I am a professor at Villanova University in the School of Business. I teach in our executive and graduate programs — MBA students and Masters of Accountancy. And over the years, I have had the opportunity to work in executive education with large organizations in consulting and writing with Forbes. And one thing I would like to highlight is for many years I worked, as you know, with EY Knowledge (EYK) — and it is a very innovative and creative group of folks who serve the firm as internal consultants, as researchers who feed the client-facing members of the firm and they also start to think about how can EY best position itself. So, it has been a great opportunity to make friendships, to learn and to work together with EYKEYK (EY Knowledge) over the years. So, I see that this conversation today is almost a natural extension of that longstanding relationship.Corson
It is great to have you as part of the network of EY. So, thank you for all of your support. You mentioned the writing you do for Forbes, and you recently wrote an article entitled, “Why Boards Need to Invest in Finance AI Success.” There is a lot to unpack from the article, but perhaps you can start by talking about the opportunities and challenges you see from AI in finance?Barsky
When we talk about AI, beyond the technology, it is really a question of where are businesses and organizations going over the next decade. And when I talk to senior leaders, I always ask the question —managers, frontline — think about how different your business is today from where it was just five years ago. We are in awe. If you watch even a television program or a movie, it seems outdated from five years ago. So, if history be the trend, how could any of us even begin to imagine what five or 10 years hence looks like? When I talk to leaders, we don’t always talk about just the opportunities, but we also talk about what I characterize as the obligations of leadership. And when people start to think about those obligations, it starts with stewardship and putting the organization in a better position five years from now than where it is today.So, what prompted me to write the piece for Forbes was not so much what are the particulars of which technology to choose and which one to invest, but are we willing to address what I would characterize as the rhetoric reality gap in a lot of organizations. We say these things and inevitably, we find ourselves chasing the next buzzword, the next trend and the next technology. So, how do we really make that difference in a substantive way and behind that, the essence was do we really have not only the will, but also the skill to lead that type of transformations. That was a motivation and, then in my research, I stumbled upon the work you have done with your team in terms of what are the expectations for CFOs going forward and it was natural pairing in terms of the thinking.
Corson
A lot to unpack there. You talked about the skill and will gap and in the article, you talk about AI potentially being able to elevate strategic influence, tighten controls, enhance business agility and deliver better results. As you are really getting to the point of this is not just about the technology, it is about what are the outcomes, as leaders, we are trying to drive. Can you talk a little bit more about that interplay between technology and the human skills that finance leaders need to develop in themselves, personally as leaders and in their teams to really capture these opportunities that arise from AI and technology?Barsky
The EY research really tapped into it when it talks about what is a demarcation in what is happening in C-suites today. In the report from EY, it says that what is the level of trust that we have that is meaningful across the C-suite and with the board. And when we start to think about AI, a lot of people worry that those jobs that can be automated will be automated. But to what extent are senior leaders able to use AI to be a business accelerator? And what I mean by that is what are we doing in substance? There is a very big problem, we talked about the will and skill gap, is that the digital CFO has been bantered about for 20 to 25 years with very little accomplishment. We have a wasteland of overspending and projects that have failed. AI is far more than just an IT project. It is something that commands the ability to think strategically and to reverse engineer the business to where it needs to be.But so many organizations today find themselves in a position that is probably best characterized as distracted. And the CFO position, in particular, is one that suffers greatly from it.The report itself showed that very few CFOs even characterized their organization as best in class or even fewer think they have the appetite, the willingness to lead a transformation. So, when you think about the scope of transformation, the pressure on transformation, the monetary cost of transformation, and the bearing of inflation and interest rates, what is the CFO expected to do, now they have risen to that type of level? So, it is a bit forward-looking, but it is also a clarion call that it is time for boards and C-suites to have real conversations.
Corson
You are alluding to some of the human aspects here. One of the things that gets talked about a lot, as you kind of just mentioned, is what does this mean for some of the existing roles within finance functions. As you think more broadly around the impact on finance and accounting as a profession, you highlight one of the big challenges that we are all seeing, which is the shortage of accountants, the number of people retiring from the profession, the tightening of the funnel, and people coming in. What are some of the broader impacts you see for the profession?Barsky
I was talking to a company recently about their CEO change, and there is a lot of nervousness in the organization about who will this new person be. I will not name the company for the obvious reasons, but who will this new person be? What will they bring to the organization? And there was a feeling that it was a time to become invisible and to wait and see. But the pace of change in business does not allow us to do that. And what I pointed out to that group was that any executive — CEO, CFO or chief experience officer (CXO) — is dependent upon the people below them, maybe even more so than they are dependent upon that leader. And when you think about not having an ample number of technically trained accounting and finance people, it is a very big problem.According to recent research, I think it was over 600 US-listed companies failed to meet filing deadlines and they are talking about the driver of that being inadequate personnel. It is frankly unacceptable that we cannot get our regulatory filings in order in time, and what have we done and what have we neglected over time. And when I work with companies, I always ask them to use a sports reference.
What it is more troubling than an unforced mistake? Is it what the competition does? Is it what the market does or the things what we do or fail to do where we cannot get out of our own way? So, to answer your question specifically, when we think about what are the expectations, the CFO office really needs to think carefully about how to employ technology, who to partner with, and who are these trusted partners? In the article, I use two simple words: name names. Who is going to lead this? Who is going to do this? And a lot of people who wind up in leadership positions in finance roles come from a compliance and audit type of experience.
Now while that is good from a risk-exposure perspective, it does not necessarily ensure that we have the strategic tools to ensure what must go right. We bring a what-could-go-wrong mentality, a counting mentality, but we do not really think about performance in the future. And that is a big transformation that, as the EY report shows, is something that — again, there is very little appetite for, and if there is little appetite, how much success really awaits.
Corson
You have mentioned a couple of times the examples of where transformation initiatives have failed and I think in the article, you used the word bungled. As you think about advising clients, how should organizations think about investing in developing AI to avoid those pitfalls that people have fallen into historically?Barsky
A lot of it comes back, Myles, to what I would characterize as business acumen. Very simply, how can we transform or change a business that we do not understand? A lot of people who are in leadership positions spend a lot of time worrying and focusing on what happened. Data are abundant. They tell us those things. But what will happen and why? And the more that we have those types of questions being asked, if we can have purposeful leadership of people who can think about and communicate clearly with courage, what we will do and what we will not do, it has to be of substance. And too many times, we have people, as I characterized in the article, as ”ledos,” leaders in title only.We have all worked with them. We all know them. We all see them. And if they did not have a job title, would they command any respect at a meeting, in a conference room, in the hallway? So, when we have leaders who are true leaders, they are the ones who can speak with clarity. They have a point of view. They have a position. They may ultimately not be exact and precise, but that imperfection leads to a trust. It leads to a direction that allows us to accomplish things. And too often, we fall victim, because when you think about the functional experience of people across the organization, most people are not business people.
They are functional experts. And what that leads to is that we start to filter strategic decisions with operational readiness, and that happens in the finance function. It happens across operations and all the way across the business, and then we find businesses that are laggards. So, in the EY report, 2023 Global EY DNA of the CFO Survey, we talk about bold leadership. Well, bold leadership not only has a target, but it also has a credible plan to get there and has people all throughout the organization, talking about what must go right.
Corson
So, the combination of business acumen with the people skills and I think that is really exemplified when you talk about purposeful leadership. And as you say, our research really highlights the importance of getting that human aspect right in driving successful transformation programs. Again, the ability to communicate a vision, to have empathy with the journey your people are going on, particularly for these major transformation programs that are very difficult, complex and frankly, the uncertainty that causes anxiety in many people. So, a lot there. Are there other things that you have seen organizations do to drive successful transformation?Barsky
They have candid conversations about talent. A big problem that organizations face is they take people who are high-potential, and they really deny them the opportunity to be high-performance. In other words, if we have eight people and they are around B players, frustration, stagnation sits in. So, when we talk about people who have that talent to drive things, what are we doing in terms of our expectations? Sometimes, if you sit down and really dissect a person's job, particularly in a transformation project, they start to think about they are trying to maintain what I would characterize as running the business. Now they are being asked to somehow change the business, change business workflows and “oh, by the way,” grow the business, because in a market of high interest rates and inflation, if we sit still, we are falling behind.So, when we start to think about who these people are who are going to lead them, they have to be credible, and they also have to be accountable. Now that is a word that is yet another buzzword that is thrown around organizations. And what I found in working with a lot of companies and researching this is that the word accountability is completely meaningless unless it is preceded by the most important adjective in the dictionary, which is mutual. If we do not have mutual accountability, we don’t have any accountability at all. So, that type of accountability means that we focus on finding out the bad news in the organization, highlighting it, and more importantly, fixing it. And if you notice, the words that you and I, Myles are using are one syllable words.
So, if we had any advice for leadership is to simplify it, make it clear, make it sensible to people, and also follow through. Otherwise, we have people who just have a litany of meetings and we wake up a year, two years later, not only the issues we are talking about unresolved, we have fallen horribly behind our competition. And I always ask the question, I will leave it at this Myles. If we cannot run a meeting, how can we possibly run a company. So from that perspective, we have to have the people who have this mix of skills but also have a unified focus in terms of what we are trying to accomplish.
Corson
That resonates so much and organizations are designed to hide bad news in many ways. The organizational structures leaders can find it very difficult to actually find out what is going on and the need to really skip level and to get insight into the business is an important role of leaders. I would comment and it was interesting you referenced the bolder cohort of CFOs that are driving more transformational change and a couple of the themes that we saw from that or the attributes of that group.Won the focus on culture and I think the culture of transparency, agility and openness, I think would be characteristics that we would probably recognize as being ones that are very desirable. And then the second one that reached out to me was the ability of those leaders to identify high-potential talent earlier and accelerate it. And I think particularly in this context of digital transformation, again the skills often reside with more junior professionals and people that have grown up more in the digital realm. How do you break away from the traditional hierarchical structures of organizations into more dynamic structures that allow you to pull resources and expertise from wherever it exists within the organization? Interested in your observations on how organizations think differently about dynamics in this very rapidly evolving world?
Barsky
Some of them have a mantra that really started with the former CEO from EY, which is listen to the kids. You have forums where everybody can talk openly and understand the business from the outside in. So, when you think about just our lives existing today with technology, we do not talk about the technology that we use, but we interface with the world and it is generally frictionless. But when we get to the workplace, Myles, sometimes it is hard to even schedule a meeting. So, what happens where I have the seamless opportunity at home to interface with all sorts of technologies and like a member of royalty, have things dropped on my doorstep, customized to what I like, but I cannot barely generate a report in an organization to have a meaningful conversation. So, I think that beyond all of the platitudes and the hollow cheerleading, businesses are very, very difficult.It is extremely difficult to have a successful business again and again and again. It is one of the hardest things to do in life. And what we know about human beings is that while it is important to have this element of seeing the future and having a vision, fear motivates, and what I mean by that is I have a lecture I give at the university called A Healthy Dose of Fear, and it does not mean to be a draconian in any way. But how many organizations have really taken the time to ask questions about what are the strategic consequences of inaction? Do we have an anti-vision? What does the world look like five years from now, if we do not get the implementation of AI right? What does it mean if we don’t enter certain markets? And if the answer is we can live with those consequences, so be it.
But too often, we are worried about project management, and we lose sight of our priorities. So, if we think about the consequences and how costly it can be from an operational perspective or reputational perspective, or financial perspective, I can go on and on, talent retention, what are we doing to get things right? Because we do not want to live in a position where that is not the outcome. And getting people to think critically sometimes if we were, for example, making a vendor selection, what if we had everybody in the room take an opposite position and take the time just to clarify thoughts and write them down to defend the other position, we will be thinking more thoroughly.
When we ask people who are the frontline of our organization, how do our customers see us? Why do we do business? How are we better than the competition? And the answer in most industries is it is hidden in plain view what we are doing and what our competitors are doing. But how willing are we to commit to having a well-run business? And when I hear the word glitch that should be deleted from the corporate vocabulary, it simply means we had a lack of management oversight. It wasn’t a glitch, and people understand when those things are being said as a distraction. So, we need leaders who can create unbreakable clarity, and that takes a healthy dose of courage and AI is forcing that conversation about substantive leadership.
Corson
You mentioned the fear factor, which I think is such an important point, and this question about risk aversion is an important one, particularly for finance leaders. You are highlighting the point, actually, that organizations tend to be designed to support the status quo rather than to drive change. I think the point you are making the importance of critical thinking to evaluate all the options and actually doing nothing may be more risky than making a change, particularly if it puts you at a disadvantage competitively. Again, as you work with organizations, with companies, what are the things that you have done, or you have seen them do to really institute some of that critical thinking and to be able to really do that robust evaluation and make an informed decision about whether doing nothing is a viable option or actually you do need to be bolder and take more aggressive action?Barsky
Well, not to wander too far into the world of statistics, but there is a great tool there, which the statisticians will call a type 1 or a type 2 error. What does that all mean? Well, we learned very quickly through the pandemic [COVID-19 pandemic], are we willing to gamble with a false positive or a false negative? So, we use commonplace examples for our employees. We can think about what are false positives and what are false negatives and we can’t have it all. And one of the things in terms of the default life — the default life is to do nothing. There are more songs that I can stream today that I won’t listen to than I can possibly listen to. There are more stocks in the market that I cannot invest in than I will invest in. So, business is about making choices. What is the cost of carrying an umbrella versus not? Will it rain? Will it not rain? Well, when we extrapolate that to our business, we understand the cost of insurance.But if we have people who are making choices from a “what could go wrong,” then we migrate down to compliance minimums. And the compliance world is an absolute necessary foundation to have a functioning business, but not a successful business. It is like having a car that has been inspected. But the question is, where in the world is the car going? And to extend that example, one that I work with, to take the type 1, type 2, false positive, false negative a little bit further, is I work with companies all the time and I ask this question and to tell them to just imagine when you are driving your car, imagine the size of your windshield versus the size of your rearview mirror. And most people have never thought about this. Imagine how hard it would be to drive your car if they were inverse. Imagine the massive rearview mirror and a little slit to look out and see the future.
Well, that is how we design performance measurement systems in companies. We have massive rearview mirrors to see the past with impeccable perfection, and large mirrors also give us a narcissistic opportunity to admire ourselves with a little peek into the future. Now, if we had to drive a car, we have cars, unfortunately, all over the sides of our highways and byways. So, I beg executives to think about how do you build those big clear windscreens so people can see what is going on in the environment? Has night fallen? Has it started to rain? What is the competition up to? The analogy continues itself over and over and over again. And when people start to think about that, those commonplace examples give people the context to ask the question.
It is three letters: Why? Why are we doing this? Why are we not doing something else? So sometimes, the executives trip over themselves, because they have these fanciful strategic visions and multisyllabic words and all these things that they think they are doing to really just sound good. But people see through it. So, in making those types of connections, people understand the choices they have to make. And then maybe when we get back to improving operations, driving finances, picking the metrics that matter, we are measuring strategy. And we are not simply going through these exercises of validating the projects that we have chosen to invest in.
Corson
I love the analogy of the windscreen and the rearview mirror. That is so well-made. I think what that points to is part of the research that we have seen the evolving role of the CFO is beyond that backward-looking reporting out and helping inform the forward-looking decisions and to your point, making proactive business decisions. And the role of CFOs and finance organizations to be able to interpret the past and use it to project forward and obviously, the use of AI to be able to do that in a much more scaled ways is very important. As you think about the role of CFOs and particularly this cross-functional aspect, we have seen potentially in the past challenges with that and I think there is a number of reasons for it, but it is clear that successful CFOs are able to build strong relationships with other functional leaders across the business. How do you advise CFOs to go about that and to really have that strategic seat at the executive table?Barsky
Just like we look at the business from the outside and we need to look at the finance function from the outside in. This idea of the role of the CFO is decades old. Back when I was even studying at Penn State, Steve Jablonsky wrote about these things back in the 1990s — wrote books about these things. And he identified with his research three activities that finance is responsible for the compliance function, control, the internal flow of information and then helping the business to compete. And it provides a very helpful framework if we have the humility to ask the right questions.and I will give you a very simple example here. I was working with a CFO recently and she said, I want to do exactly what you are talking about, Myles, I want my people to not only act more strategically, but also be perceived in the organization that they are trusted partners in these decisions, and we can talk about all that we want.So, I came in and I said, to what extent do you think that you spend your time? If we did just an old-fashioned tailored time study, how much of your time do you think that you spend on those competitive activities? Things that really help to drive the business, to grow the business, and to drive revenue, as opposed to things that are compliance and control-oriented? And we went around the conference room, there were six or eight of us and we just did some thumbnail math and the average was that that group spent and this was the CFO's leadership team. They spent approximately 40% of their self-estimate on competing and 60% on compliance and control. If you are 60 parts one thing and 40 parts the other, you really cannot broadcast it. You are primarily the minority part of what you do. So, then I said, well that is not the question.
If I took that same question around the hallways and asked your peers in all the other functions what they think of the finance function, put down the numbers that you think they would write down and the answers very quickly came back and in fact, the math was a lot easier, but the compete part was four. So, I looked at the group and I said the consequence of this is simple. In finance, your team has a self-inflated sense of self-worth at a multiple of 10 to 1. And we are assuming that they would score you 96 to 4, maybe it is even worse, the number, the accuracy is irrelevant, but think about what you think you do versus what they think you do. So if you are going to have a partner, there has to be a common understanding of what the contributions are to the partnership and that really sparked a conversation of not only what the perceptions are, but more importantly, what the realities are and how they can make those types of changes.
But if we don’t know our anchor point and we are presumptuous enough to think that we are doing things and other people in the organization view those people as leaders and titles only, then they are going through the motions and CFOs can talk about it, but it really takes the time to listen to the partnerships. So, we understand how we can all contribute and that gets to another topic that is in the article, which is resilience. It is how do we help the organization to understand that when we take a detour, that we have the ability to understand the financial realities of one hour of downtime, of correcting a problem, of remediation. So, a lot of those things are connected and that gives people, who are technical experts in their function, the opportunity to appreciate and cooperate with people across the C-suite, but really across the entire organization.
Corson
The point you made earlier on the importance of the word mutual, it really comes through that it does not matter what you perceive yourself to be unless others perceive you in the same way. There is a gap, and those conversations and the engagement around how do we close that gap is critical to the success. And I think if finance organization is going to make that step change, they need to understand the perception of the starting point and then certainly some of the data that we see would support your thumbnail assessment with that one organization. I kind of enjoyed some of the colorful descriptions you used in the articles about CFOs as a growth fantasia peddlers and myopic penny pinchers. Now hopefully, those are kind of extreme views and that there is a common ground, but as you think about the attributes and the characteristics of a successful CFO — and the necessary skills and experiences, what would you call out as being the ones that you think are most indicative of someone that is going to be successful in the role?Barsky
I pointed the two extremes is important, because it points to probably what is one of the things that is most deadly for an organization from a money and morale perspective, which is rework. And every time we take a step in the wrong direction, a lot of times, people who are very talented, new CFOs come in and their biggest task is remediation. So, we really cannot bring the organization forward until we are able to get the organization to a solid footing and a good operating level to go forward. So, if you think about the role of the CFO, a big piece of it is to be able to enable what the CEO and the board envision — the strategies and visions. Those are words on paper. But if we don’t have fuel in the engine, i.e., cash flow and all the multiple dimensions that run into helping the business to operate successfully, it ties back to understanding accounting and finance.Yes, keeping the company in compliance, making sure that we maintain our budgets. But above and beyond that, thinking about that, even if all of our predictions were spot on, what would we do with the money when it rains in. And sometimes, companies have these periods — I was working with the CFO just last week, where they had a very successful run on some of their offerings during the pandemic, but the money that came in was ill-invested. It was invested in capital projects that did not lead to things that really benefit the future of the business. It became a compounding of where the business was, not where it needs to be. So, when I was talking to you earlier about having that courage and that clarity to see the future, it helps us to make those adjustments rather than having what people suffer from, which is called escalation of commitment.
Being able to take really good money and pour it into bad projects. It is like any of us. We have never gotten rid of an old car too soon. So, do we have the ability to understand what are the consequences of our decisions? So, CFOs that have that leadership ability is rooted in trust. And what are the elements of trust? There are many studies of trust. Character, of course, is critical, but competence is important. And we think about that confidence, that confidence from a leadership perspective, that trust. It is tested when there’s crisis. It is tested in those points, but it is built in terms of that daily interaction of making sure that we have preparation and credibility and accountability all along the way so that the bigger decisions become more routine in terms of the relationships across people who are senior leaders.
Corson
We have talked about the executive dimension and interaction and the article is obviously focused on the board's role and responsibility, and our research highlights the importance of the board’s CFO relationship. Can you talk about the role do you think boards have to play in supporting addressing some of these challenges that we have talked about and also the importance of the board- CFO relationship?Barsky
The board piece is a whole second dimension to talking about the direction of the organization. And in fact, as you know, Myles, the follow up to the finance piece was a piece on boards that was a very simple question, is AI better than your board? And it was a bit of a teaser question, but the baseline is 60 seconds can prove it. And what I wrote about there is that a lot of people on boards perceive that their fellow board members are disengaged. They are not actively participating and there are empty seats. And that is a problem, because it is hard to formulate a board that has the right composition of abilities, backgrounds, experiences and industry insight. But everyone from the board to the frontline has an obligation that has been at the heart of EY for decades. Ask better questions and I would even change that. Ask any questions.So, in that article what I did, Myles, is I said let me go on to and you can pick the AI form of your choice and just type in what questions should X ask. And I said what questions should a public company board member ask. In 60 seconds, the machine yielded a rudimentary 10-point framework with two or three questions, but there were 30 questions on a paper which were imperfect and incomplete. They can all be judged, but they are better than nothing. So, my question is for anybody who comes to a meeting at the board level or a new associate, how dare we, how dare we be so unprepared that we do not have questions that could be generated at no cost by a machine. So, when a board has that ability to tolerate and there are incentives why that happens, but to tolerate people who sit silently on the board, that behavior cascades to the executive team and cascades to the frontline.
An organization that is healthy asks a lot of questions. And in fact, AI properly implemented and deployed, improves our ability to ask better questions. It may ask the questions for us. It may fortify the questions, or it may open our ideas to saying, if we can do this for free, what in the world are we all being paid for in this room. And just to give you a very brief act, but I know a CFO who does exactly that. He has, in the old days, he had a taxi meter. Today, it is a bit of a technology tool, but he runs the hourly rate of the meeting based on the imputed salaries of the people in the room, and he says, we have been together. This is costing us thousands. Where are we going with this? Time is money and it really, really helps people to have a perspective that we may not have all the answers, but going back to the obligations of leadership, we all have an obligation to the fundamental stewardship role of being prepared, being curious and being courageous enough just to ask questions. And working in a healthy work environment is one where questions are not only expected, but they are welcomed.
Corson
That is so well said and the importance of curiosity, I think, is an attribute that is so fundamental. And just to bring it back to the board's role in AI and that curiosity, in the article, you talk about three diagnostics that you suggest in a board should be asking about for AI. Can you just talk a little bit about those three diagnostics and why you think they are so important?Barsky
They are very telling when we have the proper diagnostics, the responses or nonresponses are very informal. I went through this and said, if we are sitting in the board chair, what should we be asking of the CFO or the perspective CFO? And the first question is when you think about AI implementation, will it be transactional or transformational? I remember one time I visited a retailer and I said this has been something I have always wanted to do in my life or my travels before I went to consult with the retailer, I said over the last year I have been a mystery shopper. I have stopped in your shops all over the world and I have noticed something. You have two types of shops. He said what are you talking about? We are all structured the same way, the precise footage in the building, we operated with great precision. I said no. You have some stores that are transactional and others that are transformational.Some point to the products on the shelves, others ask the customers, why are you here? How will our product help you with your life? And it is the same thing in business. If you talk to the CFO and they prioritize compliance and control, it tells you the problems that they are focused upon. We see AI as an ability to expedite invoice payment to be able to reconcile accounts, to be able to help us with the issuance of our compliance filings. That is the CFO’s focus. So, how can the CFO talk about being competitive if they see AI as a mechanism of efficiency? Alternatively, if the answers are transformative in terms of saying, this is what the business expects to do in the next five years and here is how finance will have an interplay using technology and cooperating with technology leaders to drive our operations, customer satisfaction is a transformational mindset.
So sometimes, that little question of why are you interested in this technology is very revealing about the CFO's emphasis or non-emphasis on growing the business or simply running the accounting side of the business. Number two is what we mentioned earlier, name names. And I ask this all the time. Myles, if you and I wanted to open up the next five-star Michelin restaurant, the menus are available online. The first question we would ask each other is, well, who is the chef? I do not know about you or me, but who is the chef going to be? So, name names. Who are the trusted partners who will design, implement and utilize this artificial intelligence tool? And when we go back, we look at their credibility, whether they are internal or external to the organization. And some of the problems with asking those questions is the names that come up are already completely taxed in terms of their job responsibilities or they may have gone through this dance over the last decades and you and I can go through the list if we want to rewind the clock.
When we were not talking about AI, I think we were last talking about metaverse, and before that, we were talking about digital transformation, business analytics. What shall we go on? Y2K? We can take this all the way back to the absence of all these things. But when you think about who are the people, what is their availability, what is their interest, and what is their credibility to have a job done well completely on time, on cost and on target. And the last one is a word that we have talked about a good bit and I think it is a word that it is really misused. It is business resilience. And I did a little work with Lee Waters, who is the Head of the International Positive Psychology Association at the University of Melbourne, and she works on visible wellbeing and individual resilience. And she points out that it is faulty to use resilience or resilient as an adjective.
This person is a resilient person — no. Resilience is a condition. So, we are either in a low state or high state of resilience on a particular day, depending on what our stressors are and same thing with our business. The Latin root of the word resilience is to regain form. How can something physically regain form? So, bridge builders first picked up on that term and they said to make a bridge that works, and I love the analogy, to make a bridge that works, we have two options. We can fortify it or we can lighten the load. And for all of us, from our own level of wellbeing, we can either fortify ourselves or lighten our loads. And from a business perspective, it is the same thing. So, if we need a business that is adaptive and responsive and you can pick all of the brilliant buzzwords, what are the financial consequences of doing otherwise?
What makes us able to bounce back to form to serve our customers with great rapidity? And what are the consequences of not losing that business to the competitor and then chasing for years or decades to regain that type of market share, to regain that retention. There is nothing deadlier for an organization than rework. So, real questions about how AI would help business resilience, the third diagnostic, would really help us to understand if we have somebody who is working on it, that has the credible answers with real evidence and real examples that will help us to have an implementation that we know will likely be costly on all dimensions of cost, but more importantly, will be highly effective. So, to summit those words need to ask are we really interested in transformation number two, who in the world are these human beings who will guide that transformation? And oh, by the way, if the transformation works, what is the inherent value in pursuing that? So, those are the three that I stumbled upon in terms of writing that for Forbes.
Corson
A brilliant summation and exactly the right kind of questions to be asking at multiple levels. Boards focus on them, but I think executives as well. We have cut a lot of ground. I really appreciate you taking the time. As we wrap up, just some final quick-fire questions. You are obviously a thought leader yourself, but are there any sources, podcasts, books or other areas you used to stay educated and informed, particularly in these emerging areas?Barsky
Besides, EY Better Finance podcast? [crosstalk] Myles, I get this question all the time is summer reading list, what should I be listening to? Etc. And I have an answer that people love and simultaneously frustrates them. It is a three-letter answer. Any. Any, do something. Spend some time away from the work tasks, thinking and reading, and more importantly, what you hear or what you read, share it. Have a coffee conversation. Have a lunch. That is the power in it. So, if you can pursue your curiosity, it is not that any single podcast or any single book or article will unlock all the answers, but it gives us a moment to think more broadly, but the value of it is in sharing. So, the answer that I always give is an intentionally vague one, but very powerful. People come back and they say, I just went to the bookshop and picked the cover that sparked my curiosity. And guess what? I found some things and wound up talking about it and that changed the conversations in the workplace. So, my answer to that one would be, besides the EY Better Finance podcast, if you are listening, it will be anything else that is out there.Corson
Wonderful. Love it. Any particular quotes that you find yourself coming back to or thinking about?Barsky
I have quotes all across my office wall here and a lot of them talk about the root of the word accounting, which is count. So, Muhammad Ali, if I could paraphrase, had a great one, where he said do not count your days, make your days count. And Albert Einstein had paraphrased said something similar, where he said a lot of times not everything that we can measure counts, but also not everything that counts can be measured. And the word count is really a remarkable word if you start to think about; it has multiple definitions. It can be a noun, it can be a verb, and as a verb, it can mean to enumerate, or it could be something that is of great value.So, there is a dual play and picking it as a verb, even picking as a noun, it could be simply a sum, but is not it Count in terms of nobility, someone who is of great importance in terms of land ownership and things like that. So, when we think about what really counts versus what we can count, I tap into those type of word plays and there is a lot of wisdom in those quotes. So, I love those that say whether it is personal, it is professional for our business, do not simply be a person worried about the outputs, think about the outcomes and as Ali said, do not simply count your days, but make your days count.
Corson
And is there a particular piece of advice that you found had a massive impact on your career or the way you operate?Barsky
When you point to that, it is an interesting one, and I talk about this quite often. It is the three most important words in business are I don’t know. And if we take anything from this program today in terms of what we are talking about, I do not want to be able to say I listen to the Better Finance podcast and what did you learn? I don’t know. But it is so important. It is an act of humility. It is an act of trust, and it is an act of curiosity. So, in healthy organizations, those three words are heard all the time. When we are in a meeting, people can speak up and say, I don’t know why we are not doing something different. I don’t know what I am supposed to do. I don’t even know what these terms mean.From a leadership perspective, the piece of advice that I received, maybe the most powerful thing we can do as leaders when we talk to people who work for us is to say, tell me something you know that I don’t know, but I need to know. What a sense of humility. You work on the frontline with this task every day. What do I need to know more about? And set some time aside when you ask that question, there will be plenty to talk about. But if we ask direct questions, you know the answers we will get — next Friday, overbudget, 10,000, whatever the answer may be. So, the more that we can inculcate those three words, I don’t know, it is good for our personal and professional growth and development, but it is incredibly powerful for our organization in terms of having that valued culture that CFOs need to drive growth and success.
Corson
Such good observation, the importance of humility personally, but what that creates in terms of psychological safety within organizations to ask those questions and to your point to listen and act on what you hear. I am going to change this last question a little bit, because you talked about resilience being a continuous state and where on the continuum, but again, as you think about the times that you are in your highest state of resilience, what are the things you do to maintain your wellbeing and balance to support that resilience?Barsky
That is a challenge for all of us these days, Myles. There is a lot of research, a lot of neuroscience behind it too, and if I could put it into one word, it would be nature. Spend time in nature. There is something that is rejuvenating about just a small walk in the woods and observing the behavior of our fellow creatures who are just untouched, uninterested, whatever the word might be, by technology and they are going about their daily businesses, a butterfly, as a bird or fish in the stream, whatever it might be and there is something that is very restorative about disconnecting.We are living in a world where we have perpetual connection and the question that is upon us are we really together or are we more and more alone? And a lot of times, when we think about the inundation of what we have across our daily agendas, taking a small bit of time via 10:15 minutes just to step aside and to use the old wisdom of smelling the flowers, it does a lot in terms of rejuvenation. So from a wellbeing perspective, I think that the more the people can find themselves in the simplest things in nature, does not have to be this high adventure of mountain climbing and river rafting, etc, but just simply going out amongst the trees and the birds and having a bit of fresh air is reinvigorating for all of us, and I hope maybe that is something that is the key takeaway of our conversation today.