1. Have a clear, practical vision
CFOs must think beyond the immediate future and envision what their finance function could look like in five years’ time. Understanding the “art of the possible” allows CFOs to build the skill sets and the agility needed to adapt to technological disruptions. Once the CFO has laid out a vision, communication is key. Research by an EY study with the University of Oxford found that the likelihood of a successful transformation increased by a factor of 2.6 when the workforce understood the leader’s vision and the purpose. In high-performing transformations, 48% of respondents agreed that leadership had clearly articulated why the organization needed to change, compared with only 25% in low-performing transformations.
2. Clean up data
Historically, finance has been considered “back office” and not a revenue-generating function, which has meant a lack of investment and the cobbling together of solutions to get the work done. The result has been a complex web of inconsistent data and systems that don’t fully align. However, having quality data is critical to the long-term transformation journey. CFOs will need to ask themselves if they’re generating the data set that they need to drive insights and whether they have consistent data definitions across the enterprise.
In the short term, addressing data issues can provide a quick win for CFOs, who are under pressure to drive cost efficiencies and hit earning targets. In the 2023 Global EY DNA of the CFO Report, 67% of respondents reported tensions and disagreements within the leadership team on how to balance short-term and long-term priorities. By fixing data elements and ensuring that they are looking at the right drivers, CFOs can improve their forecasting. These short-term benefits can serve the long-term transformation, providing funds to invest into more expensive technologies.
3. Understand which technologies will enable finance transformation
Identifying the right technologies is crucial to the process. In the EY study with the University of Oxford, 48% of respondents in successful transformations said their organizations had invested in the right technologies, compared with only 33% of respondents from underperforming transformations. As CFOs consider their end-state architecture, questions they should be asking include:
- Is finance going to have world-class enterprise resource planning (ERP)? Should that ERP be in the cloud?
- What other digital technologies should we be leveraging?
- How will generative AI (GenAI) be leveraged?
4. Envision an operating model
Once digital technologies have been implemented and the right data element captured, the transactional work that has taken up 80% of the finance function’s time will be automated. With that shift, CFOs can rethink what’s going to get done, where the work will be done, which tasks will be automated, and which will be done by the human workforce. For forward-thinking finance leaders, the heart of this new operating model will be the “FDO” – the financial data office. Freed up from transactional work, the human workforce will be left with two mandates: compliance, which will never go away, and leveraging GenAI to create value through the data insights. Data-driven decision-making will have a profound impact on talent. CFOs will need to reconsider the capabilities and skill set of their workforce. For example, instead of CPAs, finance leaders will be seeking out data scientists to fulfill the functions of the new FDO.
5. Determine a business planning, reporting and analytics process
With the FDO model, the human workforce will be acting on data-generated insights, answering such questions as:
- Do we change our resource allocation?
- Do we acquire a company or divest part of the business?
- Do we need to revisit our capital allocation to change our investment mix?
CFOs don’t have a crystal ball to show them the future, but having the additional bandwidth to analyze and act upon data will be the next best thing, leading to more accurate predictions. Often, the value that’s created by transformation is overlooked in the planning process.
With technology advancing at an unprecedented pace, the CFO role has become all-encompassing. But this evolution also offers a more exciting and rewarding path. By considering these five steps, CFOs will come away with a practical roadmap to transformation and value creation.
