Strategic Challenges — What’s a CFO to Do about Sustainable Growth?


Sustainable growth ranks as global companies’ No. 1 strategic planning challenge – in which chief financial officers will be playing a major role, says a study. 



Global executives say sustainable growth is their most salient planning challenge and their chief financial officers will help lead the effort. But how CFOs will respond remains to be seen.

Those were the main conclusions from the 2013 McKinsey Global Survey, which included responses from senior executives and CFOs.

“Regardless of which sources of growth their companies pursue, the results indicate that, in the coming years, CFOs will need to up their game in a wide range of growth-related activities,” wrote the authors in McKinsey & Company’s New York office.

ID-10042601 worradmuAside from the researchers’ point about CFO capabilities, the study raised these salient questions:

  1. What are CFO perceptions about growth?
  2. How will they achieve it?
  3. Will growth come through mergers and acquisitions or organic growth?

Report findings:

— 86 percent of CFOs admit difficulty in identifying new opportunities – organic and otherwise

— 77 percent of CFOs regard another dilemma is long-term growth vis-à-vis pressures from short-term investors

— 72 percent of executives agree it’s difficult to determine the best growth strategy – whether its organic or inorganic

— 70 percent of executives concur it’s challenge to identify and implement long-term growth strategies while keeping short-term investors happy

— For the next five years, 45 percent of CFOs and 36 percent of executives specify organic growth as the most likely in importance

— “CFOs are also less likely to see shifting of resources within the portfolio as the most important driver.”

There wasn’t a consensus on M&A or organic growth. In reading between the lines, it does appear that there will be a healthy debate on the two growth options.

Aside from the researchers’ point about CFO capabilities, the study raised these salient questions: What are CFO perceptions about growth, and how will they achieve it? Will growth come through mergers and acquisitions or organic growth?

Satisfaction with effectiveness

The researchers say the executives expect to be content with their organizations’ efficacy in handling their growth drivers and matters relating to “portfolio management, including capital allocation, capital-expenditure approval, and profit-and-loss management…”

But there is an area of concern:

“Yet nearly half of non-CFO executives report less satisfaction with their companies’ effectiveness at processes that drive M&A, as well as expansion into new markets and organic growth (such as new-product development and expansion to adjacent products and services),” wrote the researchers. “Not surprisingly, these are the same areas where non-CFO respondents think CFOs could more effectively spend their time.”

The McKinsey researchers: Ankur Agrawal, an associate principal; Kaustubh Joshi, a consultant; and Ishaan Seth, a partner.

You can see the report here. (You’ll probably have to register to view this and other McKinsey reports.)

From the Coach’s Corner, related information:

Strategic Planning – Profit Lessons from Companies That Focus Long TermTo alleviate uncertainty in business and to grow profits, it’s increasingly clear that businesspeople must keep an open mind to seek opportunities, be bold and plan long term. In other words, companies that change their business models in order to become sustainable enjoy higher profits. 

How to Avoid Failure in Risk Management and Strategic Planning — Incredible as it might seem, companies fail because they underestimate strategic risks – yes, strategic blunders instead of common sense – according to an authoritative study.

Are You up-to-date on Opportunities in Emerging Markets? Most Managers Aren’t — Seventy-six percent of business managers at global companies don’t have information for their needs – even though it’s necessary for productive decisions in expanding into emerging markets. Some 86 percent agree that data – market sizing and growth estimates – is vital. However, only 24 percent say the information isn’t available at their companies.

Vision in Setting Goals with 8 Best Practices — Whatever your entrepreneurial dreams, focusing on the right details is a skill conducive for setting goals strategically. However, if management doesn’t ponder enough on action-oriented details, goals are inordinately difficult to achieve. That’s really true in our new economy in which ever-increasing change makes for surprises in a dynamic marketplace.

“There are no great limits to growth because there are no limits of human intelligence, imagination, and wonder.”

– Ronald Reagan


__________

Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.





Photo courtesy of worradmu at www.freedigitalphotos.net

Why Get Your Teeth into Career Finance Opportunities



Are you looking for career opportunities with long-term growth potential? Consider finance.

Increasingly, corporations worldwide are recruiting chief financial officers for their boardrooms. In addition to affecting current CFOs, it’s an encouraging bonus for financial professionals who aspire to become a CFO.

A 2012 EY (formerly Ernst & Young) study shows there’s an unprecedented clamor for CFOs to serve on corporate boards.

What are the catalysts? They include a challenging economy, government regulations, and the ever-increasing capabilities of CFOs.

“Regulatory pressure is driving a major increase in demand around the world for CFO experience on boards,” says EY’s EMEIA Markets Leader Jay Nibbe in a press release.

“In many countries, a CFO’s financial expertise is not only highly valued, but also mandatory,” he adds. “Additionally, as companies grapple with a volatile economy and the diverging growth trends of developed and rapid-growth markets, they increasingly want good insights and support for cost, risk, and cash flow management – three areas of focus that fall squarely within the CFO’s skill set.”

However, there are professional risks. A board position must be the right situation with the right timing (more on the risks later).

The report is entitled, “CFO and beyond: the possibilities and pathways outside finance.”

It includes responses from the following:

— 800 CFOs

— A 10-year review of the careers of CFOs at 347 companies with revenue in excess of $5 billion (US)

— Interviews with notable academics, CFOs, and governance experts

The study also indicates current and former CFOs are intrigued. They want to improve workings of boards of directors, develop innovative concepts, and create opportunities for boards to learn dissimilar cultures.

Key findings:

Rising demand for growing number of CFO competencies

  • 79 percent of respondents agreed their financial expertise means they are in more demand than ever for board level roles.
  • 14 percent of board members from the world’s largest companies studied were serving or former CFOs, up from 8 percent in 2002.
  • The proportion of audit committee chairs who are serving or former, CFOs has doubled in the last decade (41 percent in 2012, up from 19 percent in 2002), perhaps reflecting the demand for increased transparency on company balance sheets.

“Although they are crucial, financial skills alone don’t necessarily make for a good board member,” adds Mr. Nibbe. “Many CFOs today have the financial skills as well as a unique combination of analytical, technical and strategic capabilities.”

That explains the trend.

“Regulatory pressure is driving a major increase in demand around the world for CFO experience on boards.”

Benefits of CFOs taking on non-executive roles

Seventy-five percent of respondents say a board position provides new perspectives, which enhances their skill sets.

“Experience in a different sector is seen by many CFOs as particularly valuable, with the opportunity to gain knowledge and transfer best-practice across industries,” Mr. Nibbe observes. “There can also be a ‘halo effect’ for those companies whose CFO is serving on the boards of large well-respected companies.”

Professional risks and distractions from core role can be a deterrent

  • Despite the benefits, more than 40 percent think it is inappropriate for them to take on part-time roles.
  • Board directors are often personally liable if it can be demonstrated that they have neglected their executive duties. For some, the demands of their core responsibilities are too great, and the risk of being overstretched is too significant. As corporate governance legislation becomes more stringent, the time required to be an effective non-executive director is increasing.

Note: Despite the appetite of CFOs to take on non-executive roles, there is a growing mismatch between the amount of time they feel able to dedicate to such a role and the recommendation by corporate governance best practice.

More than half of CFO respondents confirm that they can only spare five hours or less per week on a supplementary role, yet the minimum recommendation from the 2009 UK Walker Report (30 days per year) corresponds to at least that.

CFOs should adopt a long-term view and anticipate board composition changes

  • Among the CFO respondents, those who identified themselves as long-term planners were significantly more likely to have taken on additional roles than more opportunistic CFOs.
  • CFOs are also taking on board positions at a younger age than they were a decade ago. The increase in those CFOs from the companies studied who have taken on non-executive directorships is most marked among the younger generation – those aged between 40-49 years old.

Mr. Nibbe’s conclusions

“CFOs and future finance leaders interested in taking on a board level role should start early – competition for roles and expectations are rising so career planning is critical. They should do the research and choose the right role carefully and for the right time,” he asserts.

“They should also expect that, over the next decade, boards will increasingly value knowledge of rapid-growth markets, analytics and other dynamic technologies such as social media,” he adds.

“Finally, board recruiters are now looking for deep technical know-how, such as M&A and capital markets. Building deep experience of a particular domain will give candidates a good chance of being matched up with certain positions on certain boards.”

I agree. These are notable career insights from Ernst & Young (www.ey.com), a global leader in assurance, tax, transaction and advisory services. Globally, the firm employs 167,000 people.

Copies of the study can be requested at www.ey.com/cfoandbeyond.

From the Coach’s Corner, from this portal’s Finance category, here’s  a variety of suggested reading:

How Bloggers Help Startups Get Venture Capital — Multi-million dollar venture-capital financing decisions are affected by bloggers and social media. That’s the conclusion from an academic study, “Putting Money Where The Mouths Are: The Relation Between Venture Financing and Electronic Word-of-Mouth.”

Cutting Costs: 9 Best Practices to Avoid Reactionary Decisions — In chaotic times, it’s common for businesspeople to be fearful and reactionary when they feel they must cut expenses. But entrepreneurs need to be unemotional so that they make decisions that will bolster their objectives.

Tips on Understanding the Mindset of IRS Auditors — An IRS audit is enough to make you tense with cold sweat in the palms of your hands. More businesspeople have complained to me about the mean-spirited treatment at the hands of IRS agents than any other federal agency.

Finance: The Intrigue of Sovereign Wealth Funds — Some eyebrows were raised during the last week of the 2012 presidential campaign when the second-oldest son of Republican presidential nominee Mitt Romney journeyed to Moscow. But he was after a big prize.

“Under capitalism, man exploits man. Under communism, it’s just the opposite.”

-John Kenneth Galbraith


__________

Author Terry Corbell has written innumerable online business-enhancement articles, and is also a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.





Photo courtesy Ambro at www.freedigitalphotos.net

Why CFOs Call the Shots in IT Decisions



The top IT decision-maker for many companies is not the chief information officer. The chief financial officer is increasingly calling the shots for IT.

The CFO has become the top technology decision maker in around half of businesses, according to Gartner research released in June, 2011, which is entitled: “Financial Executives International (FEI) Technology Study.”

In fact, more IT departments are overseen by the CFO, not the chief executive or other senior managers. True, CIOs should learn how to get more respect in the C-suite. But for the CFO to call all the shots in IT decisions is ill-advised, and I’ll explain later.

ID-100123176 imagerymajesticThe study’s conclusions:

— 42 percent report to the CFO

— 45 percent IT investment strategies made by the CFO

— In 38 percent, the IT department is managed by the CFO

— In 7 percent, the CFO is the lone decision-maker

“Understand that the CFO views the impact on business process and business enablement as the top technology issues,” said Gartner analyst John Van Decker.

“Therefore, applications and analytics are the top investment priorities, and the enabling technologies that support these initiatives need to be viewed as equally important,” he added.

The study also indicated that analytics and applications are the No. 1 investment priorities by the CFO.

While this trend probably makes financial executives happy, it doesn’t make for best practices.

It raises at least three questions:

— Do such CFOs have the necessary tech knowledge to understand the value of each decision? Sufficient steps have to be taken to ensure due diligence in IT security and other decisions.

— When will CEOs reconsider such strategies because of the negative impacts on the teamwork and morale of IT departments? An IT thought leader will resent such intrusions on the chain of command in organization structure.

— What will CIOs do about it? CIOs must take the proverbial bull by the horns to exert more leadership.

My bottom-line: Agreed, the CIO should adhere to all financial checks and balances. But there should be balance.

As with human resources management and marketing whom the chief people often aren’t sufficiently respected, in essence, the top IT decision-maker should be the chief information officer with input from the CFO and other managers.

From the Coach’s Corner, here’s related reading:

4 Keys So Marketing and IT Can Create Business Revenue — Businesses will generate more revenue if their information technology and marketing professionals strategize more effectively. For instance, success in e-commerce is increasingly challenging for companies that want to dominate in brand preference, customer loyalty and word-of-mouth advertising. A study shows Internet shoppers are more demanding in the three Cs — channels, choices and convenience.

4 Recommendations to Avoid Spending Too Much on IT — To take advantage of big cost savings in information technology, a study says businesses need to change their buying habits. Here’s how.   Despite an unprecedented trend to control information-technology costs, the majority of companies fail to achieve maximum savings, according to a multi-nation Forrester Consulting study.

Tech Trends: CFO’s the Boss, IT Departments Are Disappearing — Two developments are clearly underway in information technology. Increasingly, the chief financial officer is in charge and IT departments are shrinking in size. Here’s why.

Tech Planning: What If There’s Another Downturn? — Technology-research firm Gartner recommends in a study that chief information officers should get ready for another downturn. That requires planning.

Executives Target 5 Technology Threats to Company Value — Corporate executives see new strategic risks as a result of technological changes — from big data and cloud computing to social media  — according to a 2013 global Deloitte survey. Deloitte queried more than 300 executives, risk managers and board members — 81 percent said their strategic-management focus has evolved with technology.

Men are respectable only as they respect.”

-Ralph Waldo Emerson


 __________

Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.





Photo courtesy of imagerymajestic at www.freedigitalphotos.net


Career Strategies: How to Get a C-Level Job



If you’re climbing the corporate ladder and have designs on the C-suite – CEO, COO, or CFO – a Stanford University professor has some excellent advice.

In essence, he advises getting a strong, generalist-background in business.

“The higher you get in an organization, the more likely you are to encounter problems from a variety of different areas,” says a Stanford Graduate School of Business labor economist, Edward P. Lazear, Ph.D.

He believes it’s important to be a generalist, especially for professionals wanting to become a CEO because of the broad issues the job entails.

ID-10081528 stockimagesDr. Lazear contends “those people have to be generalists” according to Stanford GSB News in its September 2010 newsletter.

The economist has won numerous honors, and written 11 books and more than 100 articles. He was an economic advisor to President George W. Bush, and was chair of the Council of Economic Advisors from 2006 to 2009.

He’s also counseled the governments of Czechoslovakia, Romania, Russia, Ukraine, and Georgia.

“A good CEO is someone who’s very good, possibly not excellent, but very good, at almost everything,” he asserts.

“People who are most likely to end up in leadership positions are ones who have had many different roles throughout their career,” explains Dr. Lazear.

He points out that successful companies make it a practice to give various jobs to talented employees to groom them for leadership.

In other words, the broader the skills –the more desirable a person is for the CEO’s role.

No. 1 needed skill

A salient skill: The CEOs ability to hire the right people to fill the senior executive’s gaps in knowledge or experience is very important.

CEOs must understand enough about the company’s needs in any given area to evaluate, recruit and hire talent.

… it’s important to be a generalist, especially for professionals wanting to become a CEO because of the broad issues the job entails.

“Putting together a team is a generalist’s skill. ‘Just hiring someone’ is not so easy,” says the economist. He believes specific highly visible jobs, such as banking, high-level finance or marketing, are great catalysts leading to the C-suite.

Dr. Lazear says jobs in “publicly observed decision-making situations” puts ambitious people in the right environment at the right time so that others can watch them in action. He believes it’s inevitable that others will become followers as the leader is born.

But he has a warning for an ambitious person – don’t just go through the motions – don’t assume that a variety of jobs or working in a marketing job is enough.

He suggests something akin to physical training for the Olympics – increase your strong points in multiple areas so “you can enhance your probability of going into leadership.”

Excellent advice to which I’d add: In everything you do, do it with enthusiasm with a positive outlook.

From the Coach’s Corner, here is additional reading:

7 Tips for a Young Professional to Become a CEO — For a professional to jump to the senior-management level in the 21st century, it’s imperative to demonstrate seven core competencies. Consider them part of your personal branding for success. It starts with speaking the language of a chief executive officer, and understanding the big-picture needs of an organization to get to the top. It requires a positive personality. No, it isn’t necessary to perform at a Ph.D. level in all the competencies, but it’s important to excel in them.

18 Leadership Strategies to Earn Employee Respect — Even though Wall Street gets ecstatic over productivity growth, merely slashing costs and jobs to create profit is not sustainable for profits. Investors mistakenly believe the earnings for such publicly held companies are good, but it will not last. Workers are realizing they’re not sharing in the wealth. Poor morale will cause profits to plummet, and consumer demand will continue to plunge.

Key Differences between Leaders and Managers — It’s possible for a run-of-the-mill manager to become a leader in management   Published reports in Google News are an eye-opener. If you Google “leadership crisis,” you’ll get at least 9,000 search results for business and the public sector. If you enter the key words, “management crisis,” you’ll probably see twice the results.

5 Personality Traits Why Managers Are Promoted into Leadership — In selecting candidates for leadership, the risks can be great for both the company and managers in lost time, effort and money. So when deciding which of their corporate managers should be promoted into a leadership positions, naturally, companies don’t want any surprises. Among the distinguishing personality traits, companies prefer to promote managers who demonstrate abilities in strategic vision and planning.

7 Thought Leadership Tactics for Strong Performance — For a company to achieve strong performance, its culture and employees must be aligned with business strategy to provide value. But more and more, it seems employees can’t even articulate business strategy. Therefore, management must identify and communicate effective programs that are aligned with employee behavior in order to blaze new paths and fuel business growth.

“Leadership is the art of getting someone else to do something you want done because he wants to do it.”

-Dwight D. Eisenhower 


__________

Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.





Photo courtesy of stockimages at www.freedigitalphotos.net

Tech Trends: CFO’s the Boss, IT Departments Are Disappearing



Two developments are clearly underway in information technology. Increasingly, the chief financial officer is in charge and IT departments are shrinking in size.

First, regarding the shrinking size of IT departments, a Corporate Executive Board study indicates they’re diminishing in size, according to writer Joe McKendrick  at SmartPlanet.com.

MH900422730 young business womanIt’s not a cutback in jobs, just a shift in how IT professionals are put to work. He writes companies are either are tapping IT service providers or clouds.

The study indicates IT department will be 75 percent smaller by 2015, and 80 percent of IT budgets will be spent on IT vendors’ services.

What’s driving this phenomenon?

Probably best-practices in consolidation as CFOs assume more authority.

A study by Gartner and Financial Executives Research Foundation (FERF) was based on the perspectives of senior finance managers.

It’s entitled, “2010 Gartner FEI Technology Study: The CFO as Technology Influencer.”

Findings include:

— Forty-two percent of IT departments report to CFOs

— Thirty-three percent are supervised by the chief executive officer

— Sixteen percent report to the chief operating officer

— Two percent are overseen by the chief administrative officer

— Seven percent to other executives

Most importantly, the CFO has a major say in 75 percent of IT departments and a minor input in 20 percent. In 5 percent, the CFO has no influence.

Why? Two studies indicate a need for IT pros to get businesslike.

“In most organizations, the CFO and CIO work together daily to finance IT and provide information that supports financial processes, but there is also an opportunity for them to form a powerful alliance that generates more value for the enterprise,” said Bill Sinnett, FERF’s director of research, in a statement.

“The CFO and CIO are well-positioned to work together at generating superior performance from the enterprise,” he added.

The  study makes it clear IT department personnel, especially the CIO, should understand an organization’s big picture and how they can best contribute to the  firm’s welfare via the CFO.

My Biz Coach conclusion from the two developments:  IT success hinges on acculturation with the finance mindset as well as a higher degree of integration with the rest of the organization. It’s different but it’s the wave of the future.

From the Coach’s Corner, related resource links:

Nervous About Your New Boss? Here’s How to Deal with ItWhether you just got a new job or whether your company just assigned a new boss for you, here’s how to develop poise and to manage your boss.

8 Tips on How to Ask Your Boss for a Pay Raise — Your food, gas and other living costs have increased. But you need tips on how to ask your boss for a pay raise. You’re mindful about the economy and that unemployment rates are high. With the exception of Wall Street, payroll budgets are constricted everywhere, and you haven’t had a raise recently. Here’s what to do.

The 22 Dos and Don’ts for Successful NegotiationsNo matter what you need to negotiate, there are easy strategies to get anything you want. But you must first remember it’s important to reach a fair compromise – with win-win negotiating skills.

9 Dos and Don’ts for Best Decision-making — The dos and don’ts for best decision-making are applicable in three ways: Whether you have difficulty making the best decisions, engage in self doubt after making one, or are gun shy because some of your decisions have failed you. To err is human.

“I wasn’t a financial pro, and I paid the price.”

-Ruth Handler


__________

Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.






Seattle business consultant Terry Corbell provides high-performance management services and strategies.