The CFO's evaluation: Needs improvement in technology and big data.

Bankinter's CFO Barometer points to an increasingly strategic role for the CFO, with a long-term, global focus, capable of leading multidisciplinary teams. When we asked other departments in the Spanish companies who took our survey how they saw their CFO, 60% identified them as the partner that provides them with tools and makes their work easier, but 40% still continue to see them as an iron-fisted keeper who controls their spending.

A few days ago, a senior Spanish manager gave an example of the change companies have experienced after years of one crisis after another and constant volatility: “We can no longer take an Excel file and drag and fill cells, projecting what we had” . The data is fine. We have it now and it is very valuable, but what we are being asked to do is to use it to design new strategies and find new markets.

In a recent article in El País, the technology expert Karelia Vázquez invited managers to cultivate a virtue that has been denied to algorithms: Improvising and thinking outside the box.

“Humans are unbeatable at this. Companies should pay us to digress and give free rein to our cognitive processes, doing what we've always done well: Interpreting the information we have and creating alternative scenarios in order to make progress”.

Technology is in control. Am I ready?

In the CFO Barometer, we asked Spanish chief financial officers to what extent they had been intensely involved in the digital transformation of their companies. And this was the answer: 6 out of 10 had been very involved, 3 partially involved and only 1 out of every 10 had not been involved in the process at all. The Transport sector was the one that saw the least involvement.

Technology that was first included in financial departments to help understand the past and manage the present. But as time goes on, it is focussing more on helping to project the future. As Christian Grube of McKinsey puts it, “The processes for which technology is increasingly relevant are those that look to the future, such as forecasting demand or planning cash flow”. And, in the short term, it is proving crucial for stock management, given the disruptions in the supply chain.

Within a decade or two, nobody will be talking about technological transformation or digitisation. It will be a commodity concept in organisations. But today the CFO is anointed as a technology evangelist, that essential figure in companies that lays the foundations for taking the definitive leap towards digitisation, starting with their own department. Not all CFOs experience this the same way. In the CFO Frontline Report, almost 70% of CFOs acknowledge that their dependence on technology is greater than it was three years ago, but 31% believe that it is the same or even less.

The Human Resources consultancy firm BMA Group provides a very good definition of the technological leadership role that CFOs need to enhance in their career: “The new CFO must be able to adapt to new technologies. They need to understand the use, value and cost of emerging technologies. They are expected to guide and manage investment in technology, know how technology works and how to implement it, and measure return on investment in technology”. We add: And they should know how to surround themselves with the best professionals.

A pending subject: attracting and retaining financial digital talent

The financial department was always seen, as we mentioned above, as the keeper of the purse strings. They are now also perceived as the keeper of data. Data that helps manage the company, control costs and find new market niches. Like a big data czar, the CFO must know how this complex technology that is changing the world works and be able to ask data engineers the right questions. If we have any: because 8 out of 10 Big Data positions in Spain are vacant.

In Spain, we have a serious problem covering positions related to data engineering. Professionals are scarce and turnover is high. That is why it is important to not only attract but to retain digital talent.

The main incentive for professionals is financial, but these data scientists often change companies for more intangible reasons, such as the feeling that their work is not sufficiently valued or understood by other areas or because they sense that they have little room for improvement and growth working separately from the rest of the organisation. A feeling that they are part of a different culture. A bit like when companies used to talk about “the IT guys”.

As the main data controller, the CFO must have detailed knowledge of the role of these engineers and afford them the appropriate standing, as BMA Group pointed out. They need them integrated into their department along with professional profiles that are as different as they are complementary. The management of multidisciplinary teams: a pending issue in many companies and for many CFOs.

ESG criteria are weak when the CFO is not involved

A recent McKinsey study found that things went notably better in companies where the CFO was directly involved in the promotion, internalisation and measurement of ESG criteria. The percentage of implementation in E (environment) went from 39% to 65% if the CFO intervened. For S (social), the percentage rose from 40% to 69%. And from 63% to 83% in G for Good Governance. 

Ankur Agrawal, a partner at McKinsey and formerly the vice president of the Gerson Lehrman Group (GLG), believes that CFOs are essentially sceptical and initially viewed ESG criteria as a fashion or fad. But as they implement them and see the results, they have become their main promoters, as they have seen that they end up contributing to the growth and differentiation of their companies. In addition to the positive effects on compliance and risk management.

CFOs are also, as we have seen in other CFO Forum articles, the main contacts for investors and shareholders who are increasingly interested in the green and social aspects of their investments. And the CFO is the person responsible for measuring and ensuring that these criteria are met within their companies. Non-financial indicators have taken on prime importance and they are, obviously, also the responsibility of the financial area.

Indicators that not only refer to ESG criteria. In Spain, investments in what are called intangible assets (brand, human capital, design, patents, etc.) are still far behind the levels of the most advanced countries, such as the United States and Nordic countries, but they are continuously growing, year on year, as the knowledge economy is established. We are talking about 35% of total investments in Spanish companies, compared to 60% in the United States, France or Finland, according to data from the COTEC Foundation. Are CFOs pushing in that direction?  

Standardised narrative and clear communication

As we recently read in a Forbes article, one responsibility of CFOs s to make sure that financial and operating systems are standardised and automated accurate, accessible in real time and synchronised throughout the company. What a challenge! This means that nobody should have any doubts about the results achieved.

And it means that the company, thanks to the smart management of technology and leadership of the Finance area, can maintain a competitive advantage that will allow it to change course more quickly in turbulent times like the ones we have been experiencing over the past two years. It is equally important for the CFO to publicly provide some simple metrics to help the entire organisation understand the technical information.

Steve Jobs was a genius at turning complexity into simplicity. This is what is called 'usability' in technology. Making extremely sophisticated technology look useful and beautiful to the user.

Laurie Krebs, CFO of the technology company Red Hats, dismantles the myth of the chief financial officer as the keeper of the purse strings that still persists in 40% of companies, according to the CFO Frontline Report: “I was told early in my career that I would never make it in finance because I was too empathetic and people-focused. The traditional finance professional was seen as rigid and analytical (which I think is an insult to many people who work in this field)”.

The London School of Economics (LSE) divides its CFO programme into four main blocks: one is on Artificial intelligence and another is about Design Thinking. Priorities change. And it directly establishes potential candidates as the target of its programme: “Enhance your strategic communication skills to become more influential, leading internal and external stakeholder groups with greater success.” A real declaration of intention.

Finance teams have to communicate with a multitude of stakeholders internally and externally on a daily basis. This requires improving communication skills. They have to become excellent communicators and they actually already act as spokespersons for many organisations before the markets or even public opinion.

That means, for example, enhancing the conversation, making meetings more attractive and improving participation, simplifying language and empathising with all departments for more horizontal and enriching interaction with them. The 40% that still perceive the CFO based on stereotypes means that there is still a lot of room for improvement.

What can I do to improve?

Training, training and training so that you are always up to date and can ask the right questions to the entire organisation. Of course, without ever losing sight of the long term: our vision of the company and the purpose that guides it. If we take a look at training programmes on the Finance area, we see that there are optional subjects that will surely guide us towards the new skills that are asked of us as CFOs: communication, blockchain, big data and ESG (Environmental, Social and Corporate Governance).

These are some ways we can make proper progress with our professional development:

• Staying up to date on innovation in finance through the reports published by the big four, Deloitte, KPMG, PwC and EY, and other consultants such as McKinsey and Accenture, to name the most internationally relevant ones.
• Regularly attend industry events like the ones we organise at Bankinter through the CFO Forum. It's a way to catch up and do some networking with other chief financial officers. Let's not forget the CFO forums that exist in Spain, such as the Spanish Association of Corporate CFOs and Treasurers (ASSET).
• Following relevant people in the profession on LinkedIn and their personal blogs. Such as Jeff Thomson, who we quoted in this article and who was CFO of AT&T and now chairs the Institute of Management Accountants (IMA), the major finance association created in New York in 1919. His articles and interviews with industry colleagues are a global benchmark.
• Designing a personal growth roadmap that includes taking some type of executive programme in sensitive subjects such as big data, artificial intelligence, Industry 4.0, sustainable finance or ESG criteria.
• Not being afraid to show that we aren't perfect and we don't know it all. That we can continue learning, even if others think we are already no. 1. To improve, we have to surround ourselves with the best and grow with them. And also with the young talent that takes up financial positions with different aspirations and priorities than we had when we entered the profession.