What it takes to be a data-driven CFO
Due to today’s advancing technologies, there is a wealth of data that is presenting both opportunities and challenges to those tasked with deciphering and analysing it. CFOs in particular are facing increased pressure to connect and interpret multiple data streams in order to identify patterns to optimise a company’s growth and align its costs with its strategy.
We take a look at the scale of the challenges, and how CFOs can be more data-driven and proactive in today’s business climate.
The gap between expectation and capability
According to a recent survey by FSN.co.uk which targeted 47,000 of its Modern Finance Forum members on LinkedIn, many senior finance executives indicated that they were struggling to balance their traditional roles as finance steward and guardian of corporate assets with their newer roles as business partners, strategic advisors and technology influencers.
The results showed that just 48 percent of CFOs are more actively involved in strategy development now than they were three years ago, and two thirds reported that they lacked the time to focus on process improvements and innovation. More than 50 percent expressed the desire to do more in terms of business partnering, while one third believed that their organisations relied too much on ‘gut feel’ rather than hard data for decision-making.
Although technology has the capacity to help CFOs and others in the finance function to overcome many of these barriers, it can sometimes be perceived as a double-edged sword. The survey found that 52 percent of those in the finance function felt threatened by the increasing role of technology, because they didn't like the idea of increased automation and de-skilling of finance processes.
How CFOs can become more data-driven
Although there is no one size fits all approach to developing a deeper understanding of data and optimising it to boost the financial success of an organisation, there are steps that CFOs can take to play a more active role in proactive finance management within a business. Here, we list our top 6 steps:
1. Set goals and objectives
CFOs should first identify the organisation’s short and long-term objectives, developing key performance indicators to track progress. Consider this step the driver that will motivate business leaders to introduce data analytics to their day-to-day operations and to assess their impact on business goals. By developing target metrics, a CFO will unconsciously commit the organisation to routinely collecting and analysing data.
2. Engage with the rest of the organisation
After establishing an organisation’s strategic objectives, it is crucial that CFOs and finance leaders engage with the rest of the organisation to ensure data analytics become engrained in routine decision-making. Alternatively, a CFO may find that data analysis is already a well-entrenched part of the machine in other business units, which could create an opportunity to learn from established processes. A vital aspect of this stage is collecting feedback from those who interact with the data analysis platforms first-hand. Engaging within the organisation will not only help finance leaders understand the capabilities and weakness of the existing platforms, it will also safeguard against any inconsistent analytics methods across the company.
3. Propose pilot projects
Once CFOs have buy-in from key players within the organisation, they should use this support to introduce pilot projects rooted in data analytics. CFOs can start small by proposing new operations and ensuring that they encourage participation from other members of the organisation. As these pilot programs progress, the goal is to illustrate the CFO’s data literacy and knowledge of on-the-ground perspectives to other business leaders.
4. Collaborate with IT and data experts
While data analytics platforms are able to organise large amounts of information into digestible portions, CFOs should remember that their IT departments and data experts are an invaluable resource able to better parse through the results generated. Partnering in this way will inform the decision-making process and also uncover additional viewpoints and perspectives which may not have been previously considered. Collaboration with IT and data specialists could also lend additional credibility to analytics-driven initiatives.
5. Ensure accuracy
With deeper use of analytics comes great responsibility. CFOs must remember to work diligently towards strong data governance. This means ensuring that consistent and strict guidelines for analytics are implemented and enforced across the organisation. These principles should outline protocols for data ownership, quality, security, and accuracy. Good insights and strategies are born only from reliable and credible data analysis.
6. Continuously seek feedback
There is an adage that says, ‘If you want to walk fast, go alone; if you want to walk far, go together.’ CFOs must realise that ongoing feedback from other members of the organisation, including its leadership, is necessary after introducing new data analytics platforms and processes. Seeking out and listening to the input of others will allow finance leaders to adjust course as needed and perfect the system in place.
Although becoming tech-savvy and data-driven is by no means an overnight process, by taking the steps above you will ensure that you are moving progressively towards increased information regarding your business’s financial performance, thus empowering you to make proactive decisions that will add value to your organisation. Knowledge is power!
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