Reinventing the CFO: A book review by Bob Morris

Posted on: July 11th, 2011 by bobmorris

Reinventing the CFO: How Financial Managers Can Transform Their Roles and Add Greater Value
Jeremy Hope
Harvard Business Press (2006)

Those who are — or who aspire to become — a CFO need to understand that, as Hope explains, “too many CFOs…remain prisoners of dysfunctional systems and mental models that were developed for a role that is fast becoming obsolete.” That is to say, the position of CFO must be reinvented. However, my own opinion is that that will not happen unless and until governing boards and CEOs insist that CFOs be centrally involved as part of the senior-management team running the given business. The same is also true of Coos and heads of HR. Today, CFOs face a number of external pressures. For example, new success drivers such as strategic planning, resource allocation, and performance measuring systems as well as a new regulatory environment and more demeaning shareholders. With regard to internal pressures, they include too much detail and complexity, inadequate forecasting capability, too little understanding of how to reduce costs, and a lack of risk management expertise.

He suggests that the CFO be viewed in several different roles:

As a “freedom fighter” who liberates both finance and business managers from “huge amounts of detail and the proliferation of complex systems that increase their workload and deny them time for reflection and analysis”

As “analyst and adviser” who, by breaking free from detail and complexity, “creates time for finance to provide the information that managers need to make effective decisions”

As “architect of adaptive management” who enables managers to be liberated by releasing them from “the chains of the detailed annual planning cycle” by replacing targets and budgets with “effective steering mechanisms, including continuous planning reviews and rolling forecasts, that enable managers to sense and respond more rapidly to unpredictable events and to changing markets and customers”

As “warrior against waste” who with her or his finance team is able to focus on “huge swathes of costs that have remained unchallenged for years”

As “master of measurement” who brings measurement back under control and provides clear guidance about its meaning to managers at every level who, with rare exception, only need six or seven measures

As “regulator of risk” who provides an effective framework for good governance and risk management “by using multiple levers of control that support corporate governance controls, internal controls, strategic controls, and feedback controls”

In the final chapter, Hope focuses on the CFO as “champion of change.” He cites a number of exemplary CFOs who have transformed their finance operations, examining how they started, what vision or goals they set for themselves, how they got buy-in from key people, and how they implemented the changes. His case examples include American Express, Tomkins, and the World Bank.

Hope devotes a separate chapter to each of these “roles,” explaining how the reinvention of the CFO involves a multi-dimensional process of increased involvement in management at the highest level. To repeat, this will not happen unless and until the governing board and CEO insist upon and support, then sustain that process. Otherwise, pious affirmations of what Hope proposes are simply flimflam and flapdoodle.

 

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