Balancing The CFO’s Twin Objectives: Growth Versus Optimization

There’s an old proverb that says if you chase two rabbits, both will escape. But what’s not so obvious is the (often) needed balance between the twin objectives of growth and optimization. This need for balance is becoming increasingly amplified as organizations grow and move to digitize. Thanks largely to Big Data, CFO priorities have shifted to a strategic, more value-based, future focus.

It’s easy to get swept up in innovation and digital transformation around growth and the art of what’s now possible for the business. Seeing a vision come to life and helping to drive sweeping change is exciting and engaging. Who wouldn’t want to be part of that?

But growth is often in direct competition with optimization. And digital transformation is an accelerant. While both growth and optimization are good for business, managing the balance of when to say yes and when to block change isn’t always a popular role. And sometimes rationalizing the change is exactly the right thing to do.

Now that we’re acting as business partner to different lines of business, CFOs are pulled in many directions. Supporting strategic decisions; keeping one eye on financial stewardship, compliance, and optimization; and reining in colleagues when they become overambitious, requires a foot in both camps. But that’s easier said than done. So what’s the solution?

Three things. First, a recognition of the different mind set required for each. A tactical finance mindset must reflect on the implications much earlier than a strategic one. Enthusiastic salespeople and senior management are always excited about top-line growth, but it’s our job to bring the focus back to the P&L. That’s not always easy, but if you have a good team of C-suite colleagues, you’ll all be aware of the dangers of groupthink, and will bring your own assessment to the situation.

Second, have strong analysis tools in place to help you reach better decisions faster. By way of a tactical example, we’ve started to use an SAP tool around travel and expense management. Thanks to the insights we get from the reports, we can now see where we need to close the loop on flights and hotels to get a much better edge on negotiations. Strong analysis tools will totally change the game internally and externally, and let you make the right decision, regardless of how attractive a deal looks or how enthusiastic your colleagues are.

And lastly, a CFO must maintain steadfast independence at all times. It is our responsibility to remain financially agnostic. It’s all well and good wearing two hats, but as CFOs continue to acquire more commercial responsibilities, we must recognize where these competing objectives lie and when they occur.

Of course, there are huge benefits to having the CFO role become more rounded. Focusing more on bigger picture business growth is great, but only if it doesn’t sacrifice the steady influence of fiduciary control.

SOURCE

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