The CFO might not be the first executive who comes to mind when thinking about a company that’s making a big splash in the marketplace. But a newly published study by Oxford Economics and SAP demonstrates that when the finance function influences strategy and business planning throughout the organization, the company grows faster.
We examined the measurable impact on business performance of six finance-function practices that we define as “Finance Leadership,” surveying 1,500 executives in diverse industries around the world. Only a select 11.5% of respondent companies qualified as “Leaders.” These are organizations where the finance function:
- Drives strategic growth initiatives
- Has strong influence beyond the finance function
- Collaborates regularly with other business units
- Is very effective at core finance processes
- Works closely with governance, risk, and compliance (GRC) teams and is well equipped to handle regulatory change
- Improves efficiency with automation.
According to our study, finance leaders are nearly twice as likely as non-leaders to report that their company’s market share increased over the past year. Why? The results suggest it’s because leaders collaborate with business areas where finance may not traditionally have been highly visible, including customer-facing functions like marketing, sales, R&D, and customer service. Our respondents say finance-function collaboration with these parts of the business pays off (a future blog post will explore finance collaboration in more detail).
The power of cost control
Finance leaders also excel at more typical finance activities, such as cost control. When we asked respondents to pick the top three risks facing their business in the next two years, far fewer leaders than non-leaders named rising costs and wages as a threat. They are more than twice as likely to rate themselves as “very effective” at T&E management. Not coincidentally, they are also more likely to make use of T&E analytics and procurement spending analytics.
These practices show up in the bottom line. For example, 82% of our respondents reporting profit margin growth of 5.1% to 10% over the past year say they find T&E spending analytics extremely or very useful, compared with 62% of those with 0% or negative profit growth.