The number one topic I hear CFOs talking about right now is how to achieve more flexible and dynamic forecasting and planning. The number two topic is talent.
First, planning becomes more critical as finance leaders recognize that they need to respond to this complicated environment in a much more agile and flexible manner. Most finance leaders have conducted their planning cycle through a calcified, annual process that is too detailed, too resource intensive, and too slow. But CFOs are starting to completely reimagine how they plan and forecast, basing decisions on underlying business drivers rather than simple trend lines or wishful thinking.
The important thing to remember is that uncertainty breeds opportunity, and adaptive finance leaders can drive strong business outcomes in a time like this. Companies can still be optimistic about growth. Focusing only on trying to survive? We're not at that place yet.
Scenario planning is very useful here. With everything that has happened in the past few years, from COVID to economic turmoil and supply chain issues, executives are no longer trying to predict what’s going to happen. Instead, many are developing processes that will set up their organizations to be more responsive and adaptive to whatever comes.
By running scenarios, we can consider what could happen and what actions we should be prepared to take, from redeployment of resources in the short term to new investments in the long term.
Technology is an enabler of dynamic forecasting and scenario planning. The investment associated with planning software pays off in different ways, such as driving efficiency though a greatly streamlined planning process, enhancing effectiveness, and better informing decision making. The use of strong data is key as well. More finance teams are standing up a middle data layer that pulls from different systems using a common taxonomy and agreed-to definitions for calculations and metrics.
This data layer provides several benefits. It enables finance—and other parts of the business—to access the data they need more quickly to make decisions. The CFO function can take a more holistic view of business conditions by integrating not only financial data but operational and market data. By treating the layer as a single source of truth, the organization reduces risk and builds greater confidence in its data management.
CFOs are also focusing on talent, and leaders everywhere are recognizing how important people and capabilities are to financial planning in uncertain times.
The skills needed for finance today are different than they used to be, and this has created a gap in finance departments. Many finance leaders with traditional accounting backgrounds have been trained and rewarded for detail-oriented performance, including applying financial policies to a highly accurate degree.
While these skills are valuable, finance departments also need people who understand business drivers and can engage dynamically with internal stakeholders about tradeoffs, consequences, and long-term benefits. Financial professionals should have both new technical skills—next-generation tools, data management, advanced analytics—and softer skills, such as communications and stakeholder relations.
Given the rise of technology, data, and automation, transactional work is going away as value generation and business partnership become strategic imperatives. This further drives the need for a fundamentally different set of capabilities.
We hear many CFOs saying, “I need to upskill my people in a way I’ve never done before. I have all these people who were doing transactional and backwards-looking work, and now I don't need them to do those things—I need a new set of skills that are more forward-looking.”
Middle managers are key agents of change, and leaders should enable managers to help upskill and cross-skill workers to drive new ways of working.
Companies must anticipate the finance capabilities they need down the road, embed those skills into job descriptions and performance management mechanisms, and implement a robust program for developing finance talent over the long term.
There is a step change in the expectations of businesses to respond to an increasingly complex environment. Organizations are becoming much more resilient and flexible, and a firm can’t rest on its laurels. There is a new sense of urgency around topics like reinvented planning and talent management. Finance has a unique opportunity to guide organizations through uncertainty by focusing relentlessly on value generation and business partnership.