For finance leaders, the digital revolution can feel like a two-edged sword. On the one hand, more data and stronger analytical capability can make analysis more simple and accurate. On the other, AI and automation seem to threaten some of finance’s core functions. Will the finance department of the future be nothing more than a collection of algorithms?
According to Middle Market Media’s Jack Sweeney, there’s no cause for alarm. Sweeney has interviewed hundreds of CFOs and finance leaders for his podcast, CFO Thought Leader, and has learned that the future of finance is not a diminished role, but an expanded one. Finance departments that can change perspectives and embed themselves more deeply in decision-making will be well-equipped to thrive — and to help drive greater business outcomes.
We sat down with Sweeney to ask how CFOs and finance leaders can crush the future of finance by expanding finance’s role in the organization. Here are his thoughts.
Prophix: Do you feel like the finance department’s role is expanding? If so, what’s driving the change?
The whole discussion around data has become much more exciting within the last, I would say three years. There is this interesting moment in time when finance leaders realize that their skill sets and the skill sets of their team members are so valuable.
As more and more companies are collecting pools of data in so many different areas, how do you analyze it, how do you correlate it? And at the intersection of technology and analyzing data, you’d find few people more skilled in an organization than your finance people.
The finance department has been broadening its role for many years. Finance leadership anyway, I should say, as we know that “the changing role of the CFO” has been a theme probably for the last decade or more. But it is true that finance leaders find themselves sitting in on more discussions than ever before. And their people are being deployed into new departments and are being embedded in parts of the organization where they never even stepped foot before.
So it’s a very interesting time. Finance people are being embedded in departments because they’re helping with PNLs [profit and loss statements]. They are helping the business leaders make decisions based on financial analysis.
Prophix: What are some of the biggest trends you have noticed while interviewing for your podcast?
Transparency is a topic that comes up a lot. Millennials in particular crave transparency. They want to know; they don’t want to be told what to do and told to like it. They want to understand why they are being asked to do something, and how it will bring value to the business.
We just did an interview with Mike Foley, who is CFO of Unity Technologies, one of the most popular gaming development platforms out there. There is a culture in the gaming community that you should give your software away. The idea is to encourage developers to develop and come up with new ideas for games on your platform. His challenge was that they were giving too much away.
They had to educate the workforce why they needed to somehow make money and understand better how to do that. So they started pushing numbers down into the organization, more numbers than earlier CFOs may have felt comfortable doing. But he figured the more he supplied and educated the workforce, the more accepting the culture would be if they began charging a little more for their software. And in fact it got the results he wished: Suddenly, the workforce understood that they couldn’t continue to operate by giving everything away. That was achieved through transparency.
We also had an interview with Phong Le, who is the CFO of MicroStrategy. They have displays throughout their headquarters pushing financial data and metrics. The displays provide interesting ways for different departments to look at their world and understand how it fits into the big picture. It’s an opportunity to educate the workforce. So, interestingly, those are the types of things finance leaders now realize. It’s about pushing numbers down to the workforce.
Again, transparency is just so powerful. The workforce hungers for it, thrives on it.“Transparency is just so powerful. The workforce hungers for it, thrives on it.” says @Sweeneyoman Click To Tweet
Prophix: Do you believe that the transparency you’re talking about should come from the finance department?
Finance can play such an enormous role in helping educate the workforce. Top finance leaders have always known this, but you know finance has always been rather guarded. Finance has always been the gatekeeper, and that’s had to change over time.
When you speak to finance leaders today, very often you hear, “How are we going to share these numbers? How do we best educate the workforce about this business opportunity? What are the numbers or metrics that can help us do that?”
And it works both ways: Employees have been looking at the data, in their departments or at their level, and they turn to finance and say, “hey, look what we just discovered, if you look over the last 30 days, look at these customer behaviors.”
The finance executive looks into it, might even assign someone from their team to take a deeper dive with the business manager to understand better why that reveals something about customer behavior. And then finance has the wherewithal to take that measure and encourage other departments to adopt it.
So finance is not only coming up with new metrics, but has become the conduit for metrics that are bubbling up from different departments.
Prophix: How is the ready availability of data and smarter data processing/analytics changing finance?
Data is allowing us to measure all types of new ways of looking at the business. If you want to have an exciting conversation with a finance leader, ask them, “What rich pool of data did you discover in the last six months?” They’ll tell you. They’ll have one.
Now, that data pool might not have anything to do with finance. Very often it has to do with the customer experience. So part of what we’ve been talking about to finance leaders, as well, is that we believe better understanding of customer behaviors is part of finance. It’s part of forecasting.A better understanding of customer behaviors is part of finance. It’s part of forecasting.” days @Sweeneyoman Click To Tweet
It’s all financial planning and analysis. It’s better understanding the customer, so you’re going to be able to predict better what they’re going to buy and when they’re going to buy it. The finance leaders we’ve been speaking to are excited, and I don’t think that excitement was there five years ago. I think it’s there now because all of a sudden you can connect the dots.
So you ask, “What’s the hot new pool of data that you’ve discovered in the last six months and how do you plan to measure it?” And very often they’re in the thick of it. They’ll say, “Well, we came upon this thing and it’s really quite revealing. We know there’s a metric there.” And it might not be the metric they want to take to their shareholders, but it’s about educating the people within.
Prophix: How do you align your department, your people and processes, to surface the insights you’re talking about?
In the age of transparency you don’t tell people what to do, right? The way you achieve that alignment is through education and through sharing the numbers and doing a little give-and-take. If I were a finance leader, I’d be thinking about educating each set of workers. They might reside in three different areas but I have to get them all on the same page. What would incent or reveal to this set of workers why this alignment must be achieved?
There is a good deal of thought being put into that, and it’s a form of management which is really very interesting. Alignment has to be achieved through education and good management. It can’t be the old management “command and control organizations.” Alignment just can’t be achieved within that type of framework any longer.
Prophix: What is one skill that finance leaders need to develop further?
In this age of big data, the analytical skills and mind of a finance professional are so needed. There are, suddenly, all sorts of new areas that a financial mind could be put to work in. At the same time, communications skills have never been more in demand. Finance leaders must be good communicators, too. And that’s not necessarily a skillset that the traditional finance leadership path offers.
CFOs learn how to communicate to the investment community and to their shareholders, but it’s different internally. It’s different communicating to your team; it’s a new set of skills. The finance leader is venturing out into the organization and sitting down in a conference room that two years ago they never stepped foot in, and they’re dealing with people around a table. Many of the finance leaders we’ve talked to have told us that they are seeking to acquire those skills any way they can.
Prophix: What would you define as a high value activity for finance leaders? Where should they be focusing attention?
Again I’ve got metrics on the mind; part of what I’m searching for in these discussions is the next great metric that has been derived from data. So when I think of high value activity for any finance team, it’s coming up with a way to determine business opportunities.
You could save your company a great deal of money by not investing in the wrong areas. So to me, it’s high value when your teams are capable of forecasting and helping to guide the business.
Prophix: What do you think finance leaders should be looking out for in the near future?
One trend that’s making a lot of finance people nervous is that many of their traditional roles will be automated sooner rather than later. A great deal of the accounting software out there is helping people close the books quicker, is eliminating the need for as many professionals.
There are opportunities opening up in other areas, though. I think this nervous energy around automation is prompting finance leaders to experiment. And again, finance leaders tend to not be the experimental type. In the past, they were married to their function, processes and traditions. But it’s opening up.
It’s obvious that the top finance leaders are the ones that are able to evolve and understand that it’s about change in the finance department, and helping foster change in their organizations.
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