From Gartner: CFOs find themselves at a pivotal moment as multiple sources of rapid transformation unfold all around them. The very nature of work is transforming, along with where work gets done and how it gets done. Additionally, the accelerating pace of investments to enable digital transformation across functions is another key cause for CFOs being at crossroads. However, CFOs are often brought in at the last minute to write checks rather than being key partners in guiding meaningful transformative change.
But the more that CFOs can involve themselves early and help shape these transformations, the more they will be seen as true enablers, as catalysts for change.
“Becoming this catalyst for change will be one of the most important challenges for CFOs in the coming years,” says Dennis Gannon, Vice President, Advisory at Gartner. “Yet most are unprepared for it. The people- and technology-intensive nature of these changes has created brand-new investments with profoundly different and uncertain risk-reward profiles.”
To help CFOs better prepare themselves for the challenges ahead, finance leaders need to break these challenges down into three overlapping sets of critical transformational change:
The shift to a hybrid model
One of the biggest lasting shifts from the pandemic is the arrival of the hybrid working model. As one CFO of a retail firm puts it, “What’s hardest right now is the fact that we’re starting to be back in the office — but not all of us and not all of the time.”
During the challenging period of lockdowns and fully remote workforces, there was a level of consistency and uniformity. Most employees were using the same platforms or were all in front of their cameras. But a hybrid environment can be a lot more disparate, and that is harder to manage.
There are even bigger questions to answer about what the workplace is now and what function it serves. Depending on the nature of work, the past year has proven that employees can and do work very effectively at home. So offices that used to be individually focused spaces where employees came in to do work they now do at home need to move more toward team spaces — places to collaborate in ways that prepandemic office designs were not set up to do.
The typical office is beginning to look quite different. Beneath that change lies fundamental resourcing questions that CFOs must answer about how organizations will adapt to this enormous shift — and how that is funded.
Accelerated digital transformation
“In 2018, 3 out of 5 companies had a digital transformation plan; in 2019, 4 out of 5; and in 2021, we have all had to embrace it whether or not it was a part of best-laid plans,” says Gannon. “In many ways, for all its challenges, the year of the pandemic was a strong tailwind for digital finance transformation.”
The pandemic simply removed travel and expense (T&E) and many other business-as-usual expenses from the system. Many of these expenses have turned into new digital investment. But now these old costs are starting to return to the system and will create much stiffer competition for resources. CFOs will need to make tough trade-offs and, similar to the hybrid workplace, figure out a strategy to bring back the most critical things from before the pandemic while continuing to fund all the new digital initiatives that have emerged in the past year.
Furthermore, digital spending is disappearing from the CFO’s line of sight as it spreads and becomes decentralized into different business lines. And so the benefits or ROI of that spending also become harder to see and track. CFOs will need to become more comfortable operating in more opaque conditions than ever before while understanding the right places to line up digital investments.
New employment deal
The profound sociopolitical events of 2020 changed — in fundamental ways — what employees expect from their organizations. And these expectations have rendered traditional employee value propositions obsolete. More than ever, people want to feel a sense of shared purpose with the organizations they work for, and 74% expect their employer to take a stand on social issues.
The CFO might say, “That’s not a big cost and risk decision — we just issue a statement reiterating that we are on the right side of the issue and move on.”
Except that just issuing statements decreases your share of motivated employees. It is counterproductive because it not only alienates those who disagree, it also disappoints those who agree. In the long term this could in fact prove expensive in terms of employee attrition and drive up the costs of candidate attraction.
Putting money into action is what is truly valued by employees and stakeholders. Just making a statement on an issue results in a 2% decrease in highly engaged employees, whereas making a tangible investment results in a 20% increase.
It’s a difficult risk-reward question, the answer to which will be different for different organizations or workforces. But CFOs should understand that the scope of investing in people is now significantly expanded to include upholding modern standards of sustainability and diversity.
Read more: What Is the New Employment Deal?
In summary, these three overlapping waves of transformation are going to affect CFOs whether they are prepared for them or not. The choice the modern CFO has is to take an active role in shaping and driving these changes, or to be left behind and seen as an obstacle to progress in their organization.