Three Essential Qualities Of A Modern Finance Leader
Thought Leadership

Three Essential Qualities Of A Modern Finance Leader

As a result of the burgeoning fear of the upcoming recession and the ongoing evolution of the corporate landscape, CFOs and finance leaders are being tasked with taking on a more strategic role. They now not only have to handle finances but simultaneously focus on the long-term benefits while accelerating the digital transformation of their respective organizations and quickly adapting to the changes. 


A Global Survey conducted by Workday titled ‘Closing the Acceleration Gap: Toward Sustainable Digital Transformation’ interviewed 1,150 senior business executives—295 of whom were finance leaders—revealed that CFOs have struggled the most to meet business demands consistently. The research showed that finance transformation lags behind other functional business areas. However, in a world where such change is continuous and business-critical, CFOs are increasingly aware that they need new skills within their function and the ability to lead their organizations forward decisively. 

One of the most excellent tools that organizations can leverage today is data. Tapping into the large volumes of data available in the enterprise and implementing advanced analytics represents a significant opportunity for the finance department to make a real difference and steer their organization in the right direction.

New Expectations

The finance leader is now expected to be a proactive and central contributor to the decision-making of the overall company. CFOs now play an increasingly critical role in organizational transformation. More than ever, CEOs now rely on their finance leaders to make crucial decisions and drive value creation within the business. For instance, look at famed investment guru Warren Buffet, who expanded beyond just analyzing financial data to examining the economic impact. Buffet started by taking control of Berkshire Hathaway and cash-cowed its dying textile business to purchase stock in other companies. Berkshire then evolved into a holding company while evolving its investment philosophy. Buffet learned to look beyond financial data and recognize the economic potential of unique franchises like dominant newspapers turning him into one of the greatest moguls of the industry.  


Below are the five qualities the modern finance leader needs to succeed in this dynamic role. 


1. Business Acumen

While financial literacy is key to being a good finance leader, like Warren Buffet, it is essential to have foresight of the economic impact of the financial decisions taken by the company. For instance, let’s assume the case of Spotify; its business model relies on free users who must listen to advertisements. However, with the advent of the pandemic and advertising agencies slashing their budgets in half, this previously profitable model became a liability for the company. To combat this drop in revenue, Spotify smartly pivoted towards creating original content, following Netflix’s formula for success. They started with podcasts, which have seen a tremendous increase in popularity and numbers in the past year.


This content creation pivot shifted Spotify from being an intermediary in the delivery of music to being a source of original content for its consumers – a brilliant long-term pivot. By ideating and analyzing the long-term effects on the organization, the CFO is now in a position to make or break the company’s future.


2. Collaboration with CTOs & CIOs

The journey of finance to becoming a more strategic function will depend on its ability to embrace upcoming digital technologies. This will require a shift to honing their technical skills and creating better links with IT leaders. While Stanford University’s Strebulaev emphasizes the importance of the CFO-CIO partnership in creating a more data-driven organization. “CFOs need to partner closely with CIOs on this data-driven revolution and help them understand what kind of data they need. The challenge in the past has been that they often speak different languages, so improving that communication channel will be important,” he added.

In a survey, Finance Redefined: Workday Global Finance Leader Survey, conducted by Longitude of more than 670 global finance leaders, 68% revealed that effective collaboration between CFOs and CIOs is limited b as the IT and finance don’t speak the same language – terminology and jargon specific to a particular functional domain. While 66% said, IT executives are reluctant to collaborate with their finance peers. Collaboration between these two key departments will pave the way for the next revolution in the financial world.


3. Data Science Knowledge

CFOs and finance leaders need to learn how to harness data — beyond just numbers and figures — to explain why specific strategies are the right ones. Ilya Strebulaev, Professor of finance at Stanford University, says, “We now live in a sea of data and have the technology to evaluate that data and make decisions about consumers, competitors, markets, and much more. CFOs must understand how to use all of this data — not just financial data — to understand the business and drive decisions. The companies that don’t won’t survive.”


For instance, CFOs may not know how COVID-19 will play out, so they must prepare for multiple scenarios using the available data. This includes monitoring insurance risks, legal and covenant as the pandemic unfolds and collaborating cross-functionally to ensure adjusted plans focus on stabilization. CFOs will also need to ensure that the delegation of duties is clear and that the organization is ready to adapt quickly, eliminating the hierarchical governance models left incumbent after the pandemic.


In Conclusion:

The current crisis has demanded rapid action and extraordinary leadership skills to stay afloat. Many CFOs have risen to the challenge and have implemented the quick changes needed to protect their employees, pivot business plans, stabilize the balance sheet, and temporarily help the company’s survival. But the best CFOs resilient enough to recover and plan for the future will quickly transition from short-term reactions to transformation measures to create more resilient, value-providing organizations aimed at a bright future. They will serve as the architect that works with each facet of the business, commercial, operations, corporate, and technology to revolutionize the industry.