This story, written by Steve Dunne, originally appeared on the Workday blog..
The business environment has become an increasingly complex, heady mix of changing customer behaviours, new regulations, constant technological change and disruptive business models. As a result, organisations have had to become more agile and collaborative. Working in organisational silos will not bring together the integrated expertise and solutions demanded by these complex challenges.
Yet while some teams have improved their collaboration capabilities, what about their individual leaders? In particular, are CFOs collaborating effectively with their marketing, operations, HR, sales and IT peers?
Our "Finance Redefined: Workday Global Finance Leader Survey" – which gauged the views of over 670 CFOs and senior finance leaders around the world – revealed that the answer is "no" in many cases. We found that only around one-third of CFOs report "seamless collaboration" with their C-suite peers, though the degree of collaboration varies by role. For example, while 37 percent of respondents reported "seamless" collaboration with the chief sales officer, only 27 percent enjoy the same level of collaboration with the CIO.
The shape and remit of the C-suite have changed considerably over the years. "C-suite 1.0 is the original model where CEOs are in charge – they say what's going to happen and everyone follows," explains Rob Dicks, financial services industry leader for human capital at Deloitte. "C-suite 2.0 is the model we all grew up with; the C-suite started to expand, with the CEO delegating problems to the responsible executives. If it was a people problem, it went to the CHRO. If it was a technology problem, it went to the CIO. If it was a finance problem, it went to the CFO. This was pretty clean, and it worked for almost 40 years."
As Dicks implies, we are now moving into a C-suite 3.0 era, as the increasingly complex business environment has shifted responsibilities to a broader group of people. "When you try to hand a technology problem to the CIO, it may include data issues, which is why we have chief data officers," he explains. "But it also may include risk issues, so the CRO needs to get involved. It can have people implications and finance implications." As a result, he notes that "the C-suite we're all starting to observe is a much more integrated, dynamic and collaborative set of executives."
A CFO who can effectively collaborate across the C-suite can bring very real benefits. Research from Deloitte found that organisations in which C-suite executives regularly collaborate on long-term interdependent work are the most likely to anticipate growth of 10 percent or more in the coming year.
The greater the degree of collaboration, the more likely it is that the executives leading the organisation will share the same priorities.
A report by EY looking at the relationship between the CFO and CHRO, "Partnering for Performance", found that companies with more collaboration between their people and finance leaders reported benefits including greater earnings before interest, taxes, depreciation and amortisation (EBITDA) growth, higher workforce productivity and better employee engagement.
Examining the CFO-CMO relationship, EY noted that "a strong finance-marketing relationship can spell the difference between high-growth organisations and those that stagnate or are left behind."
The greater the degree of collaboration, the more likely it is that the executives leading the organisation will share the same priorities – and the better placed they will be to achieve their goals.
There are many areas where collaboration can be undermined. The EY report into the CFO-CMO relationship pointed to a lack of common tools and processes as the foremost barrier preventing a closer relationship between those two leaders, followed by the absence of clear KPIs linking financial performance and the marketing agenda. Other obstacles included cultural differences and a lack of perceived value of this type of collaboration.
In order to work more effectively with other C-suite executives, finance leaders should focus on three key factors:
1. Build a good understanding of their C-suite peers' pressures, priorities and goals. Different functions will face different expectations from key stakeholders, including the CEO and the board. Understanding where other leaders are coming from can be invaluable.
Regular meetings and calls can go a long way towards better C-suite collaboration, as can actively bringing peers into specific projects where they can bring something to the table. It's also worth considering how CFOs can support and empower their colleagues by providing the data needed to support their decision-making. For example, they can provide other business leaders with specific KPIs on a self-service basis.
2. Ensure you understand each other's language. As well as understanding each other's goals, CFOs also need to understand other leaders' communication styles in order to build more effective working relationships. Central to this is the ability to speak the same language. In the world of business, two people may speak the same language on paper. However, if their roles utilise highly technical, disparate jargon, this can give rise to ineffective communication.
In fact, Workday’s research found that 68 percent of finance leaders say that "effective collaboration between CIOs and CFOs is limited by the fact that IT and finance don't speak the same language."
Dr. Ilya Strebulaev, professor of finance at Stanford University, emphasises the importance of the CFO-CIO partnership in creating a more data-driven organisation, but says it will require learning how to better understand each other.
"CFOs need to partner closely with CIOs on this data-driven revolution and help them understand what kind of data they need," Strebulaev says. “The challenge in the past has been they often speak different languages, so improving that communication channel will be important.”
3. Explore cross-functional career paths for next-generation leaders. The path to effective collaboration should begin long before an executive reaches the C-suite. Individuals with previous cross-functional experience may be better equipped both to understand the benefits of collaboration and to take the steps needed to achieve those benefits.
Deloitte's report observed that leaders with a broader range of experience across different functions were more likely to say that their C-suite does, in fact, collaborate regularly. So, as well as improving communication across the existing C-suite, companies may also consider how cross-functional career paths can promote better collaboration among the leaders of tomorrow.
A companion piece to this article – "Global Finance Leader Study: Why CFOs must find common ground with their HR and IT peers" – takes a closer look at the power of the golden triangle between finance, HR and IT, and how this relationship can bring significant benefits to the business.
For the full research findings behind the "Finance Redefined" global study, read the report here.
About the "Finance Redefined: Workday Global Finance Leader Survey"
We surveyed more than 670 finance leaders across the Americas, Europe, Asia Pacific and South Africa covering 10 main sectors from September 2017 to January 2018. Over one-third (38 percent) came from large organisations with more than $1 billion annual revenues, with 35 percent between $500 million and $1 billion, and 27 percent between $250 million and $500 million. Over one-third of respondents were CFOs, finance directors, or chief accounting officers/controllers, and the remaining were drawn from senior finance roles, such as head of financial planning and analysis or vice president of financial operations.