From chief accountant to strategic enabler: the evolution of the CFO
«If the pilot of a company is the CEO, the role of co-pilot is undoubtedly filled by the CFO». This statement from Matteo Rinaldi, CFO of Sandoz Italia and former student at MIP Politecnico di Milano Graduate School of Business, expresses well the central role financial directors now play in corporate organizational charts. In the last five-six years the Chief Financial Officer has undergone a very rapid evolution and is increasingly involved in decision-making processes.
Matteo Rinaldi recently spoke about the role of the CFO during an online presentation of the International Part Time MBA of MIP Politecnico di Milano.
The four main functions of the finance department of a company can be seen like a pyramid at the base of which is data processing and, as you climb, reporting and control, up to the summit that consists of decision-making support. «Until a few years ago the first three functions were preponderant. Recently, instead, participation in decision-making processes has taken on an ever-increasing weight, at the expense of the other three» explained Matteo Rinaldi. «Data processing, reporting and control have lost weight not only in proportion to the business partnership but also in absolute terms. Indeed, a good part of these activities has migrated towards centralised services at a corporate level. This means that in multinational companies the financial teams in each country are numerically smaller than in the past and that the activities of CFOs are now more focused on the business».
Today the Chief Financial Officer measures his or her success on the basis of the impact he or she has on the business, rather than on the simple accuracy of figures and reporting. This evolution shouldn’t be understood as a simple shift from one model to another, but as the addition of new functions to the original ones. «In Sandoz we summed up this process with the phrase ‘We drive the business to create value’. The basis of our work remains the ability to read data, but now we must also be able to interpret it to make strategic decisions. The first step is the accuracy of data, an aspect that’s not trivial, if it’s true that, according to research by the Harvard Business Review, about 47% of data collections contain at least one critical error. Secondly we must ‘connect the dots’ of the organization, taking advantage of the cross-cutting role of the finance sector with respect to other corporate functions. Alongside hard skills, soft skills are also extremely important, necessary, other than for managing people, also for negotiating and for understanding all aspects of one’s company».
In summary, in the past the CFO was above all an accountant: the typical approach to the job was descriptive and to look the past. Today the CFO has become a business partner, who must have analytic expertise and adopt a predictive approach, thus facing the future. «The next step is represented by becoming a strategic enabler. That is we need to make increasing use of digital technologies, to adopt an agile operating model. And to transform the company into a ‘data driven organization’: today we deal with a large quantity of data, but many people don’t know how to use it.
Sandoz, in collaboration with the Politecnico di Milano, is using Artificial Intelligence instruments to construct a forecasting model that allows it to produce with greater precision the right quantity of each of its 800 products».