The CFO of the future: Not just a glorified accountant

Following are excerpts of an interview with Ronnie Peiris who gives his insights on the guardianship role that CFOs have to evolve to fill in a challenging future 

Ronnie Peiris

Q: What prompted you to do this course titled ‘The CFO of the Future’ under your important ‘Nurturing Leaders’ initiative? Title suggests there is a new role for current CFOs. Please explain.

A:  Since retiring from John Keells Holdings at end-2017, I have had the time, the opportunity, and indeed the privilege, of enjoying a closer, and a more intimate, interaction with business leaders, finance directors, chief financial officers and senior management of corporates, both nationally and internationally. These interactions have made me increasingly, and somewhat frighteningly, aware that the corporate world has not fully understood the urgency of the need for the thinking, the skills and the competencies of the CFO to change in tune with the volatility, uncertainty, risk, ambiguity and disruption of a world driven by data, technology and tighter regulation. 

What is more concerning, however, is that the corporate world has not fully grasped the competitive advantages CFOs can bring to bear through an appropriate balance between stewardship and business partnering. While the CFO’s stewardship responsibility embracing compliance, conformance, control and ‘gatekeeping’ enjoyed greater prominence in the period to the end of the 20th century, his business partnering responsibility, which is so critical to catalysing business performance, has, and is, becoming more prominent as the 21st century gains in age. The four-module, ‘CFO of the Future’ course will, while sensitising business leaders in the criticality of having the right CFO, will also arm the current CFOs, the future CFOs and other financial professionals in behaviours and skills to meet the challenges of a VUCA world, this being a world of volatility, uncertainty, complexity and ambiguity.

My Chairman/CEO at Anglo American Corporation (Central Africa) Ltd. often reminded me that I was his ‘conscience’ and indeed the ‘conscience’ of the Anglo Group in Central Africa. He actively encouraged me to question the integrity of our policies, procedures, processes and control, and the rationality and relevance, of forward-looking business plans. He greatly depended on me to ensure the veracity of any information, particularly financial information, communicated to the public.

 In my positions as CFO and, subsequently Finance Director, I was regarded as a critical advisor to the Board. Up to the end of the eighties, my role was, by and large, one of guardianship. With the opportunities, and indeed the complexities, emerging out of globalised capital and markets, regulatory and business drivers, advancements in information processing/availability and communication, my role changed, in the early nineties, to one of business leadership and business partnering where the thrust was the formulation of plans and the support of strategic and operational decision making.

Often were the times when the haziness of the divider between stewardship and business partnering gave rise to situations of potential conflict. An enlightened, and effective, CFO will know how to deal with such situations without compromising his/her professional codes of conduct. Based on the significantly positive outcomes which I helped to achieve at a group and individual organisational levels and at a finance function level at both Anglo American and John Keells groups, I am well-positioned to sharing, and imparting a wealth of ‘hands on’ knowledge and experience in upping the preparedness, behaviours and skills, of business and finance leaders in navigating a complex and dynamic business world. As conveyed to you at an earlier interview, I am very keen to increase the population of values-driven leaders. The ‘Nurturing Leaders’ tagline represents that vision. The CFO is no longer just a functional leader. He/she is an organisational leader and a key member of top management. Like a CEO, the CFO, too, is expected to provide shared leadership and vision to the organisation, employees and key stakeholders. 

I have interacted, and am interacting, with many finance professionals at various levels in corporate Sri Lanka, and I am convinced that most of them have a solid foundation of technical capabilities. However, I do see an urgent need for them to build on such technical foundation, without compromising their professional codes, the integrating behavioural skills. This Course will help them to achieve these. You will note that this course is being offered at a price which is considerably lower than its equivalents. This is deliberate. I want to attract more volume. My greater goal is to have a larger pool of values-based leaders. Sri Lanka needs it urgently.

Q: In your opinion, what are the common mistakes of the ‘Traditional CFO’ and where do they fall short in serving the board directors, superiors, peers and direct reports.  

A:  I will respond to your question under two broad headings. Firstly, the negative comments/observations made by Board Members, CEOs, Heads of Operations and Functions who are, at most times, a peer of the CFO, and Direct Reports and then secondly my own observations/comments arising out of my interactions with GFDs, CFOs and other finance professionals. 

Board members, often, state that the financial information given in the board pack do not provide ‘insights’. They remark that whatever information, included, is ‘tasteless’ and is just a repetition of what comes out an accounting system. Whilst appreciating that Board Packs become very mechanical outputs given the timelines by when they are expected to go out, there is an acute need for CFOs to provide a commentary which assists the Board in its strategic role. Additionally, often, the obligatory Assurance Reports are not up to date and are poorly presented. As a result of the aforesaid, the productivity of the Board is invariably impaired. The lack of proactivity in the involvement of CFOs in more advanced corporate governance matters is another common Board originating observation.

Most ‘modern school’ CEOs, being those believing in greater enablement and empowerment as opposed to great control, believe that the majority of CFOs are not ‘team players’. They see the CFO as an enforcer with a silo mentality. Like in the case of Board Directors, the enlightened CEOs demand more ‘insight’. They want the CFO to take some load off their shoulders so that they can spend more time on areas where their competence can be used with better returns to their organisations. 

They often remark that CFOs spend more time on routine matters which, in their opinion, can be done by one of his subordinates. It should be noted that such non-delegation happens because of the CFOs fear of failure. Nearly 100% of the CEOs that I talk with believe that CFOs are risk averse and suppress their entrepreneurial spirit. Such CFOs, they note, are happy to pursue, and content to achieve, average returns. 

The peers, undoubtedly, have been the most vocal in when it comes to criticising the ‘Traditional CFO’ behaviour. Almost in one voice, they bemoaned the ‘non-team’ approach of most CFOs. They remarked: “The CFOs are, in general, very good at identifying problems but not at giving solutions.” As in the case of the CEO, they believe many CFOs have a silo mentality. They opine that a CFO is an adversary rather than an ally. They perceive the CFO as a ‘policeman’ and ‘detective’, a mistrusting person who sees a skeleton in every cupboard.

A significant proportion of Direct Reports see the CFO as a rule based, one-track minded person. Almost a de-facto ‘dictator’ who does not believe in participatory leadership. In medium to large organisations, particularly where there are a good number of qualified talented accountants, a lack of self- belonging created by such a leadership style on the part of the CFO will, invariably lead to high turnover at critical levels in the finance function. Further, this style, will impede succession planning and send a negative feel about career development opportunities. 

"I am very keen to increase the population of values-driven leaders. The ‘Nurturing Leaders’ tagline represents that vision. The CFO is no longer just a functional leader. He/she is an organisational leader and a key member of top management. Like a CEO, the CFO, too, is expected to provide shared leadership and vision to the organisation, employees and key stakeholders."

The inevitable result is an erosion of the organisation’s ability to attract employees who fit their long-term visions. Lack of coaching, mentoring, guiding, delegating and empowering are a few other examples that Direct Reports mentioned when talking about the shortcomings of the ‘Traditional CFO’.

My interactions with Finance Directors and Finance/Accounting Professionals, CFOs included, reveal that they-themselves are their biggest enemy. Their ‘straight-jacket’ behaviour, their inflexible mind-sets and, in some instances, their lack of humour have led to been stereotyped as ‘bean counters’, ‘number crunchers’, ‘month-end majesties’, et cetera. As I have been telling some of my mentees, the CFO job is, indeed, a difficult one because on one hand he/she must follow accounting and reporting guidelines as spelt by the regulators/authorities. He/she has a fiduciary responsibility to stakeholders.

 So – when rules must be followed and when the CFO reports a worse than expected situation, Operating Executives, portray him/her the ‘culprit’, the ‘villain’. And yet, they expect the CFO a part of a top team striving to achieve above average returns. Given that there is no reward without risks, the Traditional CFOs with their risk averse mindset perceives a supportive/collaborative approach as a conflict of interest. For similar reasons, there are a good number of CFOs who believe that they must not be too ‘pally’ with operating and other staff. I hasten to differ. I have been in many such situations and I have been able to drive performance without compromising on my responsibilities of stewardship and my professionalism.

In my view, it is not the substance which is creating the ill-will. But it is the general behaviour, and the style of communication, of the CFO which are causing the rift. I can go on and on. Alas; time and space preclude me from doing so. 

Q: What will a CFO or an aspiring CFO gain from your course?

A:  As is indicated in the advert/brochure, the course will consist of interactive discussions and the sharing of my hands-on, practical and proven experiences which have produced positive outcomes. I am what you can call an ‘old horse’ who knows all the tricks. Old tricks and new tricks! I have been in the accounting, finance and leadership game for over 47 years and I have experienced a variety of situations faced by accountants from a Clerical Level to a Group Finance Director level. I, most probably, will have answers to all the questions of, and dilemmas faced by, the participants. I have sat on boards, executive committees, project teams and a host of other decision making, evaluating and monitoring bodies. I have been intimately involved in major IT, HR, Marketing, Branding and Production initiatives, in the forms of a project proponent, project approver and project monitor. While the Canadian songstress, Joni Mitchell says: “She looked at love from both sides now” – I can truly state that, in a corporate context, “I have looked at life from both sides”. 

In my positions such as the Managing Director, Anglo American Corporation (Central Africa) Ltd., the Group Finance Director, John Keells Holdings PLC and several others, I know what it takes to lead a winning team. As a more junior accountant and accounts clerk, I know the thrill of being in a winning team. I also believe that professional accountants need loads and loads of empathy if they are to be effective. Empathy, I have in tons by virtue of multiple positions. I intend cultivating, and nurturing, such in the hearts and minds of the participants.

Viewed from a behaviour angle – this course is one of changing from a ‘Traditional CFO’ to a CFO of the Future. I must admit that I was more a Traditional CFO till around the mid-eighties. I became a more Enlightened CFO from the late eighties and, since the nineties, I have made deliberate proactive efforts, as a CFO of the Future, in striving to be relevant to the future. This is through continuous updating, learning and development. I have a lot to share. I have a lot to impart. Change in my life has been constant. I am an admirer of Maya Angelou who said, “If you don’t like something, change it. If you can’t change it, change your attitude.”

In addition to the ‘behaviour’ aspects important to a CFO and, indeed, professional accountants, there are a few key pre-selected ‘technocracy led’ areas such as investment decisions/project evaluation, risk management, performance management and data analytics which I will focus on. These are areas where I have had very intimate involvement at all levels. At JKH, I oversaw the internal IT function and, at times, the IT businesses also. I was very instrumental in setting up a finance/accounting shared service and I spearheaded the JKH entry into the BPO area. The afore are just a few areas where I will share my experiences and advise participants on what to embrace and what to avoid.

My aim is not just to create finance/accounting leaders out of finance/accounting professionals, but rather, to make them business leaders. 

Q: Why should CFOs be skilled with the new learnings and techniques?

A: While finance and accounting will dominate the DNA of a CFO, he will, increasingly, be a cross-functional leader involved in everything from accounting, strategy, customer acquisition, production efficiency, human resource management, information technology to sustainability development and public relations. These are just a few of a long list. Whilst being just a ‘jack’ of all trades, he will have to master many. 

In the face of advances in technology and growing responsibilities, CFOs must brace themselves for rapid change and they will have no choice but to adapt to be effective. Most CFOs know it is no longer enough to play their traditional role. Instead, for CFOs to deliver value as their duties evolve, the results suggest that they must build skills in other areas of the business, play a more active leadership role, and rethink their usual approaches to overcoming external pressures and finding new investment opportunities. 

As revealed by a McKinsey Global Survey, C-suite leaders opine that CFOs must lead strategic thinking. Sadly, the CFOs, themselves, are not aware of their true value and therefore do not fully leverage their expertise and influence. 

The Survey dwells on the importance of CFOs adopting an investor mindset in their day to day management style. Examples include the adoption of innovative finance processes where one moves away from a typical, annual capital-budgeting process toward a more agile one, with flexible budgets, technology aided forecasting, data driven decision making and the establishment of appropriate performance-management systems. 

An effective CFO will have to embrace technological advances. In this respect, what immediately comes to mind are technologies in collecting, assembling, organising, analysing and working on data using *Data Ingestion Tools *Robotic Process Automation *Automated Analysis *Blockchain *Artificial Intelligence *Digital Forensics and *Visualisation Tools. 

Success is where preparation and opportunity meet. The subject course will enable just that.

Q: Is the CFO position largely a finance function or is it now evolving to a management role?

A: The keeping of books of accounts and related records, financial reporting and statutory compliance are still fundamentally important to a CFO as the head of the finance and accounting team who are responsible for such. Over time, these tasks have become the minimum requirements of finance. But they remain important. However, what has changed is that the CFO of Today and the CFO of the Future are expected by the Boards, the CEOs and their Peers to slice, dice and interpret data, not just financial data but all data, and use the findings emanating from it to influence operating decision making and strategy. As such, in recent times, the thrust of the CFO role is more leadership/management than one of finance.

Today’s CFOs and the CFOs of the future, will, increasingly, partner, with other members of the C-suite in driving business strategy. The CFO need not be one with a strong accounting or controlling background but must be one with strong business acumen and great skills in managing people. In addition to the skills of leading his team, he must be very adept at driving performance, the effective delivery of which demands an in-depth knowledge of the profit and cost drivers, the setting of business priorities against a background of ‘the ends are many – but the means are limited’, possessing an open, problem-solving mindset, and adopting an innovative and adaptive approach to change.  CFOs must possess many more skills than just the technical accounting background of the past. Today’s CFOs are de-facto deputy CEOs helping, guiding and influencing the CEOs in their decision making by providing insights which are not very visible to a non- finance mind. Finance is best placed to understand every step of the value chain and build bridges across the organisation integrating operations, functions and finance/accounting itself.

Other than the CEO, the CFO is one of the few people in the organisation with a clear and in-depth view of the bigger picture and the company’s strategic direction. It is obvious from the above that a CFO needs to be a business executive as well as a financial executive. Although they go hand in hand, the business executive component is assuming greater prominence.

Q: Is there a role for CFO in technology and innovation in an organisation?

A: At JKH where I oversaw the IT (Internal) and, at times, the IT Businesses, I worked very closely with the CIO in employing technologies which spawned value adding innovations which made real-time financial reporting more accurate, adaptable and analytics-driven. There were platforms, operating real time, enabling early detection of fraud and/or waste and flagging significant departures from the norm. Benford Law Curves, Time Series Analysis and Z-Scores were used widely. Using such statistical techniques, we were able to issue early warnings, detect potential issues, identify business opportunities and provide the Board, the CEO and the Leadership Team timely and strategic insights.

Spurred by such positive experience, I believe there is a strong case for the modern CFO and the CFO of the Future to be fully involved in the short and long-term information technology strategy, not just as a controller donning his finance cap but as an active craftsman utilising technology in building an effective organisation and an effective finance function. A CFO must have a comprehensive view of the technology that exists or that is being adopted into the workplace. 

Technology incurs a major expense and is a capital asset for the organisation, so it’s up to the CFO to make sure these systems are relevant and are implemented and managed appropriately. Their role doesn’t stop at ‘bean counting’ – it extends to what technology is used, how it is used and how data/numbers are interpreted and conveyed to the rest of the business. 

These ultimately underpin a CFO’s effectiveness. In this light, it is critical for CFOs to understand what technologies can do, how they work and how they might apply to the business environment.

The above was just an example. I can think of many other skills and competencies which a modern CFO must have. Those which readily come to my mind are Risk Management, Sustainability Development, Data Analytics, Data/Trend Driven Forecasting and Performance Management I will be covering all these in my Course. The CFO of the Future will be expected to play a very intimate role in designing, and implementing, all of them. Not just a controlling role.

We are living in an environment of an insatiable appetite for innovation and competing technology in developing, and delivering, products and services. We are, for ever, attempting to identify what works most effectively for the business. While ensuring that the technology spend is focused on generating tangible value, the CFO of the Future must enhance his risk appetite. He must learn to accept failure if the ‘innovation’ culture of the organisation is to flourish. They must look at technology, and particularly information technology, from an offensive viewpoint. 

This is vital in making certain that the organisation remains competitive. Robotic Process Automation and Cybersecurity are two areas which are currently demanding more CFO involvement. I believe that you cannot be an effective leader unless you have a managerial knowledge of technology and the sure way of getting that is to be involved. Quoting a CGMA Publication: “The CFO is living member of the company; he is not the heart or the brain, but he is a part of the heart and the brain of the company. He must contribute and not be just a glorified accountant. But it changes because it ‘needs’ to change to support the business, and because that’s life. It changes.” 

This course will be a watershed moment in the life of many a future CFO. I urge them to attend. They will be one decision away from a totally different life. Just visit www.ronniepeiris.com for details.