25. What do the Elite CFOs do Differently to Drive Impact? - CFO Now Research with Aneel Delawalla

25. What do the Elite CFOs do Differently to Drive Impact? - CFO Now Research with Aneel Delawalla, Accenture

Hannah Munro: 0:48 

So, today on the podcast, we have Anil Della Walla, Managing Director of Accenture Strategy Consulting for the CFO and Enterprise Value. So, welcome, Anil. It's lovely to have you on the show. 

Aneel Delawalla: 0:59 

Thank you so, much for having me. Excited to talk all about CFOs and what we're seeing in our research. 

Hannah Munro: 1:07 

Absolutely. So, before we get into the depths of the research, tell us a little bit about yourself and what you do at Accenture. 

Aneel Delawalla: 1:14 

Sure, absolutely. So, as you said, I'm a managing director within Accenture's CFO and enterprise value practice. And then within that, I help lead all of our enterprise value targeting efforts. So, how do we use quantitative information? How do we use benchmarks to understand how companies are doing? One element of that is also leading up Accenture's research and thought leadership into what CFOs are doing, how the role is changing, how the finance function is changing, where companies are investing and where CFOs see themselves going in the future. 

Hannah Munro: 1:50 

And you've recently released a report, CFO Now, Breakthrough Speed for Breakout Value, which I love the title of, by the way. So, do you want to just tell us a little bit about the research study itself and the methodology behind it? 

Aneel Delawalla: 2:04 

Sure, absolutely. So, it actually builds on our legacy of research that we've been doing since about 2003. And biannually, we go out, we survey CFOs and senior finance leaders. In this instance, we surveyed over 1500 of them. And then we had one on one interviews with, you know, 40 to 50 CFOs of, you know, multi-billion-dollar global companies, really looking at how the function is evolving. What changes they're seeing given the prior year's research, what they're forecasting for two, three, four, five years out. And based on that, we're then able to say, what are the differences we've seen? Where are things going? And what should CFOs do now to take advantage of the trends and where the market is going for them? And this time it was a bit unique for us because we were out in the field amidst a global pandemic. And obviously that's completely changed the game in terms of what enterprises and companies are focused on, but also how CFOs are leading and partnering across the business as well. 

Hannah Munro: 3:15 

And talking of COVID, so, how has COVID itself affected these trends that you're seeing? Do you think it's accelerated them? Do you think it's slowed them down? What's your interpretation? 

Aneel Delawalla: 3:28 

Yeah, undoubtedly accelerated them for sure. In fact, nearly eight in 10 CFOs or so, have said the organizational disruption from the pandemic has accelerated how they've had to play their roles and the leadership they've had to display across digitizing the enterprise, dealing with changing consumer and channel expectations, but also what their own employees are dealing with in terms of remote work and work from home and balancing the concerns of being healthy as well as being productive and obviously helping guard the enterprise financially. 

Hannah Munro: 4:12 

And at a top level, what sort of trends have you seen? Because obviously you do this on a regular basis. What's the shift that you've seen in the latest research? 

Aneel Delawalla: 4:21 

Yeah. Well, if we step all the way to the macro perspective, the thing we're seeing is the scale and the speed, the pace of decision-making is vastly different for CFOs today than what their predecessors had to deal with. And what do we mean by that? So, CFOs are telling us that they're having to make consequential billion-dollar decisions on a weekly basis, in some case, even daily, depending on the size of the enterprise, whereas their predecessors were making $100 million decisions on a monthly, quarterly basis. So, the magnitude of the impact is larger, the speed has accelerated, and therefore they need to have better capabilities, better data, better insights in order to play their role, not only for the finance function as a leader of the finance function, but also the role they're playing across the enterprise in collaborating with the rest of the C-suite and ultimately leading the enterprise into their new digital strategies and new business models as well. 

Hannah Munro: 5:31 

And out of interest, with that shift in terms of pace of change, is that how many of those decisions are being made based on data, but because of the speed of the decisions that are needed to make, how much is actually based on gut instinct? Is there any research around that? 

Aneel Delawalla: 5:49 

Yeah, absolutely. That's actually one of the things that jumps out at us in terms of CFOs who've really leaned into having a technology strength are capitalizing on that competitive advantage. About 21% of CFOs, so, about a fifth of CFOs, are doing a really good job of using that financial data combined with that operational data to lean forward and identify the new sources of value to be predictive with it and incorporate that into their forecasts. The other 80% are saying they want to get there, but they've been saying they want to get there for a couple of years now. And they're not really getting that house in order to unlock those capabilities. 

Hannah Munro: 6:35 

And is there any, when you're digging into sort of those that are struggling with that, is there anything that jumps out of you in terms of the reasons why? 

Aneel Delawalla: 6:44 

So, there's a couple of things, right? One is, when they think about what data is available to them, those that have that data available and can tie it across silos, tie it across dimensions, tie it across functions, they're able to actually generate new insights and be more predictive with it. So, that's one element of it. Another element of it is, what are they doing to take advantage of more modern technology? So, some CFOs that are investing in the cloud or in modern ERPs, they're using it to solve yesterday's problems. They're using it to solve, hey, how can I make my finance function more cost efficient? Or how can I help improve basic reporting in terms of just automating standard out-of-the-box reporting? But the ones who are really taking advantage of those technologies to unlock the new value, to help provide new insights, to help accelerate the speed of forecasts, to accelerate when in the month reports are available, to use the algorithms that come with a lot of the cloud-based technologies from the hyperscalers like Alibaba and Amazon and Google and Microsoft. They're the ones who are really able to say, hey, not only here's what last month's data is telling us, but here's where the prediction and the trend is going for next month. And therefore, here's the actions we should take. And it's ultimately making them better business partners, better digital stewards, rather than just simply, you know, keeping track of the P&L and reporting out how we did on a period before. 

Hannah Munro: 8:35 

So, I think it's that whole stop looking in the rear-view mirror and start focusing on what's in front of you. And in fact, what we're trying to look is look around the corner rather than keep driving a straight line. So, okay, so, that's, Awesome. I did read the report, I promise. So, in terms of, obviously, that's a massive shift. I think any of the CFOs listening are going to be feeling that requirement, certainly from the top level in the C-suite around more data, better data, cross-functional data. What other trends did you identify as part of this research? 

Aneel Delawalla: 9:12 

Yeah. So, what we ended up seeing is CFOs are having to play essentially three roles in parallel or simultaneously. The first role we're calling the economic guardian. So, that's the traditional role where they are the leader of the finance function and they are responsible for the financial and economic viability of the enterprise. They're responsible for compliance with the rules and regulations. But the interesting twist that we're seeing there is more and more of that work is being automated. So, when we looked at this in our prior study, CFOs predicted that in 2021, about 45% of financial tasks would be automated. When we looked at it this time around in 2021, they said 60% has been automated. So, not only is the automation getting to a critical juncture, but it’s also actually going faster than they anticipated. And because of that, they're able to take some capacity and, you know, lean into things like advanced financial modelling, leaning into using that data, the operational data to identify the new value sources. And so, you know, they're at this juncture where they're saying, how can I keep the really stable, the really, you know, traditional role of the CFO as leader of the finance function, as responsible for the enterprise financials. But let me use that to accelerate into the other two roles. And the other two roles that we're seeing then are the architect of business value, where they are driving end-to-end insights, collaborating across the C-suite, working with the head of supply chain, working with the chief marketing officer, working with the CHRO, working with the CIO or the chief digital officer. And, you know, 86% of CFOs are saying that the scope and pace of their collaboration across the C-suite has accelerated because of their visibility to information and data, because of the access they have to analytics, and because of the insights they have to the enterprise-wide risk. And then the third role they're playing is around the catalyst of digital strategy. And that's really about defining the future operating models and how the technology agenda is going to change the focus for the enterprise. And here's where it gets really exciting. And maybe I'll share two stats from this angle. Number one, almost three quarters of CFOs say that they are responsible for, they have the final say on the technology direction of the enterprise. So, that's not, they have the purse strings and the budget to fund it. They have the final say on what the technology direction the enterprise is going to take in terms of where they're going to invest, what value they're going to unlock, what customers and markets and channels are going to go after. So, keep that in mind. At the same time, we had about 68% of CFOs say that finance is taking on ultimate responsibility for the ESG performance of the enterprise. So, at the same time as they're trying to navigate this disruption and transform their business models. They're having to keep their eye on the ball in terms of sustainability and in the environment and how they're playing a good role in the community in which they're in and the type of governance that they're instituting to be a good corporate citizen. And that's to me where it gets very exciting for CFOs to say, I'm going to help define the future, but I'm going to do it in a way that's purposeful and aligned with the corporate mission and what society expects of us. 

Hannah Munro: 13:04 

And that's an exciting trend. And is there any information on what's actually driving that shift, particularly around the ESG piece? So, is there a reason for that happening? 

Aneel Delawalla: 13:16 

Yeah, I mean, some of it is natural because CFOs are responding to the regulatory environment where they're having to include ESG reporting in their quarterly and annual reports. So, that's a bit of a given. But CFOs are also responding to the societal change that we're seeing and where consumers and customers are going and what they're demanding of enterprises. And then they're also saying, hey, what is my evolving role? What am I going to have to do around data security to have a level of trust with my suppliers and customers and employees? And how am I going to keep that safe from breaches? What am I going to do to improve the employee experience? What am I going to do to invest in the community such that the community wants this business to thrive because they see it as a win-win proposition? So, more and more what CFOs are seeing is their shareholders are evaluating their ESG performance to make decisions on whether they're going to continue to invest in this business and recommend others invest in this business. So, some of it comes back to just pure economic viability of a public or private company, but some of it also has to do with this broadening mandate of what the CFO is accountable for, both from regulators, but also from the broader stakeholder base. 

Hannah Munro: 14:47 

And I think we could probably do an entire podcast on what's happening for sure measuring um you know all of those factors um across uh across our reporting so, to take us back a little bit a step we talked a bit about the increasing collaboration and how the finance director seems differently by other members of the c-suite can you just expand on that a little bit what does that mean for that CFO role 

Aneel Delawalla: 15:12 

yeah so, you know The CFO has always been this first among equals across the C-suite. They partner with the CEO on external reporting and communication to Wall Street at their publicly traded company. They partner with the CEO on a lot of the board agenda because of the audit committee and some of the concerns there. But they also help set... the financial baseline for the enterprise of how much each function is going to have to invest and what the ROI they expect, so, on and so, forth. So, they've always played that role. And to that extent, this builds on that. But what we're seeing is that that collaboration is becoming more purposeful. It's becoming more frequent, and it's driving a bigger impact. What do I mean by that? So, on the purposeful part, it's no longer, hey, we're going to get together as a management team on a monthly basis to review the financials and make decisions on what we're going to do differently. What we mean by the purposeful collaboration is it's happening more frequently. It's including some of the more direct reports. So, if you think about a CFO, they are one of the only people within the enterprise whose teams are embedded in every nook and cranny of the business. So, because of their role of financial planning and analysis and being business partners to every function, every business unit, every geography, they are sensors at the edges of the enterprise and embedded and have their tentacles throughout the business. And so, they're quickly able to bring that in as sensors of the edges of the enterprise to say, what's going on? and how can we predict what's going to happen in the next geography? And this became really important during COVID when in China and Asia, you were able to see some of the effects of the pandemic and CFOs were quickly able to use that plus the data, plus the algorithms to say, okay, what's going to happen in Europe? What's going to happen in North America? What's going to happen in South America? So, that enables them to have a little bit more purposeful collaboration across their C-suite. And then... What they're able to do is they're able to say, here are new metrics that we want to introduce to influence behaviours and actions across the enterprise. And so, you know, roughly three quarters of CFOs are saying that this sensors at the edges of the enterprise is really uplifting their role and uplifting the type of collaboration that they have across the C-suite. 

Hannah Munro: 18:26 

So, do you think that shift in collaboration is changing the structures of a lot of finance teams? You know, we talk a lot about business partnering in this conversation. Is it that CFOs are there with their teams and they're ready? Or are some still trying to get those support, you know, the right people in place to support the wider organization? 

Aneel Delawalla: 18:44 

Yeah, it's definitely a work in progress, Hannah. And, you know, it not only is specific to the types of capabilities they have in place, but it's the types of skills they have on their team to take advantage of those capabilities. So, if you take a step back and think about the capabilities for a second, so, a large majority of CFOs, about three quarters again, said that their company is going to have to redesign how people work, the work they do, they're going to have to reinvent their cultures to support these new mindsets and behaviours of enterprise-wide collaboration to take advantage of the value that's there. But in order to do that, what they're also saying is we need new skillsets. So, traditionally CFOs have prioritized skills around the finance and accounting, around the general manager mindset, right? So, the CPA, the MBA type of skillset. And what they're saying is going forward, that’s not what's going to get us to where we want to go. And so, the skills they're actively introducing into the organization, either through hiring or through training and learning on the job, or by bringing in some ecosystem partners who collaborate with them on these things. But those skills are around data exploration, data analysis, data science. So, that's the top skill being introduced. But also, the second most, third most, fourth most prominent skill being introduced are around scenario planning and horizon scanning, right? Becomes really important when you're dealing with volatility and uncertainty to have the scenario plans and have a look at what's on the horizon. The third most skill is around innovation. And it's not just about how do you innovate, but it's the innovation process. What stage gates and milestones do you have in there? How do you begin to invest as the innovation is taking hold? How do you have a game board or a portfolio of innovative investments? And then the last one is the most fun one, I think. It's around storytelling. So, it's no longer about having the right numbers or having the numbers at the right time, but it's about how do you communicate what that means? How do you communicate it in a way that convinces people to take a different decision, whether it's your internal business partners or externally to your investors and more broadly to your shareholders. And so, to me, that becomes a fun one because that one really allows the creativity to come out and brings in that balance from the historic quantitative. 

Hannah Munro: 21:26 

focus. Yeah, and I think that's it. I think that is definitely a weakness of some people when they're going out and they're speaking to their shareholders, their stakeholders, is that they're focusing on what the numbers are rather than what they mean. We're actually, weirdly enough, we've actually got a podcast coming up and telling stories with data. So, you've lined me straight up for that one. So, thank you. It's brilliant. OK, so, there's a lot of shift there. We're talking a lot about increased collaboration. We're talking about changes in skill sets. And we're talking about those relationships across the organisation. changing as well. So, tell me, um, a little bit more about, um, what, what, what other shifts are you seeing? Um, what about the, you know, you said about, um, CFOs getting more involved in things like business modelling and driving strategy as well. 

Aneel Delawalla: 22:16 

Yeah. Yeah. I mean, um, it, it, in some ways it's a natural extension of, of what they've been doing historically when they set, um, the annual budget and the annual plan, which links back to, okay, what's the operating plan that we're hoping to achieve? The one twist there I would say is CFOs are now saying, hmm, let me take a step back. If I'm going to be ultimately responsible for sustainability and governance in the enterprise, and we've just gone through this at the board level or at the CEO level, redefining what our purpose and our mission is. A lot of companies are doing that because they want to communicate to their customers, to their employees, their suppliers, that they're a business you want to work with or work at or buy from. And CFOs are saying, well, do we want to stop at just redefining our purpose and mission? Or do we actually want to link our investment plan to that purpose and mission, such that there are dollars behind it, such that there's teeth behind it, such that there's accountability behind it, and such that we're going to measure ourselves on achieving that renewed purpose and that reinvigorated mission. And so, they're rethinking their annual operating processes and their annual budgeting processes to say, how do we have closer linkage to that purpose and mission such that we can make it real rather than just a tagline and a good buzzword. 

Hannah Munro: 23:54 

Awesome. I think that comes back to the vision of the organization and CFOs taking a more strategic role. And I think that's a really interesting trend that they're starting to help the business connect the dots. So, what other trends did you identify? Is there anything else that you saw in your report that you think was particularly interesting? 

Unknown: 24:12 

Yeah. 

Aneel Delawalla: 24:14 

Yeah. So, one of the things we actually looked at is said, okay, if we drill down and look at which CFOs are the ones that are high performing, and what does that mean for financial outcomes? And what are the actions they're taking to differentiate themselves? And it was pretty incredible. So, we identified about 17% of CFOs in their organizations that were doing something different and differentiating themselves and performing at a higher level aligned with what the research was showing. And when you went and looked at the financial performance of those companies, it creates a huge opportunity for the other 83% of CFOs that are out there. And what do I mean by huge opportunity? They can almost double their EBITDA CAGR from 3.8% to 6.9%. So, remember, that's not an absolute number, that's a CAGR. And they can increase by about 10% or so, their revenue CAGR from 2.7% to 3%. That is a meaningful impact that completely changes the game in terms of enterprise growth, you know, profitable growth, purposeful growth, translating that into bottom line dollars and cents that CEOs and CFOs would be happy to have any day of the week. And so, when we then looked and said, okay, there is a material financial difference if you operate differently, if you operate at that breakthrough speed where you're able to report within the month rather than having to wait for the month and close. If you're able to have predictions about what's going to happen the next month in a matter of hours and days, rather than having to wait weeks to forecast the next quarter. If you have that breakthrough speed, we've now proven that there's breakout value there. Well, what are those CFOs doing? And it falls back into those three buckets of economic guardian, architect of business value, and catalyst of digital strategy. And so, when we looked at the economic guardian side of it, it was really about breaking down the data silos once and for all, using the advanced technology, using the cloud, using algorithms to unlock predictive forecasting. And then it was building those skills that we talked about earlier and empowering the finance professionals to take on broader responsibilities with those skills. So, those were the three key actions they were taking. When it came to architect of business value, it was that purposeful collaboration across the C-suite. It was leading with better insights and more sophisticated perspectives specific to the function or the business unit you were speaking to. And it was taking personal ownership for harmonizing the data and technology platforms such that the folks working in the company can basically be reading from the same book and interpreting the data in the same ways. And then when you got to Catalyst of Digital Strategy, it was, bringing the finances capabilities around strategic initiatives to those initiatives that are occurring outside the function. So, it's not just about funding and approval of budgets, but you're being more hands-on in terms of digital transformation across the enterprise. It was about stepping into the role around ESG performance of the enterprise and optimizing across those stakeholder outcomes and not just shareholder outcomes. And then it was about seeking support to develop broader resilience across the enterprise in terms of dealing with data security, in terms of dealing with breaches, in terms of dealing with the risks that are both emerging because of the way business is changing, but also the changes brought about by the pandemic in terms of work from home and remote work environments. So, to us, that was a huge takeaway from this research in terms of if you invest in the breakthrough speed, and you do it in a way that unlocks these three roles that the CFO plays, there is that breakout value. There is that pot of gold to go. 

Hannah Munro: 28:42 

after. It's exciting to see the power of that shift in terms of that CFO role and the impact it can genuinely have by taking that transition into that next view of the CFO, which I must admit, we do talk about a lot on this show, but it's great to get some numbers to support everything that we're talking about. So, if we take that into practical terms, so, what can CFOs do today and now to start that shift into becoming that 17% that those elite CFOs, as you call them? 

Aneel Delawalla: 29:15 

Yeah. So, I mean, this is a discussion we have with a lot of our CFO clients at Accenture. And I think it boils down to three simple steps. Number one, get your hands around the data that you've got in the enterprise. And that doesn't mean you've got to boil the ocean and solve for all the data, but begin to get your hands around those specific use cases that of where you're able to bring in financial data and operational data and perhaps external third party syndicated or macroeconomic data and ask yourselves, if I had that data that was tied together and I had it at my fingertips and I had it on a timely basis, what decisions would I be able to make differently? And then pick those use cases that are tied to those most meaningful decisions, most impactful decisions, and begin to lean into those in terms of bringing those data dimensions together and cutting out the data silos. So, that's one area. The second would be around cloud. The cloud, it's an unstoppable force, but... It's an amazingly positive force as well in terms of what it unlocks for the enterprise and more specifically the CFO. So, think about how you can lean into the cloud. Think about how you can move your applications and your systems and your infrastructure to the cloud, not only because is it going to result in some short-term savings in terms of lower OpEx, potentially lower CapEx investments in the future, But what it's going to do is it's going to speed up the metabolism of the organization of how quickly it's able to take it, ingest and take advantage of the data that I spoke about. But a lot of the hyperscalers also come with a lot of algorithms prebuilt that allow you to then make sense of that data and be a bit more predictive with that data. And oh, by the way, it's also got some, you know, positive carbon data. to the enterprise as well in terms of being greener than your traditional data centres. So, data first, lean in with the cloud. And then the third one really has to do with what we're seeing as the continued evolution. And our prediction is that two years from now when we talk about it, it's almost going to be a matter of fact the CFO's role when it comes to ESG and dealing with security. Right now, that's a newer thing that we saw in this research, but the momentum that is there requires CFOs and therefore their finance teams to say, let me get more comfortable talking about ESG, understanding the impact we're going to have, where we're going to invest, how we're going to communicate it out, and how we're going to mitigate risks. and build a culture of resilience as it relates to some of those security issues. So, those would be the three big things I would say. Starting tomorrow, CFOs can get more forward leaning in, get more conversant in, improve their understanding, but ultimately have a bias for action. 

Hannah Munro: 32:47 

So, if I summarize that up for our listeners, what we're saying is focus on your data, get control of it, shift, you know, use cloud to your advantage, you know, take advantage of that piece. And the third one is security and ESG, get hold of that piece and get yourself skilled up and knowledgeable about what that means for your organization. 

Aneel Delawalla: 33:08 

So, either you read the report really closely or, you know, we had a really good. 

Hannah Munro: 33:12 

discussion. I just think you're brilliant at explaining it, to be honest, Anil. I think we'll take it down to that. So, yeah. A lot of things we've talked about today are based on the research at the top end. So, with those big enterprises, how relevant do you think this information is for sort of your midsize and smaller organizations as well? 

Aneel Delawalla: 33:32 

Sure. I mean, typically what we've seen is the trends that hit your global 2000 type of companies, right? The largest 2000 enterprises across the world. We typically see those filtering into the medium-sized, small-sized, your broader SMB segment in a two- to three-year delay. So, if that G2000 CFO already is seeing 60% of their finance activities automated, then the small and medium-sized business CFO needs to make sure that they're not standing still, that they're well on their way to that journey of maybe being where CFOs were two, three years ago around 30%. So, what are you doing to automate 30% of the workload within your finance function? If three quarters of CFOs are saying, hey, they're playing a broader role across the enterprise in terms of purposeful collaboration, you don't have more than 18 months, two years to be doing that if you're a small and medium-sized business. And then because of the trends and the acceleration that we're seeing and the pace of change we're seeing around technology and changing consumers, the risks around security and the opportunities around ESG, I would say you don't even have an 18-month to 24-month gap if you're an SMB business. A lot of SMB businesses are the ones being targeted for data security now because those who have ill intent know that those CFOs and those enterprises are probably least prepared for that. type of breach. And consumers and customers are going to move at the pace that they are. And so, whether you're a B2C business or a B2B business, changing expectations is something that's common to all businesses, regardless of size of 

Hannah Munro: 35:29 

business. Awesome. And I think that's a really good shout is that, yeah, even the pace of the way that mid-size and smaller organizations are catching up to those larger enterprises, something to bear in mind in that that's changing. Fantastic. Well, thank you so, much, Anil, for talking about all of this. It's some really interesting and valuable research. So, if our listeners want to learn more, what's the best place for them to find about the 

Aneel Delawalla: 35:55 

work that you guys have been doing? in terms of how they're making it real and how they're taking advantage of breakthrough. 

Hannah Munro: 36:30 

speed. Absolutely. And I think I say this on behalf of our listeners. Thank you so, much. And for those that are interested, I will post the link to the report and obviously Anil's profile in our podcast notes. So, please do check it out. It's a really interesting read. So, well worth a look at. So, thank you, Anil. 

Aneel Delawalla: 36:51 

Thank you for that, Hannah. Sincerely appreciate it.