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Mapping Out Successful FP&A Management In the Face of Adversity

Organizations across the world have been struck with challenging realities for the past two years, it is unfortunate but true that many businesses have not made it through the storm. However, there have been many organizations that have successfully persevered through the challenges posed by the past couple of years, and among the differentiating factors between such businesses is leadership. Leadership across business departments is a foundational element of success. Effective practices in this indispensable aspect of business can be defined by 4 categories; personal leadership, technological leadership, operational understanding, financial competency and strategic capacity. You need to develop these various competencies and understand what they mean in a volatile corporate environment rife with technological innovations if you wish to maximize your performance as a CFO.

5 Leadership Competencies for CFOs

1. Personal leadership (incl. personal branding and emotional intelligence)

Personal leadership is a critical facet of a CFO’s performance which is often ignored by many finance professionals aspiring to take leadership roles. Two major elements in personal leadership are personal branding and emotional intelligence.

Personal branding is nothing different than corporate branding done by companies to sell and promote their products and services. Entrepreneurs are also in the business of selling their own talent. Therefore, if you have all the necessary skills and talent, but you don’t have a strong personal brand within your organization, your management and colleagues will not perceive you as a value creator and treat you as a more analytical person limited to financial analysis and reporting.

As you advance up to the corporate chain of command, a strong personal branding may not be enough. Being an FP&A Director, CFO or any other senior-level professional, you will encounter lots of challenges and have to deal with difficult people by facing resistance and counter-arguments. In the face of such adversity you will need a high level of emotional intelligence by managing your own emotions and understanding and managing emotions of others.

To execute and bring results, an FP&A leader must be able to influence and lead others by having strong networking skills, close collaboration with colleagues, coordination & effective communication with non-finance business functions and all stakeholders and ability to lead the enterprise in times of crisis.

An FP&A leader needs to collaborate with different business functions including sales, marketing, business development, supply chain, IT, HR etc. This collaboration should help establish strategic alignment among these different business functions and to accomplish strategic objectives of the organization and identify and manage any gaps or misalignment of activities. You can achieve it only via strong public leadership rather than just your technical skills or knowledge.

2. Strategic leadership (strategy knowledge and business acumen)

This is another key pillar of the leadership development for financial planning and analysis (FP&A) professionals. In order to climb up to the FP&A leadership position, you need a high level of business acumen and strategic capacity. This will help you understand the value creation model of the business, how the organization creates value for different stakeholders including internal and external customers, how to quantify the value being created and minimize leakages in value creation using enterprise performance management.

Having solid analysis skills is not sufficient to get your seat in board meetings and to create influence at the C-suite level. You should understand the strategic position of your enterprise and where they want to reach by understanding their vision and mission. Best way to build your strategic mindset is by asking the right strategic result-oriented questions from the right people within non-finance business functions.

3. Operational leadership

For strategic finance leaders, it is also important to have a good understanding of the company’s operations in order to support them in achieving operational excellence and in executing their strategy at the operational and tactical level. To better comprehend the company’s operations and various activities involved in the supply chain, it is recommended to use Porter’s value chain model. The model can help understand how different support functions (procurement, IT, HR etc.) work to add value to the entire process. FP&A leader should collaborate closely with all these business functions including sales & marketing to understand which activities are adding more value and contributing to the overall strategic objectives of the organization.

Activity-based costing can be used to calculate the cost of each activity for budgeting and financial reporting, so it will be easy for the FP&A function to measure the performance of each business function against these activities as this will help the organization to streamline their operations.

4. Financial Acumen

Strong financial acumen is an obvious cornerstone of a finance leader’s performance, because you need to understand the strategy and operations of the company and connect the dots using the finance lens. Financial leadership includes strong grip over technical accounting including IAS/IFRS, risk management and compliance, mergers and acquisitions, financial management, financial planning, budgeting & forecasting and integrated financial reporting. An FP&A leader should be able to integrate financial planning with strategic and operational planning in order to drive the overall business performance that will result in the financial success of the organization.

5. Technological leadership

This facet of financial leadership is particularly important in today’s peculiar context. Sixty-nine percent of board directors say that the effects of the COVID-19 pandemic are accelerating their digital business initiatives. The challenge for CFOs is how to fund digitalization and growth while maintaining control over their organization’s finances, even when the corporate environment remains highly volatile.

This doesn’t mean that you need to develop the technological proficiency of your engineers or other technologist team members, but that you cultivate a thorough understanding of how to leverage emerging and existing digital technologies such as machine learning, artificial intelligence, big data and advanced analytics etc. to create an enormous amount of value for your finance team and the enterprise as a whole.

Finance leaders have a holistic view of the entire organization and they understand various performance metrics of every business function. Therefore, they are in a position to lead digital transformation projects for their enterprise by collaborating with other C-suites including CEO, COO, CIO/CTO etc. This collaboration can help maximize the ROI on these projects.

Financial planning and analysis (FP&A) leaders should also understand various digital technologies that they can leverage within FP&A function, particularly, the use of big data and analytics including predictive and prescriptive analytics. Technology can significantly enhance the predictive capability by enabling faster response to rapid changes in the business environment.

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