More CFOs partnering with CEOs to drive strategy, but many ignoring the shift to digital
Wednesday 3 February 2016
- Despite playing a larger strategic role in their organisation, CFOs still see their main focus as managing costs
- Digital transformation, operational redesign and performance measurement identified as critical areas for CFO and CEO collaboration
- Yet only 49% of CFOs say they will make a high contribution to their business’ digital approach
The relationship between chief financial officers (CFO) and chief executive officers (CEO) has become more collaborative in the past three years, but new research from EY has found CFOs are still more focused on managing costs and setting budgets than carving out a broader strategic role within the business.
Findings from the fifth instalment of EY’s Partnering for performance series indicate 82% of CFOs feel that while they collaborate with the CEO on M&A decisions, performance management, operating model redesign and the shift to digital, their most important contribution is still within their traditional finance remit. The report is based on a global survey of 652 CFOs and a series of in-depth interviews with CFOs and CEOs.
EY’s Oceania Assurance leader, Mike Wright says CFOs need to find the balance between financial discipline and taking new risks to drive innovation and growth.
“Many CFOs emerged from the financial crisis with strengthened reputations, with CEOs relying heavily on them to handle cost-cutting and protect their company during the economic downturn,” Wright says.
“Now that the global economy is becoming more stable, CFOs are finding themselves caught between cost control and growth. While this is also true in the Australian market, I think locally we are seeing CFO’s more closely engaged with the CEO on business priorities than the global survey suggests.”
Accelerating digital business
The survey found many CFOs lacked a clear understanding of the role they need to play in the shift to digital – a key factor impacting organisations today due to the disruption it can cause to business and operating models.
Only 50% of CFOs are making the shift to a digital business model a high priority in the next three years and only 49% believe they will make a high or very high contribution to it. This suggests many CFOs do not fully understand the impact digital is likely to have on their business, nor their responsibility in leading and enabling this transformation. CFOs have an important role to play in this area, including leveraging digital to cut costs, and managing the legal, tax and regulatory risks that digital creates.
“It’s surprising to hear that many CFOs are not placing a high priority on digital given it is arguably one of the biggest challenges and opportunities facing companies today. The consequences of ignoring the shift to digital are far too great for only half of CFOs to be embracing it,” Wright says.
“Digital has the power to transform organisations from market leaders to irrelevance in a frighteningly short timeframe. CFOs who don’t embrace this shift will be caught playing catch-up as their competition takes advantage of the digital culture to gain traction in the market.”
Critical partnerships don’t stop at digital
Operational redesign and performance measurement were also identified as critical areas for CFO and CEO collaboration. A large majority of CFOs (85%) who make operating model redesign a very high priority report closer collaboration with their CEO, and performance measurement is one of the key areas where CFOs feel they need to make a larger contribution.
“Collaboration between the CFO and CEO is one of the defining characteristics of a well-run, market leading organisation. CEOs and CFOs must work together to balance hindsight and foresight, moving beyond the past to focus on emerging risks and opportunities.”
“In developing a leadership partnership that really performs, it’s critical for the CFO to focus on the considerable value they can bring to the table, beyond cost control,” Wright concludes.
EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.
EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organisation, please visit ey.com.
This news release has been issued by Ernst & Young Australia, a member firm of Ernst & Young Global Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
About the survey
The findings are based on a global survey of 652 CFOs, conducted by Longitude Research on behalf of EY, and in-depth interviews with CFOs, CEOs and EY professionals. This report is the fifth in a series of studies of how CFOs are partnering with other C-suite peers to grow, protect and transform their organizations.
For more information, including related infographics summarizing key findings, visit: ey.com/cfoandceo.