Increasingly, many CFOs are partnering with their CEOs to drive larger transformations across the enterprise. To gain insight into this emerging trend, I spoke recently with Ajit Kambil, global research director of the CFO program for Deloitte LLP. A summary of our conversation follows.
Jeff Schwartz: Recently you‘ve been focusing on how CFOs can effectively drive transformation. Is corporate change an area of increasing responsibility for CFOs?
Ajit Kambil: When we interview CEOs and board members in advance of a CFO Transition Lab, we often hear the CFO has been hired to be a more strategic partner to the CEO—both on financial matters and in the transformation of the company. In line with these expectations we find most CFOs aspire to spend about 60%-65% of their time as strategists and catalysts for change, and about 35%-40% of their time as operator of the finance function and steward of corporate value. Furthermore, many CFOs oversee IT and various other company operations in the place of chief operating officers. Thus corporate change is increasingly a responsibility of CFOs.
I understand that you've found that CFOs who aspire to this catalyst role are often ill equipped to drive organization-wide change and that resistance to change is a primary hurdle. How does this resistance manifest and what can be done to overcome it?
Kambil: Many CFOs come up the finance ranks and may not have the language, tools, frameworks and prior experience to drive major organizational change. They can get stymied in their change efforts through active or passive resistance from the workforce to their initiatives. To overcome resistance it is important to understand what drives resistance. Some simple triggers of resistance and considerations include:
- Asking more of staff without taking the irrelevant off their plate. This requires careful consideration of how work is redesigned in a change effort. After all no one likes more work if they do not see a positive payoff.
- Disrupting the satisfaction of staff from their social interactions and systems at work. Beyond cash compensation individuals generally want to work in companies and groups where they enjoy peer interactions. CFOs should consider how work and workplace design can alter social interactions, staff satisfaction and commitment to the company.
- Changing the power dynamics in the organization. This requires getting the support of CEO or other critical stakeholders to establish a new distribution of power in the company.
You've identified culture as having the power to stump CFOs, and that it requires a different level of management. How can CFOs best support CEOs in effecting company-wide culture change and driving culture change within the finance organization?
Kambil: We're finding that CFOs and CEOs often need to drive culture change in their companies to really boost performance. But again they may not have the tools and background to do this. Culture is the pattern of shared beliefs across the organization. I think CFOs can help CEOs drive culture change by helping them diagnose what beliefs work well or do not serve the organization well, and by helping CEOs frame and reinforce a narrative for changing beliefs.
For example, in our labs we ask CFOs dealing with culture change issues to articulate the outcomes that are not working at the company, and the behaviors that led to them. One answer we hear is that silo behavior leads to ineffective cost outcomes as groups duplicate efforts.
We then ask what is the underlying belief leading to the behavior and why was it once valuable. In the case of silos, each group may believe they are “special” and entitled to do things their own way. For an innovative tech firm this belief may help with R&D, and creative product design and marketing functions, but it is a misplaced belief when it comes to activities like finance across divisions. In the latter, shared services and systems can dramatically lower costs. Here the CEO and CFO can jointly create stories and narratives that affirm when a belief is valuable, and disaffirm beliefs that lead to ineffective behaviors and outcomes in other contexts.
CFOs can also provide financial evidence to build the case against ineffective behaviors and beliefs. CEOs and CFOs can also reward those who act in ways consistent with desired behaviors and beliefs.
Any final thoughts you'd like to share about how CFOs can most effectively partner with CEOs to drive transformation in their organization?
Kambil: I think CFOs can really help CEOs create a shared language about beliefs, behaviors and desired outcomes in the leadership team. They can also provide analyses of outcomes that help CEOs provide a strong financial and business case for culture change. But, despite the best efforts of a CEO or CFO, it may not be possible to change the beliefs and behaviors of key staff. Then it is imperative to change key staff expeditiously.
Jeff Schwartz is a principal with Deloitte Consulting LLP's Human Capital practice. He is a regular contributor to Business Finance, sharing his perspective on executive talent development, where the next generation of finance leaders will come from and some of the best practices organizations are applying in addressing these issues.