The past couple of years have proved humbling for business leaders across departments and industries. At the start of the pandemic, there was no shame in slipping up and making unusual mistakes due to the unprecedented nature of the crisis everyone found themselves in. But as we settle into the new normal and close out the second year of COVID, living in interesting times cannot be continually used as an excuse for falling short of your goals. Holding yourself accountable is particularly important in positions of financial leadership, as such professionals execute the most foundational tasks for any major business decision. In order to best adjust to the new normal and achieve your goals as a finance leader, you should have a solid understanding of the most common mistakes made by CFOs in today’s unique corporate context, and how you can be proactive in evading such failures.
4 of the Biggest CFO Mistakes
1. Assuming you need to rehire in Digital Transformation
The need for new skills on your team doesn’t necessarily mean hiring outside talent. Your current team members may have the potential to take on new roles and learn the new competencies themselves. Automatically looking for new hires before first exploring your internal options could leave your people demoralized, cynical and unproductive. It’s critical that you bring your people with you during any transformation project, so make sure that you have engaged with each team member, determined their strengths, weaknesses and goals, and established a plan to bring them with you before you look elsewhere.
2. Lacking simplicity
Last year brought a lot of new challenges and a lot of new opportunities. Now it all just feels like a lot. Leading financial operations has always been complex, but the recent turmoil makes that complexity particularly overwhelming. If you’re consistently missing your deadlines to finalize the budget, sign that contract, hire that vendor, or sign off on goals, you may be falling into the target trap. Execution fails in the face of too much complexity. You can regain your grasp on execution with this step: Sort your giant list of priorities and objectives into three categories.
Indispensables: These priorities are related to everyday operations, such as production, revenue, project completion percentage, and customer satisfaction. These directly affect and are measured by KPIs. Most of the organization’s energy is consumed by the duties in this column.
Stroke-of-the-pen: List any priority that requires money or your authority. Examples include changing a work process, buying new equipment, hiring a new agency, or modifying a compensation system. These priorities usually don’t represent significant execution challenges. They are going to happen because the leader said so.
Breakthrough: These priorities take more effort to accomplish and shouldn’t be considered life support activities. A breakthrough item might begin in one of the first two categories, such as a product launch (stroke of the pen) or improved customer retention (life support), but soon you realize it doesn’t belong there. Think of it like this, some product launches are pretty straightforward, and your team has done them multiple times. But this one is so complex it requires major changes in how the organization operates. It needs your team to shift duties and engage in new ways. Now, this launch has moved out of your stroke-of-the-pen category and firmly into the breakthrough list.
Once you have simplified and categorized the to-do list, make sure each team is only working on one breakthrough at a time. They can juggle multiple stroke-of-the-pen and life-support objectives, however.
3. Allowing vendor contracts to proliferate
Many companies that have embraced a SaaS strategy have hired vendors that are redundant or not adding value. CFOs often discover an excess of vendors months after pushing down autonomy for spending on technology to lower levels and reclassifying outlays from a capital expenditure to an operating expenditure. For example, they may have moved from on-site computing with hardware purchased every few years (capital expenditure) to cloud computing purchased from a vendor such as Amazon or Microsoft as needed (operating expenditure).
By giving lower-level staff more room to maneuver on spending, the new budgetary approach often sparks innovation. In-house software developers gain flexibility to spin new creations into the cloud or test a new product from a vendor.
4. Failing in 'change management'
A top-to-bottom overhaul of technology can shake up all company stakeholders, from staff and customers, to investors and board members. A financial executive needs a plan for informing and rallying such stakeholders.
Before pushing ahead, a CFO should consider mapping out the different needs and potential concerns of all groups of stakeholders and identifying those who will likely champion or resist digital transformation. Change management has its own work stream and is extremely risky if you don't have a plan.
Employees will need training in new skills and roles, as well as an understanding of how digital technology advances long-term company goals. The C-suite and board will need regular updates on benchmarks, KPIs and budgets. Vendors will need to know in detail about technical changes such as new coding and shifts in company expectations.
Best Practices in Financial Leadership
Having thoroughly considered the biggest mistakes to avoid in financial leadership, one can extract a few takeaways from such insights. One is that CFOs are most likely to succeed in adopting technology by ensuring spending aligns with their company's long-term business strategy. When considering whether to replace legacy computing with digital technologies, financial executives need to choose metrics that account for the different ways old and new technology incur costs, and carefully consider the system they choose to adopt. CFOs will also need to reconsider their task management strategies to further simplify their tasks across the board, on top of ensuring that their subordinates possess (and cultivate, if needed) the most relevant skills in today’s corporate landscape.
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