The Postmodern CFO: Building Resilience To Economic Volatility

Constellation Research hosts its annual Connected Enterprise innovation summit each fall. Planful CEO Grant Halloran was a guest speaker during one of the event’s Brain Trust sessions, digging into the topic of “The Digital Back Office Meets the Postmodern Office of the CFO.” During the session, Grant explained how today’s CFOs face new challenges from modernizing legacy ERP to navigating new planning systems. But, those who take a data-to-decisions mindset and push to create an autonomous enterprise are quickly transitioning from transactional to strategic.

Here’s a recap of what Grant had to say about the future direction of CFOs and how they have become digital leaders in their own right. Or, watch the replay of Grant’s session.

Connected Enterprise is a three-day event featuring visionary speakers, showcases disruptive technologies, and attracts executives from across the globe. Constellation Research, the event host, is an award winning, Silicon Valley-based technology research and business advisory firm. This year’s Connected Enterprise featured leaders from diverse organizations like Barclays, Centurion Health, Epic Games, Equifax, Estee Lauder, General Electric, H+M, Honeywell, JP Morgan Chase, Mastercard, Walgreen’s Boots Alliance, and many, many more. The goal of the summit is to help leaders learn and share how to instill a culture of innovation and transformation in their organizations.

Grant’s session was hosted by R “Ray” Wang, the founder, chairman, and principal analyst of Constellation Research. Ray wrote about the postmodern CFO back in 2018, explaining how the CFO role was evolving from that of a traditional finance and accounting executive to a broadly strategic function that worked to shift business models and overcome non-traditional challengers.

“Go back 20 years and the role of CFO was all about compliance and audits and accounting, and that’s all still super important, but it’s really evolved in the past decade,” explained Grant. “CFOs started coming with an investment banking approach in how to use capital and debt, becoming more globalized with mergers and acquisitions, and more. That shift in the CFO’s approach made them more of a business partner to the CEO and the board. The CFO became seen as the number-two position in a company.”

Today, Grant continued, these postmodern CFOs need to be both technologists and storytellers. Businesses have grown in complexity, so it’s imperative that executives can understand what’s going on across the business but also clearly articulate it to the various stakeholders such as the board of directors and other investors. But, it also has to be a good story, says Grant.

“Your story has to animate support for your business,” added Grant. “That’s the job of the CFO today, more than ever.”

As businesses become more complex, people are having a more difficult time capturing and decoding the firehose of information being generated. Grant referenced a McKinsey study from 2021 which found that about one-third of CFOs are responsible for digital transformation at their organizations. That was up from just one-fifth in 2018 and less than one-tenth in 2016. One driving factor is that digital transformation has become a c-suite conversation, as boards of directors see the fundamental connection between digital transformation and business success. It’s all due to the need for speed.

“The reason CFOs need to modernize is because companies are so dynamic,” Grant said. “We’re in an economic fog right now and that makes the CFO’s job extremely difficult. They’re wondering where they’re going. So, the reason companies are investing in technology is to create resiliency. Business used to be about reporting. But increasingly there’s a realization that the business is driven by different metrics. So CFOs need to know the drivers of the business, model it, and look at it very quickly.”

Grant mentioned some Planful customers who are pushing those views from what used to be quarterly insights to weekly or even daily. Some customers are even using Planful to make daily decisions on how many workers to schedule for tomorrow, and it’s being driven by the Office of the CFO. Decisions across supply chain, inventory, and even marketing spend, all based on operational models but viewed with a financial lens.

Resilience, for the CFO, is being able to navigate with more speed and more efficiency through the current economic “fog” every company is experiencing. That fog is the combination of uncertainty, which is always present, added to today’s volatility that makes it more difficult to act. CFOs are then charged with telling the story of a highly complex business while navigating uncertainty, volatility, and change.

“CFOs need models that help them understand the drivers of the business and how that connects to financial performance, and then they need to constantly feed those models with new data,” Grant said. “When things change, you need to be able to answer questions within minutes. Automation eliminates a lot of that friction.”

Organizations are overwhelmed with data, and automation helps, but the data must still be analyzed. That’s where artificial intelligence and machine learning (AI/ML) are helping postmodern CFOs, but it has to be AI/Ml that’s tuned specifically for financial data. When it is, it can parse through millions of data points in an instant to highlight anomalies, something humans just can do. Even more, purpose-built AI/ML can enhance how the Office of the CFO delivers faster, better financial outputs.

“High-cognition tasks like financial projections are very complex and AI/ML is starting to get more involved,” Grant added. “But, you still want the human to make the call and tell the story behind it.”

To learn more about how postmodern CFOs are using AI, read “CFOs and AI: It’s Not Too Late to Get In the Game”.