Future Finance: Why CFOs Should Interact More with the Board, IT, and Tax
Finance types have an undeserved reputation for being restrained—unless someone within earshot happens to be expounding about any of the existing or forthcoming Star Wars trilogies.
In truth finance executives are devoting an increasing amount of time to interacting with others on the management team. They typically meet on a weekly, if not daily, basis with the CEO. Given their rising role as strategists, it’s perhaps not surprising that CFOs also tend to meet on a monthly or quarterly basis with business-unit leaders and, where applicable, the COO. But they tend to spend much less time in the company of Board members, the IT department, and the tax function.
Why is that? Their reason may also be the best argument for why they should be collaborating more closely with their corporate compatriots in those areas. CFOs typically have a tough time understanding—and, in some cases, evaluating—the priorities and capabilities of those who run those functions. But in all those cases, finding common ground would be wildly beneficial to preparing for the future.
In IT, for instance, spending needs to be closely aligned with business strategy to be most effective. But in the absence of effective communication, CFOs can inadvertently take an ax to future sources of value, basing their decision on current ROI—or the absence of it. Now that it’s becoming more common for CIOs to report to finance chiefs, it’s incumbent upon CFOs to ask questions making sure they understand the costs, benefits, and trade-offs involved in any significant IT spend. By working together, the CFO and IT department leaders can more efficiently allocate spending and implement IT projects.
The tax function’s newfound visibility is largely attributable to the impact of globalization. As tax issues become increasingly complex, they also have a greater bearing on the company’s broader strategy—for instance, which markets it targets for growth. While finance executives have traditionally viewed tax as highly specialized, CFOs have learned plenty about automation, outsourcing, process improvement, and other tactics that can help hoist the tax function over the barrier that keeps it—and once kept the finance function—from participating in the organization’s strategic decision making. By better aligning capabilities with future needs, CFOs can guide the tax function through the same kind of transformation that finance has undergone, improving its performance and ultimately making it a source of greater business value.
CFOs can’t avoid interacting with Boards—to their chagrin, it sometimes seems. But in addition to keeping the Board up-to-date on corporate initiatives, financial issues and risk management efforts, finance executives would do well to spend a little more time finding out how best to communicate with Board members. How much data is too much? Ask them, and while you’re at it, find out each member’s expertise so that you can tap into it—in one-on-one sessions—when necessary. True, a healthy relationship with the Board can make-or-break a career, but it can also help you do your job better.