BlogsA CFO’s Response to Today’s Changing Business Models
September 22, 2016, by Ryan Miller
An article was recently published in Deloitte’s CFO Journal that featured an interview titled, “Business Model and Operational Changes Demand a Fresh Look at Accountability and Decision Rights.” They interviewed two top professionals within their organization. One was Steven Ehrenhalt, who is the principal of Deloitte Consulting LLP’s Finance Transformation practice. The other was Jonathan Englert. He is manager of Deloitte Consulting LLP’s Strategy & Operations practice.
Together, Ehrenhalt and Englert shared insights and observations about how today’s changing business models are creating some confusion in the way key issues such as costs, performance and income are now measured. These changes are leading to operation disruptions and debates amongst senior management at some of the world’s leading corporations.
When asked why accountability and performance management are becoming more challenging, Steven Ehrenhalt spoke of how many organizations have globalized their operations in order to improve cost management structures. Some strategies include controlling operations from global headquarters, as well as regional headquarters. “When an organization makes these kinds of strategic and operational changes,” Ehrenhalt says, “that can shift accountability for an activity or decision to a different executive, or accountability can be divided among several executives.” His point is that if these responsibilities aren’t clearly defined and distributed, it makes it much harder to track performance.
So, what does a CFO have to do with these growing accountability issues? Jonathan Englert says the CFO and other financial executives are crucial when implementing major organizational changes. Decision rights need to be rethought and responsibilities need to be redefined. The goal is to produce financial measurements and reporting systems that are consistent, trackable and reflective of the company’s overall accountability.
“These are major strategic decisions that ought to occur at the highest levels of the organization,” Englert says. “Instead, we often find that senior management expects that the current management reporting model needs only a few tweaks to reflect what can be complex operational and structural changes.”
Ehrenhalt says that CFOs need to take control of the accountability system when major organizational changes are going to occur. They can be crucial in designing a financial accountability system that makes sense and allows for manageable performance measurement as those changes are implemented. Englert adds that the CFO should be working together with other key leaders within the company. They should aim for an agreeable system that everyone can follow. They can strategize to figure out what is not working and determine better ways of tracking finances within a more complex organizational structure than what they may have had in the past.
The role of the CFO is key because changes need to happen from the top down. Everyone should be on the same page as management accountabilities spread out regionally or globally. This will make tracking and measuring costs, income and performance more effective over time while avoiding major financial inconsistencies.
What other roles do you think CFOs need to play in these kinds of major organizational changes? We’d love to know what you think.
To learn more about ways in which Centennial supports CFOs, please contact Ryan Miller at (714) 740-1111 ext. 274 or firstname.lastname@example.org.