Good morning,
Do you know what type of CFO you are?
New research released today by IBM Institute for Business Value, in cooperation with Oxford Economics, found four CFO archetypes: strategic advisors, deliberate deciders, action architects, and constrained operators. The categories were grouped based on the effectiveness of a company in four core decision-making dimensions: efficiency, speed (deciding faster than competition), bias-to-action (converting decisions to a concrete plan), and accuracy (positive outcomes from decisions).
A strategic advisor’s strengths in decision making contributed to better outcomes in financial performance, the study found. In 2020, during the onset of the coronavirus pandemic, strategic advisors said their companies had an average annual revenue growth of 7.3%, compared to 4.3% for action architects, 0.2% for deliberate deciders, and 0.2% for constrained operators. Pre-pandemic, strategic advisors reported a 10% average revenue growth for 2018 and 2019, compared to deliberate deciders who reported 7%, for example.
“Strategic advisors are masters of strong decision-making, which means knowing when to make decisions and balancing data completeness with swift action,” Jonathan Wright, global managing partner for finance and supply chain transformation at IBM Consulting, told me. And this includes “owning what they can impact and influencing what they don’t control,” Wright says.
A strategic advisor is data-centric in terms of applying advanced technologies including cloud, and artificial intelligence, in addition to creating a finance team that’s agile with “key future-ready skills” like cybersecurity, and a focus on talent, he says. “More importantly, strategic advisors make sure that the finance team doesn’t just have a seat at the table but is a trusted voice in every strategic decision the company makes,” Wright explains.
The study is based on virtual interviews with 2,000 CFOs from 28 industries and 43 locations. IBM also conducted in-depth conversations with a dozen select CFOs from North America, Latin America, Africa, and Asia Pacific. “All four archetypes, including strategic advisors, are roughly evenly distributed in representation across geographies,” Wright says.
Each archetype has different strengths and weaknesses. Deliberate deciders are great at aligning the appropriate effort to a decision at hand, however, lag when it comes to pulling the trigger on a decision. That hurt this group in 2020 in regard to revenue growth, the study found. Action architects have strong skillsets in converting decisions into actions, which helped at the onset of the pandemic. But they are “weak” when it comes to using the best methods for decision making.
Meanwhile, constrained operators received low ratings in the four core decision-making dimensions and are less efficient. The first immediate action a constrained operator should take for advancement is shifting the responsibility of digital transformation, according to the study.
IBM’s study suggests a finance chief’s “success requires laser-like focus” and this means “disentangling CFOs from competing priorities, such as ownership of enterprise digital transformation efforts.” In this area, the CFO still plays a key role, but it’s “evolving from owner to influencer and agent of transformation,” Wright says.
For example, collaboration with the CIO allows CFOs to focus. It also frees CFOs up to build the business case across the C-suite and within the company to gain buy-in, according to Wright. The biggest challenge in finance automation may be changing workers’ mindsets, a panel of finance chiefs said at a Fortune event last month. “More than four in 10 CFOs say they are tasked with nurturing a corporate culture that embraces all things digital,” Wright says.
Although the strategic advisor appears to be the most effective, “the goal is not necessarily to move from one archetype to another,” Wright says. Why? It kind of depends on where you work. “Each enterprise has a unique structure that affects the possibilities, resources and tools available to finance leaders and their team,” he says. But there are steps finance leaders within all archetypes can take to become more strategic, Wright says.
See you tomorrow.
Sheryl Estrada
sheryl.estrada@fortune.com
Big deal
In 2021, global private equity and venture capital deal-making soared, according to a new S&P Global Market Intelligence report. At the end of the year, transaction volume was up 40% year over year. About 24,722 deals worth approximately $1.2 trillion were announced in 2021. In comparison, there were 17,618 deals worth $579.71 billion in 2020.
Courtesy of S&P Global Market Intelligence
Going deeper
Toxic culture is driving the Great Resignation, a recent report in MIT Sloan Management Review, discusses the top five predictors of attrition as well as actions managers can take. The strongest predictor of industry-adjusted attrition is a toxic corporate culture, according to the report. Other predictors include job insecurity and reorganization, and failure to recognize performance.
Leaderboard
Kevin Harkin was named CFO for North America Insurance at Chubb Limited (NYSE: CB), effective March 1. Harkin is succeeding Drew Spitzer who has been appointed treasurer of the company. Currently, Harkin serves as SVP of North America Financial Operations. He has more than 20 years of experience in corporate finance and accounting. Harkin joined the company, then named ACE, in 2007 and has held finance roles in corporate financial planning and analysis, expense management, close functions and statutory reporting. He began his career in public accounting at Arthur Andersen and, later, EY.
Sherri Moyen was named CFO at Conductor, a marketing technology company. Moyen is the first woman to become CFO at Conductor. She brings more than 20 years of leadership experience, 12 as an executive leader, to her role, having worked at both privately held and publicly listed global technology companies throughout her career. Most recently, Moyen served as CFO at Alvaria, and led its sale to Abry Partners. Moyen will lead Conductor’s finance and legal teams, overseeing the company’s growth and providing strategic direction on financial and regulatory matters.
Overheard
“We’ve long believed that a 'sprint and recharge' approach is the best way for us to manage the pace of our industry and ensure we could all take the time off we need. This is a critical moment in crypto, and we expect this year to be just as demanding as the last two.”
—Coinbase Chief People Officer LJ Brock on the company giving employees four weeks of “deliberate recharge time” this year, as told to Fortune.
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