Paul Thambar, FCMA, CGMA, Ph.D., associate professor of accounting at Monash University in Australia, explains the obstacles CFOs face when transitioning to a business partner role and where organisations are setting ambiguous and conflicting expectations for finance leaders.
A recent AICPA & CIMA report on the role of the CFO was informed by Thambar’s research.
Thambar also discusses the challenges and opportunities for CFOs grappling with digitilisation and how aspiring CFOs can adopt a “progressive” approach to career development. Thambar also was a guest on a 2019 FM podcast episode.
What you’ll learn from this episode:
- Why CFOs sometimes struggle to transition into a business partner role.
- Some ways organisations are setting ambiguous and conflicting expectations.
- How relationship building can help CFOs grow in their roles.
- The importance of understanding digitilisation at “two levels”.
- What it means to be a “progressive” CFO.
Play the episode below or read the edited transcript:
— To comment on this episode or to suggest an idea for another episode, contact Steph Brown at
Stephanie.Brown@aicpa-cima.com.
Transcript
Steph Brown: Welcome to the FM podcast. I’m Steph Brown, a news writer with AICPA & CIMA. On this episode, I’m joined by Paul Thambar, associate professor of accounting at Monash Business School. We will be discussing recently published research, the CFO study, informed by Paul’s research, which is part of AICPA & CIMA’s ongoing Contemporary Issues in Management Accounting series. To talk more about how CFOs perceive their roles today, how their roles are changing, and the new challenges they are facing.
Welcome, Paul. Thanks for coming on the podcast.
Paul Thambar: Thank you, Steph. Thank you for the invitation, and lovely to be here.
Brown: First, what interested you in doing a study on the CFO role?
Thambar: Good question. I am a former CFO. I have spent time in industry as well as academia. I do understand the CFO role and the finance teams, and I’ve always had a personal interest in understanding the issues and challenges that CFOs face.
As I saw the Future of Finance programme that CIMA was rolling out, I thought there would be an opportunity to do a study of CFOs. When I proposed a study, CIMA was very interested in the study. That’s the reason why, mainly out of personal interest although I had a professional interest as well, obviously, as a researcher.
Brown: What would you say are your top two to three key takeaways from it?
Thambar: I’ll explain my top takeaway by giving you a bit of a story. When I was a young CFO in a bank many years ago, I would attend the leadership meeting and I would want to be seen as more than just a number cruncher, as a business partner adding value to the leadership team. But I used to get frustrated knowing that I wasn’t getting a lot of traction from my colleagues around the leadership table. They just saw me as the numbers person.
One day while talking to the CEO of that division in the bank, I expressed this frustration. Then he looked at me, he was an elderly, experienced leader at the time. He looked at me and he said, “Paul, when you can do your core task, which is producing a clear set of numbers with good explanations on a timely basis and when you can present that”, because at the time we were presenting numbers that were eight weeks behind and the business had moved on. So, he said to me, “When you get to that point, when you can do your core business well, then we will take you seriously and look to you as a valued business partner.”
When I did my study, the thing that really struck me was that nothing much has changed around that.
The CFOs that I spoke to, when I asked them about some of the challenges, some of the conflicts they were having, one of the frustrations they expressed was the same thing. They said our CEO or my colleagues in the leadership [team] don’t take us very seriously because they think that we don’t do our core task, which is the number crunching, the producing the numbers and the analysis, and understanding what has happened in the business, in a timely and effective manner. And that holds us back. I was surprised to find that was still the case almost, I would say, 15 years after I experienced that. That’s one of my key takeaways.
But I also found another interesting aspect of the study was that while business leaders might see the CFO as just the numbers person, they also look to them for advice on taking on some of the new challenges, whether it is related to sustainability and ESG, whether it’s related to digital transformation. There’s a sense that I got from talking to my CFOs, that business leaders look to CFOs and their teams as being early adopters and early innovators on some of these topics and look to them to guide them.
There was almost this conflict. In one sense, they look to them as just being the numbers people and wanting them to do the numbers well. But at the same time they’re looking for them to add value by helping the organisation get on top of some of these emerging issues.
Brown: From the research and perhaps from your personal experience, what do you think organisations, particularly people in the C-suite, could do better to best position CFOs throughout this change to make them effective partners and leaders in their organisation?
Thambar: That’s a great question because that was one of the questions I was asking CFOs myself in the study. Relationship building is something that almost all my CFOs identified as a key enabler for the role to be effective in any organisation. Remembering that in the study, I spoke to CFOs from a range of sectors, from professional service firms, to engineering firms, to retail. The key thing is about building relationships. A lot of the time, that relationship is built by the CFO doing their core task, the number crunching, understanding the number, being able to explain the numbers well, that builds the relationship and the connections.
But it’s also the simple things: going around. I used to have a colleague who would say that he was the management accountant who walked because he would walk around and talk to people and not sit at his desk doing the work. I think sometimes we can get locked behind our laptops and our Excel spreadsheets and our numbers, and not really go out and talk to people in the business to understand the issues and challenges that they face, and to understand what opportunities that we will have to help them. That I think is a key to how CFOs in my study would engage and build their role to be more effective.
Brown: What did you learn from the CFOs, mostly in Australia and some in Sri Lanka, that perhaps surprised you?
Thambar: There wasn’t that much difference between the two places in terms of the CFO role. They all had similar challenges, the similar conflicts. It is a challenging time to be a CFO in any type of organisation because there are many new and emerging issues that you need to get on top of, like sustainability and ESG, digital transformation, other issues around modern slavery, diversity of the workforce, training, retaining talent.
But there’s also the challenge of just doing the core tasks well, doing the numbers well, getting the numbers analysed and understood in a timely manner, having the technology and the processes in place to be able to do that, looking at how some of these new digital technologies are disrupting existing organisational practices.
One of the things I noticed with many of my CFOs was that they were trying to understand the impact of some of these technologies on specific accounting practices. For example, how do I improve my forecasting or my budgeting processes using AI? How do I use big data and the vast amount of data that I have access to now, more than just accounting data, to be able to harness the insights that exist in the data to be able to help the business understand where they are, what they have done, and what they need to do to keep moving forward?
Those are all the challenges. I don’t see a lot of differences in those challenges between sectors and between countries. All CFOs seem to be grappling with similar challenges.
Brown: About digital transformation, what are CFOs thinking? Specifically, do they see themselves taking the lead on digital transformation in their companies?
Thambar: Good question. The more progressive CFOs certainly see that they have a role to play in driving digital transformation in their business. The more entrepreneurial CFOs would actually see that as an opportunity. But having said that, they’re are also grappling with the challenges of digitalisation.
One of the challenges is that not only do you need to understand the different digital applications, whether it is AI, whether it is blockchain, or whether it is big data and data analytics, they need to understand the application itself. But then they also need to understand how it is disrupting or can be used to disrupt and improve existing accounting practices.
Coming back to my example of forecasting and budgeting: How can you use AI, how can you use big data to improve your forecasting and your budget practices? It’s not just understanding AI for the sake of knowing AI as an application, but also understanding: How is that changing how you do planning and forecasting, how you do performance measurement? Things like that.
These are the same issues that we are struggling [with] as academics in terms of helping our students learn about these digital technologies. It’s not about just teaching them the technology itself, but it’s also about helping them understand how it is disrupting different accounting practices. You really need to almost understand digitalisation at two levels.
Brown: You discussed in the study that the CFOs’ financial controller role and business partner role is driving ambiguous expectations. Are those the CFOs’ own expectations or those of others in the C-suite?
Thambar: Probably a bit of both, I would say. [Those] ambiguous expectations relate to things like, for example with digitalisation, there’s an expectation on the CFO that they can help lead the conversation and the rollout of different digital applications within the business. Primarily, because within the finance function itself, generally, there is a fair amount of technology that is in play to do the core business. The core number crunching and analysing and understanding numbers.
In many businesses, business leaders will look at the CFO and say, “OK, you’re able to do that — work with technology well within your business. Can you help us drive that same transformation in other parts of the business?” That then creates that ambiguous expectation where, in a sense, as I said, you’re not valued as a partner because business leaders are a bit unsure about the value that you can bring. But at the same time then there is expectation that, but hang on, you may be able to help me with digitalisation. So you’re going to have to balance that.
Again, the more progressive and entrepreneurial CFOs see that ambiguity as a bit of opportunity to get a seat around the board table or the leadership table, and to be able to lead the conversation, and the transformation, and add value through that process. It does create that ambiguity. Some of the CFOs are able to handle that and leverage the opportunity better than others.
Brown: Thanks for sharing those insights with FM. To read more about Paul’s findings, we will link the study in the show notes for this episode. Paul, is there anything else on this topic that you would like to share in closing?
Thambar: I think it’s an exciting time to be a CFO. Particularly for those members who are not yet CFOs and who might be listening to this podcast and who might be aspiring to be a CFO. I would encourage you to reach for that opportunity.
But it is also a challenging time, because there are many different issues that you need to get on top of, particularly issues around sustainability, ESG, around digital transformation, around some of these other issues like modern slavery.
But I would think that, while the challenges exist, it is also an opportunity and if you’re progressive and entrepreneurial, I would say here’s the opportunity for you to actually leverage those issues and be able to aspire to be the modern CFO. You can certainly do that if you take the time to understand the emerging issues, understand how it is changing the way accounting practices are carried out, and just going for it. That’s what I would encourage.
I’m happy to be contacted by anyone listening to this audio and wanting to find out more or to have a discussion. We are developing a corporate education program at Monash for CFOs in the next few months, building on some of these findings, so would be happy to talk about that at a later stage as well.
Brown: That’s great. Thank you, Paul.
Thambar: Thank you, Steph.
