Sep 4, 2022
Gary McGaghey: How CFOs Can Champion Digitisation, Capability Building, and Company Transformation
As the role of the CFO evolves and broadens, many finance leaders are seeing more opportunities to champion digitisation, capability building, and transformations — all of which are crucial to leading the C-suite agenda in a modern, future-proofed company. But championing such areas can be easier said than done.
That’s why the group and divisional CFO Gary McGaghey has examined data from McKinsey research that spotlights the evolving role of the CFO and shared his strategies to help CFOs lead the C-suite agenda effectively.
How the Role of the CFO Has Changed Over Recent Years
McKinsey research has shown that the number of functions reporting to CFOs and the number of CFOs who manage their companies’ digital activities are quickly rising. As a result, it’s no surprise that many companies ask their finance leaders to resolve issues in areas that are new to them.
Such developments suggest that many CFOs now have the opportunity to establish the finance function as both a leading change agent and a source of competitive advantage. However, CFOs must also bridge a perception gap to break down silos and nurture collaborative relationships so they can flourish in a broader role.
Although many CFOs are keen to create financial value through nontraditional tasks, many find that they must dedicate most of their time to traditional tasks. To overcome this imbalance in use of time, Gary McGaghey recommends that CFOs prioritise tasks such as leading the company’s digitisation process, heading up transformations, and recruiting the talent and capabilities the company needs to achieve transformation, both within and outside the finance function.
Changing Perceptions About the CFO’s Role
The CFO’s role has expanded and become more complex for a variety of reasons, perhaps most notably as their responsibilities relating to board engagement and digitisation have grown. This growth has stemmed from the emergence of cloud computing, advanced analytics, data visualisation, and business process automation.
McKinsey research has also delved into where CFOs make the most value for their companies. This research has unveiled some inconsistencies in how CFOs perceive their value-creating activities and how others perceive the value finance leaders unlock. While McKinsey’s 2018 survey found that 4 in 10 CFOs believed they had created the most value through strategic leadership and performance management, all other respondents believed CFOs had created the most value through performing traditional finance activities (like accounting and controlling) and upholding cost and productivity management across the company.
These inconsistencies in survey responses extended to questions about the CFO’s involvement in strategic decisions. While many CFOs said they had been involved in strategy-related activities (such as pricing the company’s products or services, setting the corporate strategy, or collaborating with others on digitisation, analytics, and talent management initiatives), nonfinance respondents didn’t agree with this response.
How CFOs Can Grow as Change Leaders
The McKinsey survey demonstrated that large-scale organisational change is ubiquitous across companies. While 91% of respondents said their organisations had undergone at least one transformation in three years, they also noted that CFOs played a key role in transformations, highlighting the CFO as the second-most-common leader of transformations after the CEO. The respondents agreed that, during transformations, the CFO’s most common responsibilities were to:
- Oversee margin and cash flow improvements
- Measure the performance of change initiatives
- Set key performance indicators and a performance baseline before the commencement of the transformation project.
However, beyond these activities, the CFO’s responsibilities were more likely to vary from company to company. The research also found that CFOs were more likely than their peers to play a strategic role in company transformations. Nearly 50% considered themselves responsible for setting high-level goals. Meanwhile, only one-third of non-CFOs considered their CFOs involved in objective setting. Similarly, CFOs were nearly double as likely as their peers to say they helped design a transformation road map.
The McKinsey research also suggests that CFOs have room to grow as change leaders, both within the finance function and especially across the wider company. Most CFO-initiated transformations take place in the finance function, and fewer than 25% of respondents said they had seen their CFOs launch enterprise-wide transformations.
How CFOs Can Pave the Way for Digitisation and Automation
Gary McGaghey explains that conceptualising strategies and overseeing digitisation are quickly becoming central responsibilities for the CFO. Today, many finance leaders play a key role in informing and guiding corporate strategies, underscoring the fact that CFOs are well-positioned to lead the way when it comes to improving automation and developing forward-facing strategies within the finance function and at the organisation level.
That said, many organisations aren’t fulfilling their potential when it comes to leveraging digitisation and automation. This is often because of the challenges that can come with implementing new technologies. The McKinsey survey quizzed finance respondents about the challenges that have prevented them from digitising or automating. Respondents highlighted a lack of understanding about where digitisation opportunities are, a lack of resources to implement change, and a need for a clear vision on how to use technologies as reasons behind this lack of action.
However, where companies have digitised more than 25% of their work, McKinsey respondents reported notable gains from these efforts. 70% noted that their companies had realised modest or substantial returns on investment.
The CFO’s Role in Talent Recruitment
The McKinsey survey revealed that the number of respondents who believe CFOs spend most of their time on finance capabilities — developing financial literacy and building the finance talent pipeline — doubled between 2016 and 2018. That said, many CFOs still aren’t spending as much time on talent and capability building as they are on other responsibilities, and Gary McGaghey explains that there are often untapped opportunities for CFOs to take on much more at the company level. For example, while many CFOs recruit talent within specific business units or help with talent-related decision-making, fewer develop top talent across the company.
While the McKinsey research showed that only 25% of respondents felt CFOs were responsible for capability building during a recent transformation, CFOs in high-performing finance functions appeared to have a greater impact. Respondents who consider the finance organisation either somewhat or very effective were nearly double as likely to say their CFOs develop top talent across the company.
Gary McGaghey’s Three Strategies for Modern CFOs
Gary McGaghey explains that although workloads and expectations have risen for most CFOs, these finance leaders also tend to face more opportunities than ever before. By focusing on the following three core principles, CFOs can raise their profiles without experiencing burnout.
1. Allocate Time Strategically
Gary McGaghey explains that CFOs can improve their efficacy in their ever-expanding finance leadership role by carefully deciding how to allocate their time and energy. They can make this decision by exploring technologies, methodologies, and management approaches to help them streamline processes and make trade-offs where necessary.
At the centre of these efforts, rather than focusing on their efficacy in traditional areas of finance, the CFO must ensure that the finance team contributes to the company’s most value-adding activities. Therefore, the CFO must proactively seek ways to enhance processes and operations rather than wait for turnaround situations or for marketing and IT colleagues to take the lead.
2. Adopt Digital Technologies
Meanwhile, the CFO’s digitisation responsibilities are also quickly growing. They must be savvy when it comes to selecting digital technologies and realising the benefits that the right technologies can bring to specific functions and the wider company. They should invest time and resources and collaborate with other business leaders to make even incremental improvements in efficiency using digital technologies like business intelligence and data visualisation tools.
To begin, Gary McGaghey recommends that CFOs prioritise quick wins and craft long-term plans to transform the company through digitisation strategies. He notes that they may also need to prioritise value-adding activities, automate some tasks, and delegate others.
3. Prioritise Talent Development
Many CFOs have already broadened their roles and the value they generate through capability building and talent development. That said, there are plenty of CFOs who still don’t dedicate time to building capabilities, leaving many opportunities for company transformation unexplored. Gary McGaghey recommends that CFOs kick-start plans to put talent front and centre by coaching nonfinance managers on finance topics, which can help them nurture an environment of value creation, transparency, and self-sufficiency.
Pick up more leadership tips from Gary McGaghey.
About Gary McGaghey
Gary McGaghey is a chartered accountant and chartered management accountant who has vast experience as a group and divisional CFO. He currently serves as the group CFO of the €1.3 billion end-to-end marketing production services group Williams Lea Tag, where he oversees the private equity company’s commercial plans and investment decisions.
Before taking on this role, Gary McGaghey achieved large-scale organic and M&A-driven growth for a variety of private equity, privately owned, and listed companies in the media, pharmacy, beverage, and FMCG sectors. Some of the companies where he has held leadership roles include Unilever, Nelsons, and Robertsons.
Originally published at https://bmmagazine.co.uk on September 4, 2022.
