Establishing a CFO playbook of value creation and change
The majority of finance specialists we speak to are of the opinion that CFOs’ agendas have significantly increased over the years in terms of breadth and complexity. Industries such as retail, automotive and leisure require not only mastery of numbers but also proactive change.
Our recommendation for CFOs is to become responsible for the playbook of value creation and change. But what does this really mean?
In restructuring and, similarly, transformative situations, all stakeholders - banks, employees, works councils and unions – will usually be aware that things aren’t going well. It is the same after acquisitions, too, where it is highly likely that the buyer has a hypothesis for implementing change and creating value.
At the same time, all stakeholders will be anxious of such change, of taking responsibility and facing the consequences, which could possibly mean failure. Change is hard work. Creating the playbook, consolidating the levers that need to be pulled to achieve change, organizing the teams that must drive change and creating the governance and plan for such transformation has now become a core CFO responsibility. It is a leadership role, where the CFO gives guidance to stakeholders based on quantitative and qualitative analysis.
Understanding the content of such a playbook and the demands of the shareholders and restrictions of stakeholders is relatively simple. Being humble and empathetic enough to transform such demands into tangible targets and an appropriate pathway to reach these goals is the real challenge. Yet it is also the road to success for CFOs and their communication with investors.
How to create a playbook for value creation
The initial step is to establish the platform that creates awareness for such a playbook. Why is change necessary? What would happen if we do nothing? Alignment between C-level management and the communication of objectives to their teams is a crucial starting point. Joint discussions should be geared to demonstrating how managers will benefit from value creation, be it financially or simply by becoming better managers. Asking all managers and departments for contributions – ideally given in terms of size and speed to results – should be the deliverables for CFOs to collect.
Armed with these company-wide viewpoints, the playbook – or list of projects and measures with timelines and responsibilities – becomes tangible and defines the timetable for the months (or usually years) to follow. It defines the agenda for management and board discussions. A list of ideas is transformed into a plan, organized for review and refinement. And finally, this change must be tracked by a proper project management office.
In our experience, translating the ideas on paper into actual numbers is the most complicated challenge to overcome. Attending many board meetings and listening to many CFO speeches in the last decade, the pattern is often similar: the narrative on change and value creation outperforms the monthly reports on numbers very quickly in terms of interest and attention.
Key actions for CFOs:
- Embrace change when it makes sense and don’t leave your stakeholders feeling unguided and that they’re the only ones that believe change is necessary.
- Lead through change by establishing a playbook that addresses the critical projects to create value, improve profitability, and realize other goals specific to your company.
- Review and track progress to ensure that ideas become value – then communicate this progress to all stakeholders. Don’t overpromise, but deliver!