Sunday, 19 November 2017 10:02

Re-shaping CFOs for the age of automation

Could chief financial officers (CFOs) become redundant? That was the question I posed at the CFO Strategies Forum in Dubai last week. And the answer? Well, no-one believes CFOs will be redundant – not yet. But everyone recognises the impact of artificial intelligence on the accounting function and the need for the CFO to develop and change considerably. But how?

I had shared my own thoughts on the impact of automation on the role of the CFO and was keen to hear from those on our panel

Here are the highlights of the discussion, and with thanks to my fellow panellists for a lively discussion!

1.       Change must happen now

Artificial intelligence (AI) and automation systems are already transforming the accounting function – and this will continue at an increasing pace. As Adham Gasser said, “We need to be ahead of the curve.”

2.       CFOs need to become more advisory

Dr van Linder defined the three main roles of the CFO as chief performance manager – driving the business forward and adding value; chief strategiest – assisting the CEO on the strategic view and the critical role of benchmarking; and chief accountant – with technical skills and managing standards. 

He commented that the easiest CFOs to hire are the chief accountants – but it is very rare to find a CFO with all three qualities.  He went on to say, “Artificial intelligence will take over anything that can be automated.  The role of senior executives and the CFOs will be more of strategic advisory, as most of the functions will be automated to the maximum extent. AI will assist to make decisions better so the role of the human will be to make judgments and decision-making.”

Adham Gasser agreed that AI would make it easier for future CFOs to be far more concentrated around advisory/strategic skills, with AI taking over much of the operational side of activities.  He said CFOs will have to ‘remove themselves from Excel and Powerpoint’ - and that 10 years down the road, CFOs will need to think a lot more about strategy.

I was interested in this timescale of ten years – as a headhunter we are already seeing expectations for the CFO to be more strategic.  Within three to five years I think the brief for new recruiting CFOs will look very different.

CFO panel photo 1

3.       The CFO’s role needs to have more power

We had an interesting question from the audience, ‘How can we develop the role and the power of the CFO? How can we bridge the gap between CEOs and CFOs, and CFOs and other departments?’  The delegate gave a context for this question and mentioned seeing power struggles in some organisations, where the CEO inhibited the CFO’s ability to communicate effectively with the board.  He also talked about the challenges CFOs can face when needing to give instructructions to other departments – when they are not always taken seriously because others don’t recognise the CFO’s power.

Dr van Linder was absolutely clear, if the CEO is inhibiting the CFO’s communication with the board, then, “The CEO would not be doing his job in this case”.

Waleed Abu Eleiz talked about the need for a CFO to have good communication skills – so if they are facing resistance then they need to explain the potential implications if they don’t comply. It’s the CFO’s job to make sure they understand and take matters seriously.  He pointed out that often departments and individuals are not aware how their actions will affect the business so this is about communicating a message so people understand and relate to it.

Adham Gasser felt that the right incentives need to be shared across the organisation so people are motivated to take action.

As the delegate asked the question, it reminded me of one of the biggest challenges when recruiting executive roles. It is usually relatively easy to find the technical skills – much harder to find the right mix of strategic and communication skills combined with them. The ability to influence and persuade is often under-rated as a critical leadership ability.

Image from Twitter video

4.       CFOs need to increase data analysis role

As we discussed the role of automation, Adham Gasser emphasised the need for CFOs to increase their data analysis capacity.  He argued, “If you launch a new product and it fails, the easy answer is to say it could be due to unfavorable market conditions. However, you have to analyse a lot of other data to come up with a real answer for this, and make sure to look for any inconsistencies.”

5.       CFOs have to be more holistic

Waleed Abu Eleiz is group CFO but also acting COO so has a dual perspective on the CFO role.  He talked about how as CFO he can look at the brands under Harvey Nichols and it’s a simple, financial decision to remove the ones that are not profitable. However, as a COO, he has to think about the bigger picture and understand the importance of having these brands there, regardless of their financial performance. These brands could be important for their clients and stakeholders and could be used to attract other brands in. Having them in the Harvey Nichols portfolio is strategically important.

This seems to me a good example of how CFOs need to combine their financial head with taking a more holistic view of the business.

Adham Gasser commented that the focus of CFOs needs to shift from short term to long term and to setting the agenda for automated systems that will take care of operations, legal regulations and more. CFOs will act more in oversight to automated systems.

I was delighted to see the recognition from our panel and the audience that the CFO role is changing and will continue to change at pace. We may have different views on the timescale for this, but we all agreed that if CFOs are to be relevant in the future, they need to be leading and managing automation, develop their communication skills and becoming far more strategic.

If they achieve this, there will be roles for CFOs for some time to come.

Published in Leadership
Tuesday, 14 November 2017 09:02

Could CFOs become redundant?

I am delighted to be speaking at the CFO Strategies Forum in Dubai, on 15/16 November along with 150 invited CEOs, CFOs (chief financial officers) and C-suite executives.

With me to create a lively debate will be an august panel of Dr Bernd van Linder, CEO, Commercial Bank of Dubai; Waleed Abu Eleiz, CFO, Alfa International; and Adham Gasser, Regional CFO, P&G.

The topic of our debate is around the relationship between the CEO and CFO and the survival of CFOs in the face of automation; could CFOs even become redundant? How do they need to change or adapt to help the CEO and stay relevant?

In our session, we want to discuss research recently carried out by EY into The CFO and the chief executive officer.  This is part of their Partnering for Performance series which also looks at the partnership between the CFO and the CIO – a critical relationship in terms of the survival of CFOs.

Their survey of 652 global CFOs showed that the CFO role has been center stage in the financial crisis as CEOs relied on them to find cost reduction and strategies to shield against downturns in the economy. They became close allies of the CEO but this also meant reinforcing their cost management role and as economies have picked up, they now struggle to position themselves as a key strategic player in the future of the business.

CFO CEO relationship challenges image

And this is a real risk for CFOs in the long term. Cost reduction will almost certainly be something that artificial intelligence (AI) and algorithms can do better than humans. 

Research by McKinsey on Where machines can replace humans – and where they can’t (yet) concludes “While automation will eliminate very few occupations entirely in the next decade, it will affect portions of almost all jobs to a greater or lesser degree, depending on the type of work they entail. ” In the case of finance and management, they say 6 – 10% of time is spent on activities that could be automated. So it would be easy to think leadership roles are ‘safe’ for the forseeable future. 

The danger is in that word ‘forseeable’. Artificial intelligence has a way of catching even the experts out.  In May this year, the world was shocked when Google’s computer program AlphaGo beat the world’s expert at the game GO – it had been considered unimagable for a computer to beat a human champion in this fiendishly complex game.

It is natural for leaders to think they are indispensable – but are they?

If we look at the challenges facing corporates in the next decade, what are they? They are the big decisions of globalisation – which country is best for what; and digital – strategies that are fit for a digital world, using data analytics, governance and oversight frameworks, and managing the legal and regulatory risks of digital. Even the old focus of ‘staying close to our customer’ now requires data and data management.

So where are CFOs in all this? You would say they should be at the heart of this new digital world? All of the digital challenges sit comfortably within a CFO’s skillset?

Yet in EY’s research only 18% say they make a very significant contribution to the shift to a digital business model and fewer than half are significantly involved.

Qstn 5 contribution to digital image

I believe this is a shocking admission by CFOs. How are they so sidelined in a critical business issue?  We find the answer in another piece of EY’s research looking at the relationship between the CFO and CIO.  In this, CFOs admit the principal barrier to a close relationship with the CIO is their lack of understanding of IT issues.

barriers to IT collaboration image

So what does EY think that CFOs need to be doing about this – they don’t say ‘to avoid becoming redundant’, but I will say this for them.

They have a nine-point plan which includes understanding new digital business models – and new ways of financing these models; leveraging digital technologies within the finance function to improve data processing and reporting; having ‘digital natives’ within their finance team; and working with the board to develop a cyber security strategy.

The one thing they don’t say, to put it brutally, is that if CFOs are to avoid becoming redundant they must themselves own the digital space. They need to understand IT and digital just as they do finance – know the dangers, able to ask the right questions and more importantly, understand and make a judgement about the answers. 

Taking ownership of the digital landscape in their organisation will not only ensure CFOs are relevant and an acknowledged essential leader in their business, it will put them at the heart of the business and the close ally of CEOs.

I look forward to hearing the views of those on our panel – how important do they think this digital ownership is and what do they see as the skills for CFOs of the future.

Published in Leadership

I am frequently asked this question, is it the end of the road for ex-patriates in the GCC?

Given what is being written about ex-patriates and the economies of the GCC at the moment it is an entirely legitimate question – these articles by Simeon Kerr of the FT and Sarah Townsend of Arabian Business give a good overview of the issues. But the answer is not straightforward.

In some cases the answer is a resounding ‘yes’, it is the end for ex-patriates. But overall the picture is more complex and more dynamic than one might think.

The three cultural ex-patriate clusters of the GCC

To give an accurate answer I think we need to break the ex-patriate community down by region of origin and by what is going on in specific GCC countries. For example the experience of ex-patriate professionals is very different in the UAE to what it is in KSA.  

Broadly speaking ex-patriate professionals fall in to three clusters of origins: Western, Regional (Lebanese, Egyptian, Palestinian, Jordanian) and Asian.

What is happening to these three clusters is very different.

Twenty years ago the majority of senior talent that I used to recruit for the GCC was Western. It made sense then. And I think many ex-patriates did a great job in helping the local economies develop. Dubai is a great example of this. And yet today as a recruiter of senior level talent I rarely have a Westerner on one of my short lists.

Why is this? 

Where are the jobs of the future for GCC ex-patriates?

There is now an abundance of regionally produced talent that can do the jobs better than Westerners - for reasons of language and cultural affinity.  I think this is healthy. It shows in particular the success of multinationals in shaping a whole generation of regional talent. In particular I would point to the very positive contribution to the development of human capital in the region made by companies such as HSBC, Procter & Gamble, Unilever, Nestle, Mars and Pepsico – to name but a few.

Having said this there are still key industries such as commercial banking where there is likely to be reliance on Westerners in key functions for the foreseeable future.  There are also emerging activities such as Digital Marketing and Digital Technology where the talent will for a short period of time (5 years?) still need to be imported, particularly from the West.

My guess is that regional talent from outside of the GCC – most notably those from Lebanon, Jordan, the Palestinian Diaspora and Egypt will continue to play a critical role in the economies of the GCC. 

However opportunities will be less. Partly because of economic tightening, societal changes and the simple fact that they are outpricing themselves. 

What I have seen over the past 18 months is a significant number of Lebanese CEOs, CHROS and CFOs lose their jobs because of the tightening economy and not able to find new jobs because their salary expectations are too high and the job opportunities are too scarce. In Saudi Arabia whole layers of jobs that were traditionally held by non GCC regional talent are now being replaced by Saudi Nationals. Which, objectively, is the right thing for Saudi Arabia. 

But I have also noticed that in some cases – particularly, as it happens, with CFOs – that regional non GCC talent is starting to price itself out of the market.  For example it is often much better – in terms of cost and performance- for a GCC employer to recruit a CFO directly from Italy than it is to recruit a Lebanese, Palestinian, Egyptian or Jordanian because of outsized compensation and benefits expectations.  

The Asian professional class is one to which we all owe a debt. In the last twenty years I have seen time and time again the quiet dedication of those from the Indian subcontinent. I know how many organizations function because of the administrative backbone that professionals from India and Pakistan provide. All the signs are that they will continue to prosper and undoubtedly will find greater opportunities at the expense of more expensive ex-patriates. That said the challenge will be for greater numbers of them to break in to leadership roles where they are responsible for different nationalities. It is happening but I think there is still considerable room for growth. For this to happen they will need to develop universal communication skills and universal emotional intelligence and greater cross-cultural assertiveness.

This Forbes list of 50 Indians in leadership positions in multi-nationals and Arab companies shows it can be done.

The expat dream is over for those who are ‘superior’

So have we reached the end of the road for ex-patriates? The age of expats is over for those who come believing in their own innate superiority and the dream of the ‘expat’ lifestyle.  It is over as a significant factor in Saudi Arabia. It will however continue in the UAE for those who genuinely have something to contribute. Going forwards the recruitment of ex-patriates will be more selective and value focused.

One age closes. Another dawns – how do you see that new dawn?

 

Please share your views in the comment box below and follow me on Twitter

 

Published in Insights

Read more

To read more of Metin Mitchell’s insights on leadership, leave your email here:

Categories

Elsewhere online

Popular Posts

Recent Posts

Tweets