During the past weeks, I have been introduced to a new title of Chief Value Officer (CVO).
The discussions have been that this is the major subject on transformation of finance to replace the CFO role with the modern expression of CVO but I am not sure if this brings the right perception in a business with this title as I believe “Value” can be many things. It is obviously though to be the monetary value that is expressed but what about the value that are created from human resources, IT development, operational quality etc.? Where are the boundaries for the value creation that should be included in the finance value creation? I believe there are many opinions on this subject but personally, I think the boundaries should follow one simple principle:
If any subject impact financial performance (both long-term and short-term), the Finance Business Partner should actively evaluate his/her perspective on the subject.
Following are a couple of examples focusing on HR works which will not naturally fall under finance responsibility but will create a management discussion to provide value to the company:
- If the operations department discuss opening a new staff position, finance should proactively evaluate benefits and risks of such action to the company and provide their opinion on the setup to create a more precise environment around the decision.
- Finance make specific suggestions on new positions anywhere in the company that would actually create value to the company.
What happens to the CFO?
I understand that automation is the future and will remove many jobs in the future but still someone should be responsible for ensuring that this automation works and is adapted to any change in markets, IT developments, accounting regulations etc. If the CFO role is to be taken off the table, who will then be responsible for this as it is not a value add?
In fact, I find this title to be quite provoking and not covering the scope of responsibilities that are required from finance. Anyway, I do agree with the basic idea that the CFO role should have a more modern approach to Business Partnering and should have a lot more focus on creating value to the business instead of focusing mainly on ensuring requirements of support and that the business is profitable as it is expressed within the word “controlling”. I therefore see the newly expressed title as a clear statement of the primary focus area but it will in fact be a CFO with a modern view on value creation. Though, we are not to forget to be responsible for the governance and quality of the “basic” finance work and this may still be part of the role.
Would CVO be a new added role to the organization splitting Finance in 2 different sectors. I truly doubt that this will function but should we be open to the idea? I think that creating a divided sector will increase the complexity of the organization and decision making in a way that will devaluate the value creation that is the purpose for adding the new role as decision making (especially in large companies) will be conflicting and time consuming as the roles will not share the same interests.
What is “Value”?
With reference to my previous article: Does CEO’s enjoy feeling alone?, I am also touching on this point with the value creation that I believe should come from the finance function as an area of further focus to the CFO’s. Though, I would also like to discuss what is real “Value” to a company. When you think about the word, it is most commonly used to describe the overall company values such as “integrity” or “green environment leader”. Some companies go to market to make investor earning but also a few non-profit organizations host a CFO role but where the value driven are quite different. Additionally, you see companies with the main purpose of creating profits but have a clear focus on social responsibility. This leads me to say that the value to be brought on the table by the CFO is very dependent on which company you work for and what are the value that you should focus on. Not only profits.
I believe, business partnering is all about really understanding the business you work in and how you can add/create value that is beneficial for that specific company. You should ensure that the finance organization as well gets under the skin of their respective areas, adding value on all levels to optimize either cost spend in full scale or the bottom line but also to focus on the core values of the company’s wishes for clients, society or employees.
This brings me back to some of the core competencies, I believe is important for a Business Partner who is ready to adapt to the situation he/she is in. I say: “Capture the moment and add value where it makes sense.” See my article: Competencies of the Business Partner