A Strict CFO Is Likely To Hinder Business Innovation
How and why Chief Financial Officers advocate technology investments to support business operations can vary according to their own personal leadership style. That’s one of the key findings stemming from new global survey research commissioned by Epicor Software and conducted by Redshift Research.
The research provides insights into the working and leadership styles of more than 1,500 CFOs at the helm of businesses around the world, who are focused on driving business profitability and play a lead role in decision making regarding critical investments such as technology and business systems.
Based on survey respondents’ answers to a series of questions about their own personal decision-making style, the study found CFOs fall into six distinctive groups of financial decision makers: Politicians (27%), Revolutionaries (19%), Carers (19%), Conductors (16%),Traditionalists (9%) and Visionaries (9%).
The study found that CFOs who were characterized as Revolutionaries were tied to companies that had the greatest profit growth(profit increases experienced by 72% of Revolutionaries vs. 64% sampleaverage) whereas those CFOs characterized as Traditionalists were tied to companies that had the least profit growth (profit increases experienced by 56% of Traditionalists vs. 64% sample average).
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Traditionalists strict CFOs prefer to work within existing systems and prefer not to be influenced by reputation and personalities when making decisions - were the least likely of all the personas to acknowledge any need for change when it comes to technology systems (only 14% of Traditionalists believe their business IT systems should be updated, compared to the poll average of 32%).
Alternatively, Revolutionaries are happy to consider changing corporate culture and structures if the need arises and they like to set tough and challenging goals. They take a less structured approach and often work outside of formal systems and processes, taking risks where necessary.The survey reveals that they are more critical of the IT that supports finance than any other CFO personas– 48% of Revolutionaries say the IT support they get is inadequate – a sentiment shared by only 36% of their peers. This may be a sentiment stemming from their “maverick” style of improvising and sourcing data from other means outside of business systems.
Traits Exhibited by the Other Four CFO Leadership Styles
The Politician is the most common CFO working style of those polled — withover a quarter (27%) of CFOs falling into this persona. The politician is a more cautious leader with a methodical, team-based approach. Politicians like to consult widely with staff on important decisions and would rather delay a decision than risk mistakes. They are more likely than average to believe that collaboration is a key challenge that needs addressing (27% vs. 22% sample average), so likely would be most supportive of investments in technology to address organizational collaboration.
The Conductor likes to set tough, challenging goals for themselves and their staff. Conductors are also happy to bend the rules and work outside of formal systems and processes, and are more likely to make decisions based on gut-feel rather than hard data (54% vs. 46% sample average). Conductors report having an average level of satisfaction with their IT systems, and are most likely to say their system is easy to use (35% vs. 30% sample average). In theory, this may be because they are less likely to demand business systems provide drill down/detailed information and are content to work with summary/overview type information.
The CFO Carer persona would rather delay a decision than risk mistakes. The survey shows one of their greatest concerns is lack of accurate data (52% of Carers vs. 44% sample average identify it as one of their top two priorities). According to the survey, Carers fretthe lack ofquality information on the financial performance of individual product lines (only 48% feel they have good information vs. 57% sample average).
The Visionary works outside of formal systems and likes to make decisions based on experience and intuition. They fear not having the time or resources to surface meaningful insights (26% vs. 18% sample average) and embrace change.Visionaries are more likely than their peers to envision needing more team-based decision making in the future (23% of Visionaries vs.14% sample average).They are more resolute in the need for change in IT systems in the near future; (41% of Visionaries believe their systems need updating vs. 32% sample average). Some 27% believe they should invest in a new system soon (vs. 17% sample average).
“The time to update business systems is before the organization outgrows them and before they start to erode the operational and financial health of an organization,” said Malcolm Fox, vice president, product marketing for Epicor. “To this end, it’s not surprising Traditionalists–who were the least likely of all the CFO personas to acknowledge any need for change when it comes to technology systems- also tended to lead companies that were experiencing less profitgrowth than other CFOs in their peer group.”
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Dr. Dimitrios Tsivrikos, Division of Psychology and Language Sciences, University College London commented on the research, “Psychological research [makes it possible] to link the leadership style of business leaders to business growth, profit and change. The preference for traditional CFOs to work within existing systems and disregard the need for change stems from a lack of flexibility and a high need to achieve, and [often] leads to a top-down decision-making process.
This has implications for business change and innovation; new ideas that are suggested by employees are not likely to be taken on board and the business’s ability to change and adapt is reduced. CFOs need to take on new perspectives and be open to novel ways of doing things. This will allow them [and their businesses], to find optimal and creative solutions to problems, which will in turn foster innovation.”
Fox added,“The research also makes the case for flexible business systems that can accommodate varied working styles. Epicor has been very passionate about redefining the relationship people have with their Enterprise Resource Planning (ERP) systems and simplifying interactions– removing barriers to accessing information, minimizing steps in the flow, and leveraging new means of visualizing, interacting and consuming information to provide actionable insights to the whole organization.
Most importantly, the study provides important insights about decision making and the role of technology to support a wide range of leadership styles, once again reminding us of the need to design business systems for people — as opposed to ‘users,’” Fox said.
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