Jeremy Hope’s Seven Roles of the CFO

The following excerpts are from Reinventing the CFO: How Financial Managers Can Transform Their Roles and Add Greater Value by Jeremy Hope (Harvard Business School Press)

The CFO as Freedom Fighter

“The first task for the CFO is to liberate both finance and business managers from huge amounts of detail and the proliferation of complex systems that increase their workload and deny them time for reflection and analysis. This means purging their systems, measures, and reports and eradicating work that adds little value (e.g., detailed planning processes, redundant systems and irrelevant reports).”

The CFO as Analyst and Adviser

“Breaking free from detail and complexity creates time for finance to produce the information that managers need to make effective decisions. But that alone is insufficient to build a credible finance team that will be seen by managers as a trusted and valued business partner. The CFO must also work hard to attract and keep the best people and build the right team: people who know the business, can achieve high levels of analytical skills, and are able to contribute improvement ideas. They will also be able to communicate effectively and work in teams. They will become teachers and mentors as they spread financial knowledge and decision-making capability across the organization. They will also use technology to eliminate low-value work, improve controls, and deliver information in a timely way. In this way, the finance team will earn its seat at the strategy table by delivering value-adding services and performance improvement insights.”

The CFO as Architect of Adaptive Management

“Managers will feel truly liberated only if the CFO can release them from the chains of the detailed annual planning cycle and replace targets and budgets with more effective steering mechanisms, including continuous planning reviews and rolling forecasts, that enable managers to sense and respond more rapidly to unpredictable events and to changing markets and customers. The CFO must also be prepared to devolve some planning and decision-making scope and authority to frontline teams; otherwise, the benefits of faster response will be lost.”

The CFO as Warrior Against Waste

“With more time to add value, the CFO and the finance team are able to focus on eliminating huge swaths of costs that have remained unchallenged for years. The aim should be to flatten the hierarchy, centralize and standardize transaction processing, and ensure that all projects are necessary and add value. The CFO must also learn and apply the lessons from lean thinking, a concept elegantly summarized by Taiichi Ohno, architect of Toyota Production System: ‘All we are doing is looking at the time line from the moment the customer gives us an order to the point when we collect the cash. And we are reducing that time line by removing the non-value-added wastes.’”

The CFO as Master of Measurement

“The CFO needs to bring measurement back under control and provide clear guidance about its meaning. Managers at every level need only six or seven measurements. Measures should relate to purpose and strategy and be used to enable local managers to learn and improve. They should not be linked to targets; otherwise, managers will change their behavior, taking actions to meet those targets instead of more value-creating alternatives.”

The CFO as Regulator of Risk

“The CFO needs to provide an effective framework for good governance and risk management. This can be done by using multiple levers of control that support corporate governance controls, internal controls, strategic controls, and feedback controls. The pressure points that encourage excessive risk-taking need to be identified and dealt with.”

The CFO as Champion of Change

“Growing numbers of CFOs are transforming their finance operations, beginning with the vision and goals they set for themselves, how they get buy-in from key people, and how they implement the changes.”

Jeremy Hope, 1948-2011 (Reposted from the BBRT)

Jeremy Hope sadly passed away in September 2011 after a relatively short period of severe illness. Jeremy was an inspirational leader for the Beyond Budgeting Round Table and a dear friend, colleague and mentor to so many. He will be sadly missed. He has left a legacy through his role in articulating more effective ways to manage in the world where we all live. His work will live on through his writing, including his six books. His words and insightful thinking will continue to guide organizations for generations to come.

Jeremy Hope was the author of a number of articles and books on performance management and associated leadership issues. His article on Beyond Budgeting with colleague Robin Fraser won the prestigious IFAC award for best management accounting article of 1998. He is co-author (with Robin Fraser) of an article entitled Who Needs Budgets in the Harvard Business Review, February 2003. He was a renowned author of management books, Beyond Budgeting (2003) (co-authored with Robin Fraser), Re-inventing the CFO (2006), Transforming the Bottom Line (1995) and Competing in the Third Wave (1997), both co-authored with his brother Tony Hope). His books have been translated into many languages and won coveted awards in the USA. He has given many keynote speeches at major conferences on performance management topics. He began his career as a chartered accountant and has since had experience in venture capital and business management. Since 1998 his work has been focused on “Beyond Budgeting” and he was research director of the Beyond Budgeting Round Table (BBRT), an organization dedicated to helping firms improve their performance management processes.