Barbara:
As we continue to manage so much uncertainty about the future, we have to be adaptive so we can't be afraid to be wrong.
Narrator:
Welcome to Accounting for the Future, a BDO Canada podcast for financial leaders to navigate change and achieve business growth. We'll uncover the challenges financial leaders may not have dealt with yesterday, but we'll definitely have to manage for the future.
Anne-Marie:
Hello and welcome to BDO Canada's Accounting for the Future. I'm Anne-Marie Henson and I have the pleasure of welcoming Barbara Palmegiani, who is our National Leader for CFO Services at BDO Canada. In addition to helping clients with their internal financial function needs, Barb is a regular author and facilitator for executive professional learning at CPA Canada, and provides valuable insights to CFOs and controllers that help them stay informed and relevant in their roles. Barbara, welcome back to Accounting for the Future.
Barbara:
Thanks so much, Anne-Marie. I am so happy to be with you today and I look very forward to our discussion.
Anne-Marie:
Same here. And you might've seen, actually, that we recently re-released the previous episode that you had recorded last year with Armand that discussed the great resignation and the impact it was having on the finance function. What's interesting is that even today, with a more sort of uncertain economic environment that we're all living in right now, there's still a big shortage of CFOs and controllers, and we've seen many of our clients struggle to find the right talent. So I want to hear your thoughts on what you've been seeing in the market. Is there still this great resignation happening or have you seen it cool off a little bit?
Barbara:
Yes, absolutely. There is. And in fact, I would say that finance functions in general are seeing even greater challenge than I was talking about a year ago in finding and also keeping the right talent. For example, I have a client in Ontario. They came to us after trying to hire a full-time VP finance. They were looking for almost 18 months ...
Anne-Marie:
Wow.
Barbara:
And didn't even have a lot of interviews during that time, and they finally decided to bring in an interim solution from our team while continuing to look for the right fit as a full-time option. So in other words, rather than settling and just grabbing somebody into that full-time role, they really were aware of continuing that journey of the right full-time option, but they couldn't continue going without anybody in that role so we came in on a fractional basis. Another example, I have another client in Quebec that I initially spoke to about nine months ago. They were investigating various creative solutions. They reached out to us and then they decided to continue to focus their efforts on the full-time search without an interim solution. In coming back, they shared they've been unsuccessful, they're still looking. Now they're ready to bring in a fractional controller three days a week.
So you compare those two. I have lots of other clients that I would say are more proactive about keeping the rest of their existing full-time finance team. So if a controller or a director of finance or VP finance leave, they bring in a fractional resource right away so they're very aware of not putting too much pressure on the rest of their staff in the meantime. So I think I'd say, all in all, there is definitely more and more finance teams that are just much leaner these days so they don't have the ability to absorb the work into their team when a full-time person leaves.
Anne-Marie:
Wow. Well, it's incredible to think that we're still talking about this today in this environment. But it does sort of dovetail pretty well into our topic that I want to discuss with you, which is how CFOs and finance leaders can help shape the finance function of the future and continue to add value in their roles. What you're talking about with business owners and leaders that are struggling to find the right talent for their team, there's definitely been a reflection on whether this is something that's permanent or that's going to stay for a long time, which I think we've all accepted it will. In the previous podcast, we even talked about we all saw the pandemic as being the thing that happened, but you saw this sort of exit of CFOs and accounting professionals in general many years before that.
There's an article that BDO recently released, and it's called The Chief Value Officer: The Important Evolution of the CFO, and that really piqued my interest. So there was a global study that was done with about 100 finance leaders around the world, so it's interesting it's not just specific to Canada, and they asked two questions. First, what does value mean? And the second question is, is the CFO responsible for driving value within an organization? And so maybe I wanted to start there and ask you those two questions to you, as someone who works in the CFO space. So what does value mean to you when you look at the role of a CFO and do you think that ultimately they are responsible for helping to drive it?
Barbara:
Yeah, you're exactly right when you say that, for me on my radar, this concept of the evolution of the CFO role has definitely been around. For me, I think I said last time as well, it came on my radar about 2015. It was very, very clear to me that there were a number of disruptors, like technology, like the changing workforce, and then throw in a pandemic, that we're really going to be evolving that role of the chief financial officer of the future. So there's a lot that has been written on this and surveyed and studied. I think our BDO Global survey more recently tries to drill down on a very specific aspect of that evolution, which is this concept of chief value officer. And in a nutshell, what does value mean? CFOs need to manage legitimate short-term performance pressures and, at the same time, drive long-term behaviors. And those long-term behaviors have to focus on what truly matters for that particular organization.
And so when I say that, what I say to full-time CFOs and our fractional CFO team is that we have to be very clear about the answers to that question, "What truly matters?" Because if you talk about what does value mean, it is very widely held that there is no one definition of value for all CFOs in all organizations. So if you talked to me back in 2009, I've been delivering a CPA Ontario Master Controller Professional Development program. And at that time, coming out the 2008 financial crisis, we were talking about value creation for a controller as focusing on working capital management. So in other words, during the economic downturn, those small, medium, and large organizations that survived were well-managed. And what do we mean by well-managed? A nice, clean balance sheet. And so that was the concept of creating value when we talked about it back then.
Then of course, during the more recent pandemic, just before joining BDO, I was the CEO of a private manufacturing company. And so when we realized that there was the potential of a pandemic, value was driven by, I call it, first principles of cash management. For example, in manufacturing in Ontario, we were shut down for four months, couldn't operate. So value was cash management and cash was king. Now, more recently, so talking about 2023, I recently delivered a CFO program and a number of CFO round tables where we very much discussed the concept of value as uncovering the value from quality data. So yeah, if we talk about the CFO responsible for driving value in an organization, if I think of my own CFO journey, I always say this sort of early career steward or gatekeeper to then evolving to that strategic business partner where we were supporting operational decision-making.
And then ultimately, I would say the pinnacle of my CFO career was being that value creator. Some people call it a playmaker. So in my personal CFO career, there was definitely a shift from a finance focused role to very much a multifaceted financial and operational leadership role. I can also apply this discussion to the fractional finance leaders on my team. So here at BDO, my team is definitely wired to recognize and help a company to seize those opportunities for value creation. And I think the way we do that is by being very, very highly collaborative, making sure we help integrate the finance function into broader business dialogues in support of the CEO or the business owner, and to identify value and how to maximize it.
So for me, this co-branded research project between ACCA and BDO used interviews with CFOs from all those countries to tease out how value is created in organizations and the role of the finance leader in driving it. And so the output of the study definitely confirms that yes, there continues to be an evolution of that CFO role with an increasing focus on both purpose and value, and this is really the CFO becoming that chief value officer. I do think that it's been widely proven, and many CFOs agree, that having a shared purpose can make a company both more productive and more innovative, and those are definitely top priorities for chief value officers.
Anne-Marie:
I love that actually. What I really like and what's resonated with what you said is that the concept of value is relative. And so a really important thing for CFOs, controllers, even myself as an auditor, is to understand what value means to that organization before I start imparting my knowledge to them, assuming that we're on the same page from the start. So I think that's a great takeaway is to really try to understand what that business owner, what that CEO needs for the future to be able to match your skill set to that.
Barbara:
Exactly.
Anne-Marie:
So it's definitely a great takeaway, and it is a little bit different though from how we viewed the finance function in the past. All these studies show that is that the CFOs and controllers are definitely with their knowledge and their ability to provide insight and critical thinking can not just look at the historicals, but can actually help to drive strategy and move forward with various things. So with that in mind, what are some skills that a CFO should learn today that's going to help them achieve this?
Barbara:
Yeah, I think there's a really deliberate career path for those CFOs with a focus towards developing this role into CVO, and this includes making sure that they are very clear on the evolving expectations of their key stakeholders. So really, what has to sit at the heart of a modern CFO's skills development is what we call, just in a nutshell, value acumen. And there's various definitions of this, but I think one definition of this is the ability to identify and prioritize resources and capital that are key business inputs and that drive performance and value. You can almost reflect and say, "Well, CFOs have always been very heavily involved in resource allocation." But I think most CFOs I work with for sure, agree that we as a finance function can be doing a much better job at being more agile and more fluid about resource and capital management. And so ensuring that we're aligning capital allocation with an organization's long-term strategy starts to move you into that chief value officer territory, right?
Capital allocation, if you think about it from a top-down strategic point of view of an organization, should be the ultimate reflection of your organization's strategy. So between investments and long-term strategic objectives, those should all align. And I always say, I've said this for a while now, we as a finance function have suffered from short-termism for quite a few years now. And so bringing back that longer term view to shine and to come out as the best CFO you can be, we're now going beyond business partner. We're becoming those playmakers or those changemakers and being somebody who helps the organization in more proactive real-time decision making, and this includes a more dynamic resource allocation process.
So I think I mentioned this as well, Anne-Marie, in our last podcast. I spoke about and I continue to speak about the importance of that growth mindset that a CFO needs to adopt. So for anyone listening, if they haven't heard of growth mindset as a concept, I mean even just starting by Googling that idea, certainly it's on my recommended reading list, The Growth Mindset by Carol Dweck, to business people, including finance leaders. But it really just says as we continue to manage so much uncertainty about the future, we have to be adaptive so we can't be afraid to be wrong. We have to reframe our thoughts about failure and that's going to help us, as finance leaders, be more forward-looking and work with more future-oriented financial information. And as a key player on the executive team, it's that play to win attitude. So you have to know that you're not afraid to fail, that whatever you undertake, you either win or you learn along the way. And so when I talk about CVOs, they have to shift their mindset from status quo to more of a continuous learning mindset.
Anne-Marie:
That makes so much sense. And it reminds me I'm a big reader as well, so thank you for the recommendation. I have not read that book, but it does remind me a little bit of a quote I've heard recently, but it's not a new quote. And I think it came from Southwest Airlines, which had this motto that basically said that they're going to hire for attitude and then train for skill. And often, as CPAs, as numbers people, we're so focused on having the best technical skill and not knowing the answer or getting it wrong is a sign of weakness, right?
Barbara:
Exactly.
Anne-Marie:
And it's exactly what you said, right? It's that afraid of failure.
Barbara:
Yes.
Anne-Marie:
So having that mindset that favors continuous learning and being able to adapt to change, I guess, can be as valuable, if not more valuable than just having the right answer today. So I love what you've said there. And I guess looking at CFOs, which we've talked about quite a lot now, it can apply as well to their own team. CFOs aren't always just the only finance people in an organization. What are some things that CFOs can do that maximizes their chances of hiring the right people with that growth mindset, the playmakers, and not just hiring them, but retaining them in what continues to be a really competitive labor environment?
Barbara:
Yeah, this is such an important discussion, Anne-Marie. We talk about this so much and, again, in the CFO round tables and CFO programs. And increasingly so, I would say, because there are so many changes to what I think a modern CFO leadership style needs to be these days. So in other words, what got us here won't get us there going forward. There's a lot changing. And so later on now, we talk about the hybrid work environment and how to lead in that environment. And I think that from all the discussions I've had, where I've landed is that the leadership style that works really well is one of extreme ownership, as I call it. So extreme ownership for a CFO personally ... But as you said, we're only as strong as our weakest link and that is within our finance teams.
So my motto as a people leader is extreme ownership for myself and for each of my team members because as many of us know, you hire the right attitude and train skill sets. But increasingly, they want more autonomy, they want more freedom of when and how they get things done. So at the same time, we need them to deliver what's required and we need them to have positive impacts on processes and the progress we're going to make on our finance agendas, and obviously on the company results. So I find this leadership style works really well in a hybrid work environment. And by the way, Anne-Marie, I really believe the hybrid work environment is here to stay.
And so all of these recent developments over the last few years have to make CFOs really reflect on our leadership styles and continuing to evolve them as well, so we need to make distinctions between our shareholders and our stakeholders. And traditionally, certainly in my experience over the last 20 years, businesses have favored shareholder value as an indicator of success. And of course I'm talking about for-profit companies, but meaning they strive to generate value for those who own shares of the company. But I really do think that we're back to firms that are embracing sustainability, are shifting their focus towards creating value for all stakeholders. And that includes customers, clients, employees, as well as our community members. So people leaders can also look externally to effect change on a larger scale. So for example, many organizations have formed successful strategic partnerships with not-for-profits, for example. And however they do it, they need to share common purpose-driven goals, and those goals as an organization and as a finance team will ultimately attract purpose-driven people. And these are people that want to be part of something that is doing well, while also doing good.
Anne-Marie:
Yeah, that's awesome to hear. And actually, we've been talking about this a lot ourselves because even BDO just recently released our own ESG report that has talked about that.
Barbara:
That's right.
Anne-Marie:
Right? That our stakeholders are very varied. It's the partners. It's our employees. It's our clients. It's our value chains. So I really like that holistic approach. And maybe a little bit of a self-serving question for you, but as a woman, a professional, a partner, and a leader at the firm now, I've been very interested in the importance of diversity, equity, and inclusion as part of teams. And not just saying that you have a diverse team to check off a box, but actually there's studies and there's a lot of evidence right now that talks about the power of a diverse team because of the different mindsets and the different thoughts that can come out of that. So can you talk a little bit about the importance of that as CFOs are trying to build out their own teams?
Barbara:
Yeah. I mean, some simple ways companies can make an impact on people, as well as being aware of serving the future generations of leaders, is ensuring that both fairness and diversity in their hiring processes are practiced and encouraging fairness and diverse teams in the workplace. It's really that simple. It doesn't have to be complicated. It's almost as simple as saying, "What's the golden rule of do unto others?" And I think one of the ways, too, especially for CFOs to think about diversity in their teams, is to think about that multi-generational workforce because the best answer to a problem or the best solution to a problem can literally come from anybody in your team.
It's getting away from that old sort of mindset of top down or autocratic leadership that you have to have been around the company for years and years and years to really be the one that's coming up with the solutions. And I think that that is something that specifically in finance teams, with the evolution of technology and the tech-savvy, more junior staff you have, it's a real change for CFOs to evolve their leadership style and, again, focus on what really matters.
Anne-Marie:
Right. Thanks so much for sharing that. There's something else I'd like your thoughts on as well, and we've talked about it a little bit. The importance of data quality, providing value and insight to that data and the use of technology as being kind of integral to the CFO role today. So we've talked a lot about CFOs being able to add value, being more strategic and forward-looking, and helping them make those decisions. So even BDO, recently, we had our own conference where a speaker told us about the importance of embracing these changes and using them to our advantage to help us move forward. With everything that's available out there, are CFOs expected to drive value through analytics and these tools? And at the end of the day, what becomes of that data? Do they own it, as an individual who's helped to drive a strategy or be successful in a specific objective? How do you see that working in the future?
Barbara:
Yeah. I think I have a very good perspective on this because of sitting where I do and working with so many different clients, and also collaborating with so many of our various practices within BDO when we're working at clients. I've had this conversation with a lot of our technology leaders and they agree that what we're seeing for the most part is that there is a race to say who owns the data. Of course, my perspective is, "will it be the finance function?" and a lot of the technology folks will say, "Will it be the IT function?" And so I think we're at a critical point and, again, I say this to all the CFOs that I work with. We're at a point where CFOs have to focus on really starting to create a strategic finance team is what we call it. And that means really prioritizing the company's growth, the company's long-term vision at the heart of the finance function.
And I know from working with so many finance leaders that it's not the way things are done today or in the past. So we know that in the past, the org chart, we're siloed by functions, but we need to unify data across departments. And so somebody's got to own the responsibility to retrieve actionable data and insights to propel the company forward. In other words, I've personally also worked in organizations where marketing data is owned by marketing and customer data is owned by sales and finance data is owned by finance. But if we think about the future of leading a future finance function, we're really talking about a strategic finance team where you spend less time on the traditional accounting, so that's the automation that's coming, and more time by the humans on your team on higher value tasks and those will impact business growth directly.
So this concept of strategic finance teams will help assumptions and strategies be derived from real-time data. So when we have that real-time data, which I believe we're on the cusp of that in most of our organizations, as a finance team, we have to lead better decision making. We have to be able to focus on increased profitability, the stakeholder/investor relations we talked about earlier. And overall, it'll help us with our risk management duties as well.
Anne-Marie:
Right. Well, I'm sure it won't be the last time we talk about the ownership of data. There will be many conversations of that in the future as we start having more and more of it, like you said, in more real time, which is going to be great to be able to help make decisions.
Barbara:
Yeah. I'm just happy to have this opportunity, Anne-Marie, to put this out there so that all CFOs, VP finances, controllers, directors of finance, can really sort of start moving the needle towards this more forward-looking, more strategic finance teams.
Anne-Marie:
Exactly. Well, I have one final question for you, Barb, and it's a more general one. But if you could give one piece of advice today to CFOs or controllers who are listening, who want to succeed, what would you say to them?
Barbara:
Yeah, that's a really good question. There's so many things I could say. So many. But I think that what I would say to the CFO is another acronym that's emerging is think of yourself as a chief future officer. We talk about playmaker, changemaker, providing more value. All of this is going to be enabled by the good technology that's coming. And so yes, that means continuous change and it means, also, change in processes and systems. So using this technology as tools, I mean that's kind of number one. So in terms of what advice I would give of what you can do today, knowing that this finance transformation, if you will, is looming ahead is support your staff, your current staff, with some digital finance training with digital tools. Stay on top of emerging digital tools, all kinds of digital support training for the different levels in your team.
And there's lots of ways to find that, but I know for sure that there's a significant majority of CFOs out there who have not yet begun to really move the needle on change in their finance teams. And so finance leaders, we haven't been trained on this digital transformation. This topic of technology, et cetera, is not the most comfortable topic for all CFOs. But the good news is we have CPAs that are coming into our teams with more digital and data skills than ever before. These tech natives, as we call them. So continue to support them with evolving training, and let's make sure that our leadership styles are very inclusive.
When you're sitting in a meeting and you've got a number of different seniority levels on your team sitting in that meeting, just really collaborate and believe that the best solution or the best idea to whatever problem you're dealing with could come from anyone on the team. I said that before, and just to reiterate, it's how we will evolve as CFOs into CVOs, as well as chief financial officers. So you gave a quote earlier, Anne-Marie. It just reminds me of a quote that I use a lot in the context of these conversations, and it's a Chinese proverb. "Be not afraid of going slowly. Be afraid of only standing still."
Anne-Marie:
Yeah, that's really fantastic. What a great way to end this, Barb. And I always love talking to you ...
Barbara:
Same.
Anne-Marie:
Because you're so knowledgeable, but yet really passionate about just generally what's happening in the finance world and stuff. So thank you so much for being here and I'd like to thank you for your time and your input today. I hope our audience appreciated this discussion. I'd also like to thank you, our listeners, for tuning in today and to all our episodes. I'm Anne-Marie Henson and this has been Accounting for the Future. Please let us know if you found the topic interesting and useful, and remember to subscribe if you liked it. We'll see you next time.
Narrator:
Thank you for listening to BDO Canada's Accounting for the Future. Past episodes and related insights are available at www.bdo.ca/accountingforthefuture. Or you can go to Apple Podcasts, Spotify, or Google Podcasts to subscribe. For more information on BDO Canada, visit bdo.ca.