# Presentation: 160866

## The CFO of the Future -- To Infinity and BeyondC. Morgan KinghornChief Operating OfficerGlobal Public SectorGrant Thornton LLPMay 31, 2007

## Agenda

- The CFO transformation vision
- Drivers of Change in the CFO Functions
- The Changing Public Sector Operating Environment
- How the CFO can Leverage that Changing Environment
- Challenges in Transforming the CFO Workforce
- Going Beyond the Bean

## The ongoing metamorphosis of the Federal CFO function ("a striking transformation by supernatural means")

## The Metamorphosis continues

- Green Eyeshade
- Back office chief accountant
- Data collection
- Compliance assurance
- Consolidating data
- Report historic data
- Report performance
- Accountants and analysts

- Business Partner
- Strategic advisor and change agent
- Information dissemination
- Analyzing risks and strategies
- Partner in delivering program mission
- Provide predictive tools and analytics
- Benchmark and set performance levels
- Linking budget & accounting, strategic planning and IT enablement

## Drivers of change in CFO functions

- Statutory and Regulatory Environment
- Expanding CFO responsibilities beyond the traditional accounting and reporting functions
- Primary focus on credibility of external reporting (Statements)
- Business Pressures to be more Effective/Efficient
- Centralization or outsourcing of transaction processing functions and focus on more strategic processes
- Budgetary pressures driving the need for better financial and performance information to prioritize program funding
- Public Expectations
- Greater need for accountability and transparency
- Increasing expectations of direct stakeholders

## Priorities – Still on the basics of getting the clean opinion, controls, and financial information

- Formulation and execution of the budget (3)
- Internal controls (2)
- Unqualified opinion on annual financial statement (1)
- Cost and performance management
- Strategic use of financial information for program decision making (4)

- Entity-wide financial MIS (6)
- Financial management human capital

## Drivers of financial management – time and money spent on key activities (data for '07)

| Transaction processing  | 34% (28%) |
| --- | --- |
| Complying with outside mandates for reports on information  | 22% (25%) |
| Supporting strategic and program decision making throughout your agency  | 19% (19%) |
| Sound stewardship of public funds  | 18% (24%) |
| Other |   7% (1%) |

## The Nature of the Broader Public Sector Operating Environment is also Changing

- First, there is radical change in the framework of **how** government functions
- Portability
- Performance-based pay
- Second, there is quite radical changes in **wha**t government does
- Direct delivery to dizzying array of indirects
- Its about making government work--  much less about creating new government programs
- Finally, there have been radical changes in “**who** government **is**"
- Public sector is no longer just public employees.  This requires new methods of relationship management

## So what do you do to meet the changing environment?

- You will need to manage in an environment in which your best people come and go and perhaps come back
- You will need to create an environment to decide what you need and then **continue** to **get the best and get them quickly**
- You will be managing your agency’s mission functions (as well as administrative) much more indirectly, through others and you will need to know how better to do that than you have in the past
- In many organizations, there will be fewer new missions to attract new employees and keep existing ones and you will be challenged to draw people in who are interested and able to focus less on “**new whats**” but rather “**new hows**”

## How does the CFO community leverage these changing environments?

- Focus on **usefulness to programs **
- Link financial data to program-meaningful detail
- Make it easier to get the information
- More user-friendly format
- Sell program managers on better cost data (sell yourself first!!!)
- More **cost accounting around program operations**

## What the CFO must do to meet the challenges

- Assess Institutional Credibility
- Build capacity and reputation before leaping
- Manage Upwards
- Is anyone home? Only when the House is on fire?
- Move Around
- Do not, I repeat, do not stay in the same organization for more than 3-5 years
- Create a simple short agenda – stick to it
- Think beyond the clean opinion
- Keep your focus (no free goods; no reserves; corporate data)
- Build or create financial strategic leadership with all players in the multi-sector workforce
- Cultivate program champions/partners

## If you don't focus and think differently about what the work is and how to get it done, you are dead!

- Workload: too many new initiatives; deadlines getting shorter
- Unfunded mandates
- System stabilization
- Conflicts in policy & goals
- Human capital: Properly trained staff from the multi-sector workforce
- Shrinking resources/funding for administrative functions
- Need to hone cost accounting skills
- Getting a place at the table

- Better integration of program, performance & finance
- LOBs and E.gov initiatives
- Financial statement preparation and audit process
- Internal controls
- Financial management system
- Performance measurement
- Quality of information inputs & reporting capabilities
- Outsourcing being implemented before ready

## Challenges in transforming the CFO workforce

**Challenges in transforming the existing workforce:**
- The CFO community is dealing with the impending wave of retirement that will result in a loss of institutional knowledge base and expertise
- With the transforming role of the CFO, current employees have to be retrained to think and function as advisors
- Little mobility within agencies and poor or no succession planning
- Response:  Decide what skills you must have and those that can be found in the your existing workforce keep:
**Challenges in acquiring new talent:**
- The financial job market is highly competitive and government has relatively few incentives.
- Response:  Think about the reality of the multi-sector workforce and use it; but also make your organization a magnet for the in-house kind of talent you determine you need for the long run

## So what is good management?

- A good business has interesting problems, a bad business has boring ones.  Good management is the art of making the problems so interesting, and their solutions so constructive that everyone wants to get to work and deal with them.  ...Some good problems are too much demand for good product, too many opportunities to expand, too many requests for donations, other people taking credit for your success, having a staff smarter than you are Your job as a manager is not to solve every problem.  Your job is to create a company with compelling problems that attract bright unusual people to join in solving them. "
- 					Paul Hawkin, Growing a Business

## 21st Century CFO workforce – Going beyond the Bean!

- 21st Century CFO workforce – Going beyond the Bean!

- Understand the relationship of the finance function to the achievement of the mission program's goals
- Use your access to financial data to learn program operations
- Broaden the understanding by educating agency executives and program managers on the importance of financial information to their professional lives
- Drive stronger focus on performance by incorporating management reporting on outputs/outcomes as part of the financial reporting process
- Demonstrate to executives the use of timely financial and performance information for effective monitoring, review and decision-making
- Leverage technology tools to assist in the efficient delivery of transaction processing activities and the production of management information
- Identify opportunities for cost savings, efficiency and effectiveness gains
- Lead a multi-sector workforce and learn how to manage it effectively

## Beyond Bean Counting - Competencies of the new CFO workforce

- It comes down to leadership:
- A more appropriate and varied experience that includes financial and accounting expertise with business knowledge of program operations
- Comfort with roles and responsibilities that encompass both strategic and operational financial management
- Communication and strategic skills to operate as advisors to the agency executives and program managers
- "Presence in the Room"
- Both personal and subject matter
- Analytical understanding to help lead others to develop information that will ensure more effective performance
- Knowledge and application of leading management tools and techniques such as activity based costing and lean six-sigma

***The greatest danger for most of us is not that our aim is too high and we miss it,  but that it is too low and we reach it.***
**	****	****	****	****	****Michelangelo**

## Questions and commentsC. Morgan Kinghorn Jr.Chief Operating Officer - Global Public SectorGrant Thornton LLPMorgan.Kinghorn@GT.com