According to partner in Deloitte, Kim Hendil Tegner, Danish companies increasingly need CFOs that dare to take the lead when it comes to driving growth.
Danish CFOs undoubtedly have many challenges on the agenda in 2022: Rising uncertainty driven by the Ukraine crisis, significant price increases for raw materials and transport, continued difficulties in supply chains, increasing challenges in attracting talent and an increased need to ensure progress in digitalisation and sustainability.
Still, there is one word that constantly lurks in the background: growth. Numerous studies have shown that the value of one extra percentage point of growth over a number of years is often far greater than the corresponding value of one extra percentage point of EBIT margin. Nevertheless, profitability – rather than growth – is often at the top of the CFO's agenda when it comes to developing the business. Kim Hendil Tegner elaborates:
“With the risk of generalising, I believe you can talk about two different types of CFOs when it comes to the commercial agenda: The first type focuses primarily on tight pricing management as well as cost and working capital efficiency. The second type, on the other hand, is a CFO who does not feel constrained by this narrow commercial role, but engages broadly in the company’s value chain and at the same time creates the necessary financial room for manoeuvre for the company to realise its full potential.”
According to Kim Hendil Tegner, the different ways to approach the CFO role should be seen in relation to how roles are distributed in executive boards:
“In many executive boards, we continue to see the classic configuration in which the CFO primarily takes on a defensive role, while other board members take on the more offensive roles. Fortunately, we are also seeing more and more executive boards where all members are encouraged to take on a broad responsibility for the company. In these boards, roles are typically more dynamic and aimed at a common goal, and people are much less nervous about stepping on each other’s toes.”
Kim Hendil Tegner emphasises that the dynamic interaction between the CFO and the rest of the executive board could very well be a key driver for success in the coming years:
“Our hypothesis at Deloitte is that more and more companies will need a CFO who want to venture into a more offensive, growth-driving role. The increasing rate of change and the constant development of companies’ business models simply mean that a CFO always ‘playing defence’, so to speak, will rarely be the recipe for long-term success.”
CFOs prioritise growth
Thankfully, more and more CFOs are turning their attention to organic growth as confirmed by Deloitte’s latest CFO Survey from the spring of 2022 with over 140 respondents. Kim Hendil Tegner is pleased with the development:
“Our latest survey shows that 67 percent of CFOs believe that they should be actively involved in driving organic growth in the company, and 77 percent believe that CFOs will play a greater role in this growth creation over the next two to three years. In other words, there is a broad consensus that companies should prioritise organic growth, and that many CFOs will take on an active role in realising this growth.”
Despite this consensus, however, there are also inconsistencies when looking more closely at the numbers. Kim Hendil Tegner explains:
"When the CFOs assess the most important growth drivers, the majority point to areas such as customer experience, branding and sales force optimisation. When the same CFOs assess their own role in the growth creation, the majority point to pricing and commercial models. Again, we are seeing that certain CFOs do not focus on the areas that are included in the offensive CFO role although the greatest potential is found here.”
Still, Kim Hendil Tegner is convinced that Danish CFOs will adapt to the new reality with many ambitious and growth-oriented CFOs already showing the way forward:
“In this year’s CFO Survey, for example, we spoke with Anders Boyer from Pandora and Kristian Krag from 3Shape – both of them having taken on a significant responsibility for driving organic growth while also engaging in the entire value chain in their respective companies. These are the CFOs we can all learn from, because they have created impressive results.”
Guide: Seven areas that are crucial to driving organic growth as a CFO
- Market potential. Do you sufficiently understand the market in which your company operates? What is the current and future competitive situation, and what is the full potential? What does your company need to get right to secure a competitive advantage and a leading growth position in the market? What are the main themes of the growth journey?
- Product portfolio. Is there sufficient focus on those parts of the portfolio that really have a growth potential? Are there products that need to be excluded to ensure adequate focus on the areas that can drive growth?
- Research and development. Does the company invest adequately in the development of existing and new products?
- Brand and marketing. Is the level of investment sufficient to expand the position, ensure differentiation and support the growth potential?
- Distribution. Are there plans to scale the company’s distribution, either through partnerships, expansion of own sales channels, acquisitions or development of new sales channels in new markets, with direct access to end users or via e-commerce?
- Supply chain and operations. Can the company’s supply chain and operations support the company’s growth? Is there the right balance between security of supply, speed and cost level? As a CFO, have you prepared your direct areas of responsibility such as finance, IT and back office to support growth, for example within data, ERP and business intelligence? Have you acquired the necessary competencies early enough to ensure scalability and handling of complexity?
- Capital and funding. Do you have a ‘license to invest in growth’ among your owners? Do you understand the concerns of your owners? Is the company’s equity story clear enough to ensure that your owners understand what the growth potential is and what implications growth has for, for example, profitability and liquidity?
4 tips
- Think like a CEO. Take a broad look at the company in order to identify the key growth drivers. Engage in the strategy process and take ownership so that a clear plan is made to realise the company’s growth potential in both the short and long term.
- Say yes. Driving growth requires a CFO who dares to challenge the business when it is spending too much money – and also when it is not spending enough! Make sure that the company does not underinvest in areas where the growth potential is greatest.
- Create sufficient financial freedom. Driving growth requires adequate access to capital and liquidity. Make sure to pave the way for this through the necessary financial preparedness, leverage and liquidity as well as a clear equity story, even if the company is not listed. Spend time with stock analysts, investors and owners to understand their perspectives and concerns.
- Remove internal growth bottlenecks. As the CFO, you are responsible for ensuring that there are no growth bottlenecks, especially within your own areas of finance, IT and back office. Make sure you are at the forefront of getting your own areas ready to handle a significantly larger business and support the growth journey.
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