Six ways CFOs can increase the likelihood of transformation success

Transformation during uncertain times is critical. Success is more likely if CFOs can focus on six specific yet complex human factors.

Chief Financial Officers have learned from experience that successful transformations are neither easy nor inevitable. At least three-quarters of CFOs surveyed in a recent research collaboration between the EY organization and the University of Oxford’s Saïd Business School say they have experienced at least one underperforming transformation in the last five years. Yet, many CFOs still don’t understand that buy-in from staff is a critical factor in determining the success of transformational programs.

In this edition of the CFO Imperative Series, which provides critical answers and actions to help finance leaders reframe the future of their organizations, we analyze the CFO perspective on transformation based on that research, which also indicated nearly half of CFOs surveyed believe their organization has insufficient capabilities to transform successfully.

The research goes on to imply that the emotional cost of an underperforming transformation compromises subsequent transformation efforts. It seems failure breeds failure.

The research also showed that nearly half of finance staff believed that “transformation” is a euphemism for cost reduction and head-count reductions. This perception is heightened during periods of economic uncertainty. But many CFOs fail to provide sufficient support to address the psychological and emotional pressures caused by a transformation program.

Our research shows that successful transformation leaders are more effective at managing the stress and pressure on the workforce, and that by mastering six key levers, they increase the likelihood of a successful transformation by a factor of 2.6 — from only a 28% chance of success up to 73%.

Six key drivers of transformation success

1. Inspire: create a vision that speaks to all and defines a compelling “why”

Leaders may fail to fully recognize the importance and the symbolism a vision can have in triggering and inspiring a sense of purpose. Because of this, the time and money organizations spend on collaboratively creating a vision is often wasted. Nearly half of the finance workforce impacted by an unsuccessful transformation state they didn’t understand the leadership vision.

CFOs do not always value the power of a shared purpose in inspiring teams. They sometimes need help challenging their personal biases and sense of what motivates others. In the absence of a personal connection, individuals often reach negative conclusions around intent, resulting in an unwillingness to engage in — and sometimes active resistance to — the objectives of a program.

CFOs must always keep the human element of transformation in the forefront. It is crucial for leaders to have a clear understanding of what is going to happen, as well as the impact on individuals and groups. Typically, CFOs think in terms of program milestones and organizational goals rather than individual journeys or personal milestones. CFOs need to invest in a narrative that addresses individual journeys to help staff members take ownership of their roles, removing anxiety that can come from feeling a loss of control.

Key actions for CFOs:

• Create a vision that individuals can relate to, will go the extra mile for and that answers the fundamental question of “why?”.
• Step outside natural comfort zones to proactively engage with teams in open, two-way discussions on the transformation vision and how it impacts them. Connecting on an emotional level and telling personal stories that others can relate to are two critical characteristics that will drive belief in the vision.
• Constantly reference and test the vision throughout the transformational journey.

2. Lead: develop an empathetic and authentic leadership style to build alignment around the finance vision

Successful transformation requires leaders to exhibit determination, courage and empathy, particularly around the workforce’s expectations and priorities. While clarity of purpose is necessary to drive the momentum, CFOs also need to demonstrate empathy and draw direct links between the transformation vision and the positive outcomes for the organization and workforce as a whole.

This is not always easy for senior executives who have grown up mastering a technical subject and have been trained to show self-confidence and certainty when explaining plans and outcomes to stakeholders. Communicating to teams how a transformation is going to impact them requires a very different playbook.

Our research shows that finance function leaders need to reflect on their leadership skills. Two-thirds of the finance workforce did not agree that leadership understood the needs of the workforce. Similarly, finance function employees were less positive about their leaders’ ability to demonstrate effective and inclusive leadership than finance leaders themselves, with only one third (33%) of finance workers agreeing that finance leaders made timely and tough decisions under pressure versus nearly half (47%) of finance leaders.   

Key actions for CFOs:

• Demonstrate inclusive leadership and the capability to influence and align diverse stakeholders.
• Listen for noise, anticipate cynicism and effectively manage yourself and your teams through the emotional turbulence.

3. Care: deliberately build a supportive environment for teams that feel their jobs are at risk

Successful transformations take people on the transformation journey, achieving buy-in and commitment along the way. While leadership is important, a participative transformation culture where everybody feels fully engaged in the journey is even more important. Yet in our survey, while 46% of finance leaders said they accepted ideas from junior personnel, only 31% of finance workers felt leaders listened to them.

CFOs need to work hard to enable psychological safety and support to staff through what will be an emotional journey for many. This can be done through active listening, demonstrated empathy and constructive problem solving. People want to feel as if they are part of something bigger than themselves. And they need to feel empowered to voice their opinions. To this end, it is important for CFOs to be actively seen listening and responding to staff feedback. Sometimes this can be as simple as acknowledging the pressures finance teams are under and the volume of work they’re being asked to do both for the transformation and as part of their day-to-day activities.

There can also be a disconnect between the impact of change from the perspective of the CFO and the finance leadership team versus the impact on middle managers and the teams working beneath them. This is where honesty in communicating what may be changing is essential. Finance teams will feel more supported the more transparent CFOs can be about the changes and what they mean,  the expectations of middle-management’s role, and the relative balance between the opportunities and the risks.

Key actions for CFOs:

• Build trust across the leadership team and workforce by engaging them in collaborative design sessions to capture ideas, test thinking and agree on priorities
• Assess the health of your teams through influencers (often within the layers of middle-management) and digitally enabled tools that can provide anonymized safe-places for capturing undiluted feedback about staff feelings and concerns.
• Be open to new ideas and concerns from all levels within the team, and actively and visibly respond to them accordingly. Demonstrate that you’ve heard what the finance team is saying, either by making changes or explaining why things need to remain as they are.
• Set realistic expectations by being honest about the journey ahead and clearly articulate both the opportunities and the challenges the transformation may bring.

4. Empower: delegate decision rights and deliberately focus on building a culture of safe experimentation

Transformation journeys are not linear and can be disrupted by events during their execution. In our research, leaders of successful transformations suggested that taking a step back or changing course and following another route wasn’t necessarily a bad thing. To smooth over those changes, leaders should set expectations from the outset that changes to plans were possible, as well as communicate the changes themselves as transparently and as early as reasonably possible. 

Traditionally, finance functions perform technical work that require precision and working to regular monthly, quarterly and annual cadences. This drives a culture of no surprises. This can stifle some of the capabilities and behaviors that drive innovation. In our research, finance function staff were more inclined to believe that failed experimentation would negatively impact their careers (70% of finance workers versus 62% of workers in all functions). This difference was also replicated in the attitude of leaders in their willingness to fund innovation and new ideas (33% of finance leaders versus 41% of all leaders).

As transformation becomes a constant, CFOs must encourage creativity and innovation, so that their organizations are capable of adaptive change and learning. They need to create a safe environment, communicating that it’s okay to experiment, fail fast and learn without a negative career impact. However, it’s important to also set clear boundaries around the scope of experimentation and establish realistic expectations that experimentation and innovation aren’t open-ended. Embracing this type of disciplined freedom can create openings for new perspectives and unlock significant new insights at the expense of controlled failures.

Key actions for CFOs:

• Establish clear roles and responsibilities and delegate decision rights down from the finance leadership team. Be clear about where teams have the freedom to make decisions and where they don’t.
• Foster a culture of safe experimentation and create a “fail fast” mindset to capture and realize opportunities that a “no surprises” mindset may miss.
• Define “failing fast” so teams understand the leeway for agility while also meeting macro performance targets.
• Let go of the drive for perfection around problem solving and give teams sufficient autonomy to do their jobs, and sometimes not get it 100% right the first time.

5. Build: quickly show how the technology will help deliver the finance vision

Combining technology with the right skills is crucial in making the transformation real. Therefore, it is unsurprising that innovative technology is often at the forefront of the finance leadership’s transformation efforts. In fact, 38% of CFOs identified the pursuit of technology and digital innovation as a key motivator for initiating transformations. That said, only two in five senior finance leaders (43%), including CFOs, identified technology as among the top three biggest challenges to delivering successful transformations.

Surprisingly, even today many transformations deploy technology changes with an attitude that workers are simply expected to attend trainings, then adapt and adopt. Often there is little consideration of the end user during the design phase, or how to engage with them in a way that helps them understand the changes and provide productive feedback on further product enhancements.