Despite advances in artificial intelligence (AI) and the ongoing data analytics revolution, a new EY research report suggests there is still significant room to improve the finance function and transform the way finance teams operate.

The recent EY Global DNA of the CFO Survey shows that only 16 per cent of CFOs are confident that they have the support of a high-performing finance function. And just 14 per cent of CFOs are making bold changes to transform their finance function for the future.

This will make it difficult for finance leaders to meet increasing stakeholder expectations. For example, investors today demand increased transparency — particularly regarding credible and consistent financial and nonfinancial disclosures that not only show how the company will drive sustainable long-term performance, but also show how it will move from ambition to measurable results.

However, the fifth EY Climate Risk Barometer, which analysed the climate-related disclosures of more than 1,500 companies, found that while companies are investing more time and energy into the quality of their climate disclosures, only 53% provide a coherent plan for achieving transition.

So how can finance leaders meet these changing expectations?

Take a human-centred approach

The EY DNA of the CFO survey, which included responses from 1,000 CFOs and senior finance leaders worldwide, shows that the finance transformation agenda is dominated by technology and analytics. It also finds that talent could be underrated in terms of importance — it comes last in finance leaders’ list of priorities.

But people are central to successful transformation. “CFOs should pick their best people to lead transformation,” says Deirdre Ryan, EY Consulting Global Finance Transformation leader. “Unfortunately, this doesn’t always happen because finance leaders can struggle with the fact that the people who should be driving transformation are the great people they don’t want to lose from their day jobs.”

More than three-quarters of CFOs experienced at least one underperforming transformation in the past five years, according to research by EY and the University of Oxford’s Saïd Business School. EY analysis of the research notes that many finance leaders overlook the importance of team buy-in as part of successful transformations, and that they are not doing enough to address the psychological and emotional pressures experienced by staff during organisational transformation.

On the flipside, the analysis suggests that leaders who are more effective at managing workforce stress and pressure are also more likely to make a success of their transformation programme.

Encourage innovation with disciplined freedom

Paying attention to the cultural aspects of technology and analytics transformation can help to alleviate the pressure on teams and increase their buy-in. This includes giving teams the freedom and permission to innovate and experiment.

However, some team members might struggle with this because they traditionally see projects as only one of two things: a success or a failure.

To overcome that mindset, CFOs should create a safe environment where it is permissible to experiment. This includes setting clear boundaries around the scope of experimentation and establishing realistic expectations that experimentation and innovation are not open-ended. This form of disciplined freedom balances control and risk awareness with the opportunity for innovation and bolder change.

But a more experimental approach can be difficult if the function’s culture is risk-averse and conservative. In the EY DNA of the CFO Survey, more than two-thirds of finance leaders say that traditional back-office mindsets in finance are slowing down the modernisation of the function.

One step the CFO can take to support a shift in mindset is developing and clearly articulating a compelling vision of the future to motivate employees. Another is developing new skills and career paths for continued learning and growth. Setting out a bold vision for the future, and showing that the CFO prioritises personal and career development, will allow finance teams to attract the best talent. CFOs can differentiate their employee proposition – and underline the attractiveness of the finance profession – at a time of intense competition for talent.

This calls for CFOs with particular management skills in addition to their traditional competencies. Empathetic leadership, for instance, will lead people through transformation and culture change. It requires emotional intelligence and an understanding of the issues that are priorities for different demographics of employees. Diversity and wellbeing, for example, could be important to younger members of the team.

CFOs need the support of high-performing finance teams to succeed. Can they put humans at the centre of their transformation vision?

Global DNA of the CFO Survey 2023: Read the EY report to find out how finance leaders are reconciling the three critical paradoxes in their role.