720° thinking: a key to serving as a strategic CFO

by | Jul 3, 2024 | Articles

4-5 min read

The strategic CFO

Chief Financial Officers by the nature of their roles serve in stewardship leadership positions that involve strategy for their companies.1

The involvement sometimes involves strategy formulation (when the CEO and the Board respect the CFO’s perspectives), generally includes strategy execution, and should always involve strategic monitoring of the company’s activities, operations, performance, condition and initiatives relative to its articulated strategic path.

720° thinking

Crucial to all of these—strategy formulation, execution and monitoring—is a strategic mindset: the practice of paying careful attention to what’s going on and thinking about the company’s past, present and future from the perspective of the bedrock of its strategy: its objectives and especially its values

But what should the CFO and other strategic leaders be paying attention to and thinking about?

They should be paying attention to and thinking about what I call the 720° view of the company.2

720° = 360° + 360°

I call this the 720° view because it combines two separate 360° perspectives: a comprehensive internal 360° view and a comprehensive external 360° view.

And as soon as I describe it like that, you readily see its essence and value. But we’ll spend a few paragraphs anyway unpacking the idea and exploring practical applications.

The internal 360° view

The CFO is uniquely positioned to master a key part of this view since the Finance function provides the truth about “the numbers” used to monitor and measure the company’s condition and performance through time.

But making sure “the numbers” are delivered isn’t enough. The CFO (and her team) must be students and eventual masters of that data—and especially its implications for decision making about the company and its future.

Alertness to other key components of the internal view may not come as naturally for analytical, numbers-focused types (not necessarily in priority order):

  • Risks across every function and aspect of the company. In the banking world, regulators pay attention to a bank’s risk in several categories, captured in the CAMELS acronym: capital; asset quality; management; earnings; liquidity; sensitivity (to interest rate risk). Bank CFOs should be thoroughly knowledgeable about all of these, and experts in those with the greatest implications for the bank’s highest risks and greatest opportunities. CFOs in other industries should develop and monitor their own CAMELS-like set of high-profile risk categories.
  • The operational strength and flexibility of each function in the company, and of the company as a whole.
  • The degree of collaboration present in the company’s practices and interdepartmental dealings—and especially among the steward leaders on the executive team.
  • The robustness of the company’s culture, especially as it relates to the depth and breadth of active employee acceptance and enactment of the company’s highest values.

We CFOs may not default to deep, careful thinking about and monitoring of some of these internal matters—but they all matter for strategy.

The external 360° view

Lots to think about and pay attention to here.

As the company journeys into the future, the CFO and her peers should scan the entire horizon around the company. And this horizon includes the following at minimum:

  • The economy (at a macro level, and specifically as it impinges on the company’s industry)
  • Competitors and general competitive pressures (direct and indirect)
  • Interest rate environment (a big deal for financial institutions, but also super relevant for anyone paying or earning interest)
  • Demographic trends
  • Regulatory environment
  • Tax law
  • FASB shenanigans (CFOs: this one is on you; your peers won’t normally have it on their radar)

Add to this list anything else necessary to provide you with that comprehensive view of all things going on outside the company with actual or potential material effects on the company.

What to do with the information from the 720° monitoring

Paying attention and thinking aren’t enough. You must take what you learn as you monitor the horizons and your internal realities and carefully think through connections between aspects of the internal and external environments.3

You’ve gathered some interesting (or alarming) findings from your external and internal monitoring. Now ask yourself (you as an individual and you with your team of peers) about implications.

You see something noteworthy developing in the economy (a shift in global trade patterns, a heightened risk of a recession, supply chain constraints, inflation, whatever): what is the “so what” of that? What implications does it have for your company, now and into the future?

Or you see something internally that indicates an unusually strong operational capability. What can you do to reap the maximal benefit of that strength given your other internal characteristics and the external operating environment?

As you think through implications, focus especially on the following:

  • The current and future fruitfulness of the company, and especially the company’s ability to serve its various constituencies well.
  • Specifics regarding your culture, your current articulation of a strategic path, financial performance (now and future), financial condition (now and future), and your risk profile.

All potential material effects: all the ripples and echoes that take the implications beyond their obvious, immediate points of impact (think direct and indirect; think interactions among outcomes and among influencing factors; think both immediate and delayed).

Something to think about

Developing and growing in this 720° approach is a process, not an event. And it’s a process best undertaken with strong, collaborative, clear-thinking peers.

And it’s a practice that takes strategy out of the all-too-common mode of having an annual discussion resulting in a quickly forgotten document, and into an ongoing habit of thinking and planning and executing that is truly strategic and transformative.

And that’s valuable for any steward leader, including all of us CFOs.

 

 

Eric R. Alexander

July 2024

 

No A.I was employed (or harmed) in the creation of this content.

© 2024, Six Arrows Consulting. All rights reserved.

1 Assuming the CFO is one in fact—viewed and treated as the executive leader of the company’s finances—and not in title only. The latter does happen.

2 I’m not aware of others using the 720° concept in this manner. I’ve heard about employee performance reviews being handled on a 720° basis (classic 360° feedback…performed 2x), but not anything about this concept applied to strategy.

3 Strategic planning generally includes a SWOT analysis: an identification and examination of strengths, weaknesses, opportunities and threats. This 720° approach is essentially calling for a continual consideration of all of those internal and external hindrances and helps, and especially of careful, constant thinking about their implications.