1. Strong Cross-Functional Perspective and Business Case Experience
The CFO should have a strong cross-functional perspective of the business and of the key metrics that impact profitability and capital allocation, as well as the inter-dependence of operational metrics and how they should be prioritized.
The CFO also should have an intimate understanding of how business cases for investing in new and/or transformed capabilities are developed, including what scenarios need to be considered and prioritized. This is vital as business cases must include:
• the right financial baselines and metrics;
• the financial and strategic benefits to be delivered from the new capabilities;
• the agreed metrics to measure and track benefits realization; and
• the anticipated benefits-realization timeline, with appropriate investment exit points if the business environment changes or the execution results are not aligned with plan.
This will allow finance to hold operating leaders accountable for the realization of the benefits. CFO’s should allocate financial analysts to support the operational leaders in measuring and tracking progress of benefits realization versus the business case and reporting results to the executive committee.
The analysts will also be able to obtain the necessary financial and operating data and provide effective insight to the operating leaders on performance and how projects are tracking towards anticipated benefits
2. Prioritizing New Capabilities and Capital Allocation
Operational leader requests for additional capital and operating expenses in 2021 may at times exceed the business’ capacity. This will result in an unsustainable cost infrastructure in 2022 and beyond, given the anticipated normalization of sales growth rates.
The CFO is perfectly equipped to ensure capital is directed, allocated and prioritized towards the most important value-drivers to ensure adequate funding for the most important new and/or enhanced capabilities — and to prioritize which capabilities are essential versus discretionary and potentially less crucial.
3. Managing Cost Infrastructure Through Zero-Based Budgeting
Given the significant capital and operating investments needed to enable digital, omnichannel, CRM and other growth initiatives, retailers must make rigorous fact-based resource (both human and financial capital) prioritization decisions. The CFO is well-positioned to oversee these decisions in partnership with the CEO and key C-suite executives.
Zero-based budgeting is an excellent tool (rather than incremental edits to staffing and other cost budgets) to ensure the focus is on the correct prioritized investments needed to achieve the desired near and longer-term benefits. This is especially true in a rapidly changing retail environment where the zero-based approach will yield much better results than using historical spend for future planning.