Logistics and transportation services companies are seeing a major shift in the on-the-job responsibilities of their CFOs, according to in-depth interviews conducted by consulting firm Korn Ferry. This change is attributed to the growing complexity in the sector, technological innovation, the availability of data and an increasing regulatory environment. In this new business climate, CFOs no longer just report number outcomes; they advise and partner with business line leaders and provide a strategic perspective on business decisions.
According to Korn Ferry’s research, these sentiments resonated with CFOs across a broad spectrum of services in the sector, including brokerage, freight forwarding, supply chain and air cargo. They spoke of new skills needed to remain competitive and continue to be seen as adding value. Specifically, CFOs require the ability to make critical decisions around technology investments that improve or “turbo-charge” operations, hedge against supply chain risk and meet new customer demands. CFOs must possess a deep understanding of operations, the ability to leverage data, skills to develop a team of finance executives who demonstrate business acumen, as well as a strong grasp of traditional finance capabilities.
Industry Disruptors: Shifting the Role of the CFO
In recent years, three tightly intertwined industry trends have demanded and evoked change:
- customers seeking business-enhancing services;
- technological advances that will enable those services;
- and data, which will flow from technology and fuel further services and advances.
CFOs are under pressure to make complex and strategic decisions that have a high impact on financial statements in response to increasing demands of customers for real-time services, supply chain visibility, omnichannel fulfillment, interactive analytics, as well as customized and integrated services. To satisfy these demands, CFOs need to invest to a greater extent in IT-based services and stay up-to-date with advanced RFID, GPS tracking and global trade management tools. Advanced route modeling and forecasting solutions will be invaluable to CFOs because the results they produce directly impact financial performance.
According to logistics CFOs, sophisticated data analytics can translate into indispensable knowledge to inform decision-making and, in turn, have a high impact on companies’ financial statements. As a result, analytics are being seen by CFOs as “the next big competitive arena” for logistics providers. Leading companies are now taking customer data and tailoring it into a unique product offering for customers based on preferences and relationships to gain competitive advantage.
As finance and IT responsibilities converge, CFOs now sit at the center of strategic decisions on technology and talent. Consequently, the biggest challenge for these financial leaders is learning how to effectively balance investments in people and systems to support continued growth and maintain profitability over the long term.
A Systems Refresh in the Finance Function
As major disruptors shift the role of the CFO, companies are undergoing a “systems refresh” in the finance function. This is inspiring CFOs to rethink the way business is conducted and reevaluate key business drivers in order to leverage these market forces to achieve success.
This transformation is motivating CFOs to direct people in the finance function to partner with business unit leaders to help achieve company goals. In pursuing this new strategy, the ultimate challenge for CFOs is to build a forecast that matches labor with demand. By enhancing business systems and increasing collaboration with operational leaders in practice, CFOs will strengthen their ability to construct an accurate and effective forecast model.
CFOs are also allocating more capital for customer-facing technology projects—decisions that are complicated by rapidly evolving technology even as projects take a long time to build. These initiatives must be viewed holistically and strategically to ensure they are integrated to produce a more efficient and effective finance function and support business innovation.
Predictive analysis is the final key strategy emerging from the systems refresh in the finance function. CFOs are increasingly exploring the potential to use predictive analytics to better leverage information within the business. By understanding the company’s strategic direction, they can deploy resources accordingly and optimize performance.
Identifying the Right Talent
There is certainly more clarity around the skills and actions now required of CFOs to tackle the growing complexity in the sector. Selecting the right candidate for the job remains a challenge of growing importance. Increasingly, the source of CFO talent lies not only outside the firm, but also outside the logistics and transportation services industry.
Among the CFOs of the top 50 logistics companies, as identified by the Transport Topics Publishing Group, 64% were external hires. Of those logistics CFOs hired externally, more than half came from outside the industry. Executives from outside the industry are seen as having the potential to bring new ideas and a fresh approach to the business. Increasingly, companies seek CFO candidates who have experience working within a global organization, exposure to highly transaction-driven business models and cut their teeth at best-in-class organizations, known for developing financial leaders.
Talent will be easier to attract, but harder to find due to an expanded pool of candidates when industries such as retail, financial services, consulting, industrials and business services are included. Though sifting through the possibilities will require more diligence, the potential reward is great.
As Paul Jacobson, CFO of Delta Airlines, explains, the benefits of seeking CFO talent externally are strong: “In addition to developing talent from within, I have an unprecedented opportunity to recruit from outside the industry. We love to tell our story because we think that talented people who historically would not have contemplated the industry will find it compelling.”
Putting the Pieces Together to Foster Future Success
As companies address the shifting role of the CFO and new challenges in the market, financial leaders must partner people in the finance function directly with company unit leaders to drive business outcomes, view investments in new technologies with both a holistic and strategic approach to verify the value of costly initiatives, and explore the potential to leverage predictive analytics to align the allocation of resources with business goals.
Finally, in seeking out new CFO talent, expanding talent acquisition strategies outside the logistics and transportation services industry may help businesses acquire leaders who can bring fresh perspectives and unique skillsets to the organization.
Neil Collins is senior client partner & global sector leader of logistics transportation services, and Beau Lambert is principal, financial officer practice at Korn Ferry, a leadership and talent consulting services provider.