Only 22% of CFOs achieve a "high degree of personal effectiveness," new research from Gartner Inc. released Thursday, found. The key to better personal effectiveness is cultivating a limited set of activities and relationships outside the finance department, the study concluded.
The research, based on more than 100 CFO interviews, assessed personal performance and effectiveness to reveal what effective CFOs do with their time, relationships and teams.
"CFOs tell us they have more demands than ever, but the surprise in this research is just how few activities differentiate the most successful operators from the rest of the pack," said Peter Nagy, vice president of finance research at Gartner. "The most important relationships that drive high performance in the CFO role are in the boardroom and with customers, not in the finance department."
Gartner determined personal effectiveness based on how closely a CFO’s organization aligned to efficient growth behaviors, like positive risk-taking to drive long-term growth, as well as the CFO’s ability to meet CEO expectations around revenue growth, margin expansion, return on invested capital and balance sheet health, they said.
"We defined CFO effectiveness as a series of positive long-term behaviors, and the organization’s ability to hit the metrics," Nagy told CFO Dive Friday. "And CFOs care a lot about their organization’s health."
All this is made more difficult by the ever-widening umbrella of CFO responsibilities, which now encompass operations, strategy, and often human resources, he said.
Gartner concluded that relationships outside the finance department prove to positively drive CFO effectiveness. They selected the three most crucial groups personally effective CFOs bond with: the CEO and board, customers and sales leaders, and business unit managers.
Surprisingly, CFOs don’t benefit from relationships with certain high-ranking employees. "We actually found that quite a lot of C-suite relationships don’t necessarily drive enhanced effectiveness in the CFO role," Nagy said. "We didn’t see much correlation between the quality of the relationship of CFO and the chief human Resources officer at driving effectiveness. The same applies with CFO relationships with the general counsel, and even with the CIO."
The takeaway, Nagy said, is that positive C-suite relationships are great, but what differentiates performance is a relationship with the head of sales, the general managers, the board and the partners.
Nagy acknowledged that these bonds are difficult to spin out of thin air, if they don’t already exist, especially in today's “unprecedentedly complex time.”
"CFOs are spread pretty thin, and I think most of them struggle to make tradeoffs," he said. "In some instances, while you want to maintain those relationships, some may not be worth the current time investment."
With the need to juggle more initiatives than they did previously, in finance and across the organization, CFOs must make harder decisions about their priorities, Nagy said. "Not all of that work is equal in terms of impact. Most CFOs probably aren’t good enough at managing those as they should."
The Gartner study, Nagy said, will hopefully let CFOs gain a glimpse into what does and doesn’t make a difference in overall effectiveness based on experience of their peers.