Is Finance Ready to be a Strategic Business Partner?

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What decisions matter most in a company? Few would disagree that strategic decisions matter most. This is underlined by the fact that most strategies fail to deliver the expected ROI, to the disappointment of executives and shareholders alike. We shared earlier our view on how CFOs can exercise strategic leadership. This is undoubtedly an admirable ambition; is it feasible for the CFO and the finance function?

The jury is still out on this despite the finance function having worked on becoming a business partner for decades. We would argue that Finance has succeeded with the ambition of business partnering at the lower levels of decision-making, i.e., operational and tactical. This is highlighted by the advent of the finance business partner role, which sits close to decision-makers throughout the company, and the FP&A teams' efforts in adapting innovative budgeting and forecasting processes.

We believe it’s time to take the next step on the business partnering agenda in 2025, so we have made it one of the top trends to watch. Finance should complete its ambition by becoming a strategic business partner, and in this final blog post of 2024, we discuss what it takes to deliver on that ambition.

Success criteria for strategic business partners

Knowing if you are succeeding as a business partner is simple. We have highlighted three KPIs: business results, customer satisfaction, and documented value creation. How does this look for strategic business partnering?

• Business results: While a company’s mission and vision can be intangible, its strategy cannot. For the company to achieve its goals, it needs concrete and measurable goals. These are often also financial goals, which CFOs should measure themselves against. Failing to hit the target means we’re failing as strategic business partners.
• Customer satisfaction: At the strategic level, there are three main stakeholders (four if it’s a listed company). The primary one is the CEO, followed by the board, management team, and investors if listed. If they’re not satisfied with the work of Finance and the CFO, then no matter the business results, we’re failing as strategic business partners.
• Documented value creation: This is usually the trickiest part of evaluating Finance’s success. However, it’s about outlining Finance’s role in the strategy process, the cascade, and the follow-up. We’re failing as strategic business partners if the role is passive.

As you can see, it’s all about our role. We will deep-dive into this to clearly explain the role we see CFOs and the finance function taking in 2025 to be recognized as strategic business partners.

Be a co-owner – not a neutral observer

In traditional literature, the CFO is supposed to be a steward of company resources and be the company's board and shareholders' eyes and ears. It predicated that CFOs took a more natural role, almost like an outside observer of company matters. S/he would then highlight if things weren’t on track and prompt the management team and others to rectify the course and get the company back on track.

This has created a resentment-like culture around the CFO as a beancounter, naysayer, control freak, and more. We have long advocated that it’s time to ditch the stereotype, but it’s also time to recognize that it’s more than a re-branding exercise. It’s about co-ownership of business results, even though CFOs don’t make (m)any business decisions. How else can you be a partner?

This requires that CFOs build relationships with the CEO and management team and create an intimate space where people can confidently speak their minds without fear of concerns and insecurities landing in the boardroom. This is not what most CFOs are made for and requires a personal transformation. We cannot postpone this transformation anymore if we want the finance function to take the final step up the business partnering staircase. Speaking of the staircase, we could visualize it as this:

Of course, we also need an apparent picture of what strategic activities to undertake as CFOs and senior finance leaders. Fortunately, McKinsey has detailed this in the book “Strategy Beyond the Hockey Stick.” We took the liberty of making it ready for the CFO to take ownership. Below is a summary of how to do it, including how to utilize Roger Martin and A.G. Lafley’s book “Playing to Win.”

The first step for most CFOs, since they’re not in the middle of creating a new strategy, is to evaluate the progress of the current and past strategies. Do so by calculating the financial value of each of the ten levers. When we do this together with finance teams, it always reveals insights they had never considered. The trick is to show the development over ten years. That’s how long it takes before you can honestly evaluate the strategic success of a company.

From that, CFOs can deduct the company’s ability to strategize and execute the strategy. Use that to discuss the current strategy and what changes should be made. If it’s unclear what Big Moves the company is making, it should prompt a full stop of activities and trigger a strategic planning process. We believe the CFO or, by extension, the FP&A team should facilitate this process to drive the right strategic outcomes. The CFO shouldn’t be a neutral facilitator but should be informed about the best choices. It’s nowhere near rocket science and should be feasible for most CFOs.

Is the finance function ready?

This is the key question. One thing is being cognitively ready by knowing what to do and how to do it. If you ask most finance teams, they would say that isn’t the problem. Instead, it’s creating time to make it happen. This is an age-old barrier/excuse for which many tools are available today to solve. We talked about many options in our recent article “The Rise of AI-Driven Strategic Finance” and will further highlight the opportunities below.

Technical solutions are available for AI to do all these tasks today, and to use a popular statement of late, “CFOs who don’t use AI to free time for strategic business partnering will be replaced by those that will.” The opportunity is ripe for CFOs to become strategic business partners, but it requires that the operational and tactical tasks are still delivered with high quality. Technology is the only answer.

We believe the finance function is ready, but it won’t come for free. CFOs who want to be strategic business partners need to invest in the right AI solutions to elevate the finance role, upskill their teams to leverage the solutions, act as co-owners at every level of the organization, and ditch the neutral role they have held until now.

If you want to understand the potential of being a strategic business partner, let us conduct a strategic value creation analysis together. The insights will help us plan for taking the right strategic actions moving forward and joining the minority of companies that succeed with their strategy. Do you think the finance function is ready to become a strategic business partner?

This was the sixth and final article in a new series looking ahead to 2025. You can read the previous article(s) in the series below. Remember to subscribe to be notified when we publish future articles.

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Anders Liu-Lindberg is the co-founder and a partner at Business Partnering Institute and the owner of the largest group dedicated to Finance Business Partnering on LinkedIn, which has more than 12,000 members. I have ten years of experience as a business partner at the global transport and logistics company Maersk. I am the co-author of the book “Create Value as a Finance Business Partner,” a long-time Finance Blogger, a LinkedIn Learning instructor, and a Top Voice on LinkedIn with 400,000+ followers.