In a podcast connected to his feature in the spring 2020 Pennsylvania CPA Journal, James J. Caruso, CPA, CGMA, discusses the finance team of the future and how leaders will have to evolve to ensure long-term success. He points to the learning finance teams will have to pursue, the value of intellectual curiosity to sustained individual growth, and the importance of communicating organizational purpose on a departmental level.

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By: Bill Hayes, Pennsylvania CPA Journal Managing Editor

Podcast Transcript

In his feature for the spring 2020 Pennsylvania CPA Journal, Jim Caruso, CFO of Simplura Health Group, seeks to identify what it will take for an individual to lead a finance team into an increasingly tech-centric future. His verdict? Well, it won't be 100% about becoming an expert on emerging technology. While growth in that area is to be expected, it'll also take identification of the correct learning activities, getting people to engage their creativity, and driving home the organizational purpose that gets people to wake up in the morning. Today, we are joined by Jim to go in depth into his feature.

What do you think the finance team of the future will look like? What roles will they be performing?

[Caruso] As I wrote the article and considered this, I made reference to several white papers and presentations that PwC has done, and they really have some interesting thought leadership out there about how the finance function will evolve in the future. To put it simply, they envision a finance function that will be somewhat smaller than it is today, but the main difference is the allocation of capacity. If you can visualize a pyramid, they've shown the three major categories of activities within finance as being transaction processing at the bottom of that pyramid, so taking up the largest space in that function if you will, and then reporting and compliance being in the middle of the pyramid, and then insight and the more strategic functions being on the top of the pyramid in that small tip of the pyramid.

I think that most of us in finance are probably familiar with that and could say that is in fact where our time goes. We spend a lot of time on transaction processing and reporting and compliance, and I think all of us wish we had more time and bandwidth and resources to handle the more strategic higher-order functions at the top of the pyramid. And as PWC envisions it in their thought leadership in how finance will transform, they have that pyramid flipped. It's a somewhat smaller pyramid in absolute terms, but the pyramid is flipped so that the point is at the bottom and that small piece that is the transaction processing and the reporting and compliance is still in the middle, but now the top of the pyramid used to be the bottom. It's that larger base, that larger space, and that would be where the more higher-order strategic value is added and time can be spent on those analytics.

As that happens, that will also change the roles in finance as they envision it. There'll be much more of a digital dimension to accounting and finance, and this is nothing new. In some ways, it's a trend that's been around for years. Every accountant today has to have some sort of technological savvy to just meet the cost of entry, if you will. It's just kind of the part of the cost of admission, but in the future, this is just going to accelerate. So PwC envisions roles around digital accountants; digital engineers; data scientists; people that are skilled at mining big data; developing decision models; being able to identify, quickly learn, and implement new technologies, data visualization skills, being able to show data in graphics and in visual ways to help communicate financial concepts to non-financial people.

They're not all technology skills. There's also going to be much more of a need to be collaborative and to build relationships with people outside of finance, build relationships with business unit leaders, be able to be cross-functional and just have a wider perspective on the business as well as the industry and really even the world. One other thing to add is I just happened to read just two days ago, The Wall Street Journal had an article about the changing nature of the CFO role and it had a statistic, it said that at the 1,000 largest U.S. public companies, the portion of CFOs who are CPAs fell from 46% in 2014 to just 36% last year. So the whole gist of the article was that accounting wasn't as much of a necessary skill set for the CFO job as it was in the past, and that's just further evidence of this overall shift. Finance has always been multidisciplinary. It's never been just accounting, but I think it's further evidence of a broader shift and how the emphasis is moving within the finance function.

The roles of the finance team of the future and the finance team now, they're certainly evolving. What are some of the factors that are causing that role and the finance team to have to evolve?

[Caruso] A lot of it is technology-related. Again, technology has always been a factor in accounting and finance, and I think that all of us have seen the role of technology become more pervasive in our jobs as our careers have progressed, but it's simply accelerating. Things like robotics and artificial intelligence, these are game changers or routine rules-based activities are getting automated more and more, so that's the transaction processing and reporting. That whole record-to-report process is increasingly becoming automated. Big data is needing somebody to mine that data and turn it into actionable insights.

Blockchain is another potentially huge disruptor. The way people work has changed the trend toward being more remote and mobile. Now we had the digital natives coming up through the workforce and ultimately moving into more senior positions. There's the overall complexity of business, regulatory compliance, data privacy concerns. So, I think finance has always wanted to be more strategic. I feel like we've been talking about that as CFOs for a decade, maybe two decades already, and, finally, the technology is here to do that. Now the reporting and compliance itself is becoming more complex and it's not going to go away, but there are aspects of that that are rules-based and can be automated and that should free us up to do more evaluated things that are ultimately more satisfying.

You've mentioned a couple things here. You've mentioned the PwC report. You also mentioned the fact that some of these evolutions aren't going to absolutely have to do with technology. An interesting part of the feature states that the PwC report said of their six steps toward optimizing the finance function, five of them are people-related and not actually technology-related. Why should this give CPAs comfort?

[Caruso] I think it should give CPA's comfort because it shows that we're not necessarily being made obsolete by technology. We don't all have to become technology experts. We don't have to add IT expertise on top of accounting expertise or swap it out. We don't have to major in accounting and minor in technology, so to speak, or even the other way around. We don't have to learn every new piece of software out there, every new application. What it means to me is that ultimately what is valued is the intangibles. Things like collaboration, communication, ability to build relationships.

It's been common knowledge for a long time that EQ is more important than IQ. So, that's not changing. One may say that you need a higher IQ these days to deal with more complexity and more advanced technologies and that may be true, but I think what this shows is that it's still EQ that's more important. It's the intangibles, and those starting out their careers, they'll be more valued for their hands-on technical skills and they certainly may be under pressure to learn these technologies, but those of us that are a little bit further along and are in leadership positions, it's not that we suddenly have to become CIOs as well as CFOs. We can really use the leadership skills that we have and those intangibles and help our teams make the leap that they're going to need to make.

When you talk about the two different sides that you're going to have to learn, what sort of learning and training will finance teams have to undergo to be ready for the future environment? Is it mostly tech-based, is it leadership-based, or, as you seem to be getting at there, is it a combo?

[Caruso] I think it's definitely both. I think that the exact mix is based on level. I think that those that are more junior in their roles, earlier in their careers, are going to have heavier technology training and have to learn specific software applications, have to learn skills around data mining and analytics and data visualization and so forth, but I think that they will also, from a very early point in their careers, need to be taught to be more generalist, not to be specialists, whether it's in accounting or in accounting technologies. I think they need to be trained early on how to see trends and understand the domain that working in the industry, broader economic concepts, broader concepts in the market, they need to be able to connect ideas and be able to see the impact of different external events on the business and just be able to connect those dots and speak the language that people outside of finance are speaking, be able to communicate with the business people.

I think those are new types of training. I don't know that in all situations people are taught that early enough. Even leadership in general, I think we tend to train people about management and leadership when they get promoted to their first management job. I think leadership training needs to start earlier than that. And I think these other types of cross-functional training to help them think more like generalists and see the bigger picture, I think that needs to start earlier as well. I think that for people that are already in management and leadership capacities, the training should start to shift even more toward these other factors. The cross-functional and the intangibles and the leadership, and the hands-on technology training isn't necessarily as important, but they need to understand technology trends and technology as an enabler.

What are the new best practices? How are best practices evolving? What are other companies doing with technology? What are our competitors doing with technology that we should be doing? Those are all types of things that need to be addressed. One of the most important things really is learning how to learn. Supposedly we've all done that in college already, but I think sometimes it's a skill that we lose. We go through our day-to-day lives and don't necessarily take the time to synthesize what we've learned or to really go deeply in learning new things.

If we encounter it, we encounter it, and if we don't, we don't, and we do just enough to get by. That's not good enough. We need to really learn how to learn. Take the time to learn new complex things and be able to do it deeply and relatively quickly. We need to bring true learning and study skills to our jobs and the skills we need for our jobs and really take the time to go a little bit deeper and synthesize our experience and be able to teach ourselves new things. It can't just be about sitting through training classes or CPE or things like that.

For people to make creative evolutions within an organization, they have to exhibit intellectual curiosity, but your piece makes the case that mere curiosity is not going to be enough, that employees need to feel engaged in order to share their ideas. Can you tell us a little bit about the concept of engagement and how you can improve it in an organization?

[Caruso] I appreciate that question, especially in terms of intellectual curiosity, that you started with and that's always been a favorite attribute of mine in terms of looking for that in people that I hire and promote. I've always seen intellectual curiosity as a prerequisite for performance and for engagement. I always assumed that if somebody was intellectually curious, they would automatically be engaged. Of course, there could be negatives in a culture or environment that could squash a person's enthusiasm but, absent any particular negatives, I always assumed that someone who was intellectually curious would almost automatically be engaged. I still believe that's a critical attribute. It's something very important to me but, as I wrote this article, my thinking on this became a little more nuanced.

I interviewed Effin Logue, who is the chief people officer at Dixon Hughes Goodman, for the article, and after talking with her, I came to think that intellectual curiosity is a necessary but not sufficient part of performance. When I talked to Effin, she pointed out that someone can be intellectually curious, but about everything else but work. They may have different hobbies or outside interests, and to get them to apply that intellectual curiosity to their job, they need to be engaged and that engagement has to be looked at almost as a separate thing that it's up to a finance leader to drive. It was easy to accept that. It makes perfect sense, and she also believes that engagement can create intellectual curiosity that wasn't there before. I'm not entirely sure about that. I think that might be arguable. I've read other things that lead me to believe intellectual curiosity is an innate trait. One of those “you have it or you don't” kind of things.

If you look it up on Wikipedia, it's actually there as a psychological attribute that can be scored. I'm not totally convinced that it could be created if it's not already there, but I'm open to that idea. I've certainly come to take a little more nuanced view about it. I think I certainly wouldn't give up on someone who didn't seem to have intellectual curiosity already. I think she convinced me that there's a shot there at building it if it wasn't already evident, but your real question here is about engagement and the concept of engagement and how to improve it. There's plenty of definitions about engagement out there, but I think when Effin described what it meant to her, she had a great term. She said, "How are you expending discretionary effort? And if you're expending that discretionary effort on your work, then that is engagement."

So the person who has the, I don't know, maybe they wake up on a Saturday morning and they have a couple of free hours and in the quiet of the morning maybe they go online and they want to do some reading or recreational learning, and that person that chooses to maybe look up and read about or research a work-related topic to learn more about their industry or to find new ideas to solve a problem, the person doing that, expending that discretionary effort, that's a person that's engaged. And the way to improve it is to align everyone around a common purpose. I think that's one of the most important things. There has to be trust in the organization. People have to feel that they are valued, that their ideas are listened to. They have to feel that whoever's leading their group cares about them, has enough humility and authenticity to connect with them, that the leader's concerned with their development.

Team building is great. We've all seen these types of things. Having company outings and picnics and parties and things of that nature. There's nothing wrong with those types things, but those tend to be one-off events and if they're happening just a couple of times a year, or even once a month, it's not enough. It's really about how people interact with each other every day and the leader needs to model that. Treating each other with respect and hearing each other out and being able to trust each other, having each other's back. I think that it all comes together around a common purpose. Everybody rowing in the same direction.

To bring it back around to intellectual curiosity, I think engagement and intellectual curiosity are a feedback loop. The more curious you are, the more you're going to learn. And I think the more you learn, the more engaged you'll become. You'll understand the bigger picture, you'll understand how the dots connect and how different concepts interrelate and you'll get excited about new ideas that you can implement and you'll get excited about building something. Even if you're at a level in your career where you don't feel like you have that much influence, if you're able to find an implicit satisfaction in your own work and your own contribution and you understand how your contribution fits into the larger purpose, I think that's a formula for engagement.

You mentioned a word there in your answer: purpose. Every person who does a job has a purpose for doing it, whether they share it or they're able to articulate it, but why is it important for a company or for a leader to know its purpose and communicate it effectively to the finance team or any other teams? How does it bolster the work?

[Caruso] First, I think you're correct to say that each person may have their own purpose for doing the job and they may have their own purpose in general in terms of what's important to them. They may think of their job as a means to support their family. That may be what they see as their primary purpose, supporting their family, and that's the context in which they look at their job. There's nothing wrong with that. I think the best performers find intrinsic satisfaction in doing their best work for its own sake and striving for professional excellence, and that's again an individual focus. There's a school of thought out there that says leaders should tap into each person's individual sense of purpose in their own lives. In other words, what makes you tick? Why do you come to work? Trying to harness that and trying to really respect that and help the person feel engaged because you're making the job meaningful to their own purpose that they've defined.

That's all fine but, whether or not the leader does that, I think that imparting a common sense of purpose in the business, in the finance team, creates alignment around shared values. It gives shared meaning. It helps everyone see that they're contributing to a larger mission. I think it makes work more satisfying all round, especially on a finance team. A company could be doing a great work in the world. Maybe it's a health care company that has a fantastic cure for a terrible disease, but even in a company that has a very clear mission and value and purpose, sometimes it's hard for the finance team to feel a part of that because they're not interacting with the customer. They're not directly impacting the product or the service. So I think it's very important to help the finance team feel that they're a part of that mission, that just because they're not on the front lines, they are just as critical to the business's purpose. That, if the business is not profitable, it can't survive and it can't execute on its purpose to begin with. I think it's very important to help the finance team see that, to see themselves as beyond being just the support function. I think you can help the finance team have a sense of purpose by building its own mission. The finance team has its own customers, its internal customers, its external stakeholders, whether it's investors, it's lenders, those are all internal customers that the finance team has its own sense of purpose around. To serve those constituencies. I think it's important to impart that sense of purpose and to give everybody something that they can rally around. Michael Porter, in writing about strategic positioning, wrote how different businesses position themselves strategically and cannot be all things to all people and the people that work in that business need to understand what the strategy is so that they can make the right decisions and the appropriate trade-offs.

For example, at The Ritz-Carlton, the employees there know that the strategic position is to be very high-end and do whatever you can for the customer, and the employees feel empowered to go the extra mile and do that even if it's at an extra cost to the company. That's a trade-off. An employee working in a lower-level hotel chain, like a more bargain hotel chain, they're going to make a different decision that they may say no to a customer more often because it's more about cost. It's just a concept of trade-offs. Michael Porter wrote about that in the context of strategy and everybody knowing what the strategy is. Well, I would propose that if everybody knows what the purpose is that is equally important and that would help employees make the right decisions and make the right trade-offs in their day-to-day work.

I also think that sense of purpose is a great way to help people deal with stress. Finance can be a very stressful function. It's very deadline-oriented. Right now, we're in a year-end period where, whether you're in public accounting or private industry, you're dealing with getting the books closed for the year, you're either getting audited or you're doing an audit, you're preparing tax returns. There are M&A transactions that can cause a lot of stress in an organization for the finance team, getting a deal done, integrating a new acquisition. It can be a very stressful place to be.

I think that when people feel a sense of purpose, it helps them through that. You can work heads-down for days and then everybody picks their head up one day and says, "Why am I doing this?" Well, the answer to that is purpose. If you feel you're doing it for a reason and you feel like you're not just going through the motions, you're working toward something, trying to build something within the company or trying to help the company advance its goals and help the company achieve a larger vision and purpose in the world at large, I think those are all things that help people through the tough times. I think that stress is a good thing because if you're not stressed that means you don't care or you're not being challenged. I think we all take on challenges that we know are going to be difficult and cause us stress. It is the achievement that brings us pleasure in the end and you need to see the end result, the end vision, and that ultimate purpose to give any of that meaning.

We talked about what the finance team of the future looks like, but what does the finance team leader of the future look like? What do you think are the top qualities that they need to exhibit?

[Caruso] This is interesting because I think that the principles and qualities of leadership itself are timeless and they should not be affected by technological trends. I think that it's fun to speculate on the future and talk about how everything's changing and this, that, and the other thing, but I think that leadership principles are timeless. Whether you're talking about a Roman emperor back in 100 BC, or Napoleon in the 1800s, or Churchill in the 1940s, or the CFO of the year 2040, I think that the principles of leadership are timeless. I think it's about the ability to motivate, engage, and align a team around purpose and mission to help the team see a vision and lead them to execute on it. To set an example, to show you're right there with them, getting your hands dirty, helping them solve problems, modeling the desired behavior and how you want the members of the group to interact, inspiring trust and confidence and camaraderie among the team.

I think those are all the timeless abilities of a leader and that's the good news. It means we don't have to totally reinvent ourselves just because technology is changing. When you look at specific leadership tactics, those may change a bit. We have mobile and remote workforces, so we need to build the skills to keep people engaged and communicating with each other even if they're not in the same location very often. I think as leaders we need to be more sensitive to how and when people like to work, and I think we have to be more flexible in the future and today than we may have been in the past. We certainly need to understand technology. As finance leaders specifically, we need to understand technology as an enabler. Where are things going? How are roles going to change? How do we recruit talent for those roles? How do we help people reinvent themselves for new roles? As some of these transaction-processing or reporting roles become automated, can we help people retool their skill sets and shift to one of these newer evolving roles? I think those are all more tactical things that finance leaders need to focus on in the future, but I think the good news is that the actual qualities of leadership are timeless, which doesn't mean they're easy, and we still have to build those skills, but I don't think that they are subject to the changes on technology.

I just want to focus on a line in the piece that particularly piqued my interest, and it would be this one. I'm just going to read it verbatim. "Introducing some of these ideas to foster trust, engagement, and learning may face some eye-rolling skepticism, suspicion, and resistance, but this too can be overcome." My question there would be “How?” Is there a way to convert the skeptical folks or might you have to sacrifice some people? What's the way to overcome that?

[Caruso] I'm glad that you found that line interesting. It came about because I was reflecting on the fact that at CPA firms or at larger companies, a lot of the types of practices that I wrote about in the article are already institutionalized. In a middle-market business, a lot of these things are often not found and I think it's because of resource constraints, budgetary constraints, staffing is lean, there aren't these existing training and educational infrastructures, and a lot of times it just doesn't exist in a formalized way, and sometimes the CFO ends up being an individual contributor half the time. When they may have a small team and they're working on certain special projects where they have to get very hands-on and maybe have to go deep on that for a while and they're not spending as much time leading the team as they should.

I know I've fallen victim to that at times, and then suddenly you try to implement some of these ideas and it's like you're worried you're going to be looked at as Michael Scott on The Office when he comes up with a crazy idea that he pulls everybody into the conference room to talk about. It's a flavor of the day type of thing. So I had posed this question to Effin Logue at DHG when I interviewed her and she said all it takes is one leader to pick his or her head up and realize we may be doing okay as a company today, but it's not sustainable. That doesn't mean it has to be a new leader obviously; it's just the finance leader needs to make that clear to his or her team. We need to do things differently.

The finance function is changing, we need to transform it and get into the future, and we don't want to be playing catch-up later. We want to be leaders and serve the business. So, I think to answer your question, it all comes down to leadership. That one inspiring leader can make it happen. I think doing these things, if you have a group of intellectually curious people, I think a lot of these things will be received readily. People may be thirsting for that more than we realize. Of course, there will be those people that are not intellectually curious and that have a bad attitude and that are cynical about it, and, yes, you said, "Might you have to sacrifice some people?” You certainly might. Jim Collins says that metaphor about getting the right people on the bus in the right seats. He put it that figuring out the who is more important than figuring out the what.

So, making sure you have the right team in place is definitely the most critical thing. Some people may not be able to make the transition. They may be resistant to change, they may not want to learn new things, and that's going to happen. But I think you have to give it some time. You can't start over. You need to work with the team that you have and it's incumbent upon the leader to bring the team along. I think it's our responsibility to bring our teams along. And to get to some of the earlier topics we talked about, if you can drive that engagement, that maybe can create intellectual curiosity that wasn't there before. I think that engagement overall, people want to be engaged. I think that's the more natural state.

I think that they're not engaged when there's a vacuum there, but if you do these things, and you build trust, and you increase the communication, and you make connections between the members of your team, between yourself as a leader and the members of the team, and you create opportunities for them to develop, show that you trust them, empower them, give them new opportunities, and show that they're valued, I think that's what everybody wants. I like to think it's more natural for them to gravitate toward engagement, and I think it's just going to be that rare person that resists it no matter what you do. You just have to be patient. It could take some time if you're trying to do something new that you haven't done before. So, like I guess the old expression that a prophet isn't accepted in his own hometown.  I think if you had an army of consultants come in and say you should do x, y, and z, sometimes it's more quickly accepted than when the existing finance leaders say the same thing. But I think ultimately if you model the right behavior, you can get there. Again, it's authenticity. The leader can't just give lip service to learning and being engaged when the leader is himself detached. But if the leader shows that he or she is working hard, putting in extra effort, trying to learn new things, sharing things that he or she learned with the team, I think that shows that it's not just a flavor of the week; it's a real thing and it's genuine.