1. Elevating the Strategic Leadershipof the CFO Organization CONTENTS Overview............................................. 2 Background ........................................ 3 Challenges .......................................... 5 Framework .......................................... 6 Achieving Success .............................. 9 Path Forward .................................... 11 About ArmaninoLLP ............................ 12 Prepared by:

2. Elevating the Strategic Leadership of the CFO OrganizationOverviewThis white paper introduces Armaninos CFO Evolution thoughtleadership research. It defines a framework for consideration by MyCFOs and the key people within their organization as they think organizationcritically about their organizations challenges and goals. spends 80% of our time on Accounting The CFO Evolution categorizes the CFO organizations and we are responsibilities into three distinct roles: still working nights and Accountant - oversees fast and accurate financial reporting; weekends justProtector - ensures there are no surprises and that risk is to keep up.appropriately managedBusiness Leader - involved in the formulation, execution and support of the corporate strategyArmaninos CFO Evolution is a set of initiatives focused on people,process and technology. It Streamlines the Accounting function,Optimizes the Protector role, and Elevates Business Leadershipactivities, enhancing the value of the CFO Organization. ArmaninoLLP | amllp.comPage 2 3. Elevating the Strategic Leadership of the CFO OrganizationBackgroundDemands on the CFO and the CFOs entire organization constantlypull them in different directions. Indeed, the CFO organization hasboth a lot on its plate and a lot of people to answer to. Stakeholdersinclude the CEO and the rest of the C-suite, the Board of Directorsand regulators. In addition, the CFO organization needs to play aguiding role to the rest of the organization by enforcing spendpolicies, ensuring business operations, accurately forecastingfuture performance and providing data back to managers to enablesound business decisions.Adding to this complexity is the organization structure. For manycompanies, IT, HR and Legal roll up under the CFO organization.Whether these groups report directly to the CFO or through adotted line, the IT, HR and Legal groups can impact theeffectiveness of the CFO organization.CEO and ManagementIT Effectiveness Legal Governance TrainingDaily Accounting Budgeting CompliancePayroll Contract ManagementRevenue Recognition Company StakeholdersFinancingRiskReconciliationsMonthly CloseTax Planning HRMS Regulators Consolidations PlanningInternal Controls CFO Weekly AccountingBusiness Architecture Cash Flow Projections IT OverviewInternal Audit Board MeetingsAsset TrackingTreasury ManagementInternal CommunicationsFX Transactions Loan CovenantsBusiness Intelligence Monthly AccountingInvestor Relations Board of DirectorsNot long ago, the CFO was typically responsible for generating andexplaining the numbers, helping with acquisitions and divestituresand taking the lead with risk management activities. The CFO alsohad to have a solid understanding of the companys strategies andoperations. ArmaninoLLP | amllp.com Page 3 4. Elevating the Strategic Leadership of the CFO OrganizationThen, as a result of the increased scrutiny on corporate governancecaused by corporate failures and fraudulent acts, CFOs and their Managersorganizations were forced to spend the majority of their time on throughout thecountless accounting, regulatory and risk management matters, business keep asking forand less time on more strategic, value added activities. In fact, one- more and morethird of the CEOs, Audit Committee Chairs and Board Members information, that responded to a recent CFO survey concluded that their CFOs and we keepdo not have the needed depth of understanding of strategic giving thembusiness issues to effectively contribute to the development and more and moreexecution of corporate strategy. reports, but it is not enough.Most recently, the role of the CFO has expanded so greatly thatthere is often intense conflict among all the competing demands forthe CFO organizations time. Given the ever changing environmentin which businesses operate, we believe that CFOs must constantlyreevaluate their organizations Evolution to add strategic value totheir CEOs, Boards and Shareholders. This is no easy task,particularly because there is no wide consensus as to where a CFOshould ideally be spending his or her time and resources.Given these challenges, the critical questions are: What is the mission of the CFO organization? How best do we focus our resources to respond to all the demands put on CFO organization? What activities do we perform to ensure success? How much do we spend on developing our capabilities? ArmaninoLLP | amllp.comPage 4 5. Elevating the Strategic Leadership of the CFO OrganizationChallengesWe have studied this issue for many years and have developed aframework that we believe can be applied to all companies,regardless of size, maturity, or business complexity. We haveidentified a way to make measurable improvement for every CFOorganization in an effective and efficient manner.We have discovered through our years of consulting that threethings typically prevent CFOs from striking the right balancebetween all the competing demands:1. Accounting. Surprisingly, most CFO organizations struggle with the Accounting function. Most companies have too many people working on accounting, the timeliness of the accounting is in question or always under pressure, and the accounting staff is often frustrated due to a lack of clear policies and procedures or laborious manual processes. Further confusing the issue is what is considered accounting versus supporting the business operations.2. Business Protection. This area continues to be a challenge to most CFO organizations and really has to do with can the organization predict consistent performance or, better said, can they protect the business from surprises. In most cases, the ability to meet compliance requirements, manage company risk and forecast financial results related to revenue and cost is not optimized.3. Business Leadership. Every CFO wants to be a business leader and a partner to the CEO. However, all of the competing demands on the CFO and the CFOs organization keep this from actually happening. While most CFOs will personally say they have a goal to be a business leader, the activities of the entire CFO organization are primarily focused on other activities such as accounting, internal controls and financial reporting. ArmaninoLLP | amllp.com Page 5 6. Elevating the Strategic Leadership of the CFO OrganizationFrameworkDrawing on our client experience and market research, The CFOEvolution framework outlined below is Armanino Consultings point- We cannot get our employeesof-view on the key business capabilities a CFO organization needs to follow theto focus on to be successful. spend policies put in place.Each of the three key roles must be addressed with a specific plan We continue tofor its goals, expected outcomes, and the resources it will require: find managers throughout the organization 1. The Accountant role. The goal of the accountant role is to be doing what they fast and accurate. If your organization is accurate but not fast, want.use of resources is suboptimal and less time is spent in other key areas.2. The Protector Role. The goal of the Protector role is to manage the entire business with No Surprises. Examples include the ability to accurately forecast revenue, meeting budget to actuals. Additionally, the Protector role encompasses internal controls to prevent fraud, theft, and business loss, and adequately controlling the activities of all employees through documented policies and procedures.3. The Business Leader Role. The goal of the Business Leader is to team with company leadership to accomplish overall business success. This role is focused on teaming with the CEO, the Board and the other operating departments to ensure they have the right information to make the right business decisions. This goal can best be summarized as being Forward and Strategic. Role Goal Accountant Fast & AccurateProtectorNo SurprisesBusiness Leader Forward & Strategic Three key roles for focus and goal settingThe CFO Evolution is a set of initiatives focused on people, process andtechnology. It Streamlines the Accounting function, Optimizes theProtector role, and Elevates Business Leadership activities, enhancingthe value of the CFO Organization. ArmaninoLLP | amllp.com Page 6 7. Elevating the Strategic Leadership of the CFO OrganizationArmaninos CFO Evolution. Does the CFO Evolution frameworkonly apply to the accountants in the business? Absolutely not. Forexample, IT needs to supply systems that automate accounting tomake it fast and accurate, provide systems that allow early warningdetection to enhance the Protector function, and implementBusiness Intelligence tools that enhance Business Leadership.Other examples, such as HR and Legal, would include providingpolicies and procedures around people-processes to increaseefficiencies across the business and proper employee policies toensure compliance with laws and regulations to enhance theProtector role.Role Goal Key Elements Accurate and timely financial reporting Effective and efficient accounting Fast & Accountant systemsAccurate Trained and experienced accountingteam Company wide governance, risk andcompliance Proactive cost control and cost ProtectorNo Surprisesmanagement Effective revenue forecasting andpredictability Actively particpate in strategy setting BusinessForward & Team with business operationsLeaderStrategicForecast and plan the future of thebusinessThree key roles for focus and goal settingWhere Do You Allocate Your Resources Today?Most clients we work with tell us they currently allocate theirresources for each role in the proportions outlined below thoughnot necessarily by design. They admit there is a lot more firefighting and squeaky wheel repair going on than they would like.Role Current Company AllocationAccountant 61%Protector24%Business Leader15%Where are you spending your time?Now, before turning the page, ask yourself Where would I like toallocate my resources? ArmaninoLLP | amllp.com Page 7 8. Elevating the Strategic Leadership of the CFO OrganizationWhere Would You Like to Allocate Your Resources?The interesting insight that most companies share with us is thatthey feel they spend too much time (out of necessity) focused ontheir Accountant and Protector roles, when they know it wouldbenefit the company if they could focus more on their BusinessLeader role. The challenge of course is how, when so manyseemingly urgent and important needs and responsibilities grabtheir attention instead.Role Current Allocation Optimal Allocation Accountant61%28% Protector 24%29%Business Leader15%43%Making the most of your timeThe CFO Evolution is the set of initiatives that transforms the CFOOrganization into a Strategic and Forward-Thinking Business Leader forthe Company. ArmaninoLLP | amllp.comPage 8 9. Elevating the Strategic Leadership of the CFO OrganizationAchieving SuccessLets look at some real world examples where measureableIt is a madimprovement has been made by focusing on these three distinctscramble to pullroles:all theinformation The Accountant: A 400 person staffing agency converted from atogether prior to manual weekly time capture system to an internet-based selfa board meeting.service time entry and automated billing system. Once this wasWe nearly killdone and employees were properly trained, this business reducedourselves getting its accounting headcount by two-thirds while business revenuesready for eachtripled over a three year period.meeting.In our experience, the Accountant area provides some of thequickest, highest impact improvements a CFO organization canattain. In automating a frequently-used process such as order-to-cash or time and employee expense capture, one can drasticallyimprove accuracy while freeing up significant staff capacity. Forsomeone looking to make a pronounced impact on organizationaleffectiveness, the ROI comes in many forms - improved accountingclose process, automation of manual processes, trained personneland increased employee morale.The Protector: An $800 million technology company had receiveda material weakness within their revenue recognition businessprocesses. By re-engineering key controls, taking advantage ofautomation and re-training key individuals, this company reducedmanual processes, developed a stronger revenue recognitionprocess and saved over$5 million over 24 months.Many CFOs and Risk Managers have told us that they oftenstruggle to strike a balance between enhancing stakeholder valuefor their companies and protecting their companies assets. As aresult, gaps can occur in risk coverage as the CFO organization ischallenged to take a company-wide view of the risks that could getin the way of moving forward. Also, overly conservative processesand controls can inhibit growth and innovation and causeinefficiencies. Our view is that the role of the Protector must beoptimized at all levels to allow for creativity and growth whilepreventing surprises. ArmaninoLLP | amllp.comPage 9 10. Elevating the Strategic Leadership of the CFO OrganizationThe Business Leader: A $220 million contractor previously ran400 monthly reports for its project managers. Many of thesereports were old or stale by the time the managers received thedata. This company deployed an internet-based businessintelligence tool which allowed project managers to receive dailyinformation on their projects. No longer were these managerswaiting for accounting to produce the data. Managers were nowgiven real-time, comprehensive information on the business. Eachmanager had access to their data and was empowered to makedecisions like never before. The project payback for this initiativewas less than four months.This area provides the opportunity for the CFO to be proactive inleading the company while raising the effectiveness of the entireCFO organization. A major impact can be achieved by focusing onthe business operations needs and applying the key skills within theCFO organization to meet those needs. ROI for these initiatives areat the business level, improving margins, saving costs andidentifying new business opportunities. ArmaninoLLP | amllp.com Page 10 11. Elevating the Strategic Leadership of the CFO OrganizationPath ForwardConsider how your CFO organization prioritizes and actuallyspends its time and effort around each of the Accountant, Protectorand Business Leader roles versus how you would like to. Thinkabout the advantages of spending more time focused on theBusiness Leader role with the security of knowing your Accountantrole is fast and accurate and the Protector function is optimized.The stakes are high the demands on your time will not decreasenor will business complexity. Without a solid framework forimprovement, much of your teams performance is at risk.The CFO Evolution is your tool for transforming your organizationinto a Strategic Business Leader for the company. By providingfast and accurate accounting, minimizing business surprises, andbeing more forward-thinking and strategic, your organization canmeet its growing challenges and expectations while creatingefficiencies for the company and enhancing overall value. ArmaninoLLP | amllp.com Page 11 12. Elevating the Strategic Leadership of the CFO OrganizationAbout ArmaninoLLPArmanino helps companies succeed by enabling their CFOEvolution. ArmaninoLLP is the largest California-based CPA andConsulting firm offering a comprehensive portfolio of business andIT services to support the CFO organization at each stage of itscompanys business development.Our challenge to you define your CFO Evolution and go for it.Determine how you can streamline your accounting, optimize yourbusiness protection and empower your organziation to be astrategic and forward-thinking business leader in your company. Ifyoure looking for more insight on how to advance your CFOEvolution or how your CFO organization compares to others, wereready to help.For more information, please contact:Tom MescallPartner In-Charge, ConsultingArmaninoLLP925-790-2600 x2812Tom.Mescall@amllp.comSan Ramon Office San Jose Office San Francisco Office12667 Alcosta Boulevard50 West Fernando Street 44 Montgomery StreetSuite 500Suite 600 Suite 900San Ramon, CA 94583San Jose, CA 95113San Francisco, CA 94104925.790.2600 408.200.6400415.568.3280 ArmaninoLLP | amllp.comPage 12