Storytelling Is Not Just for Movies!

Think about your favorite movies.  Did the plot tie together?  Did the pace keep your interest for the whole movie?  Were the characters well defined so that you became emotionally invested?  Did you walk out of the movie wanting to go back and see it again?  If so, that is great “Storytelling.”  I am not saying CFO’s need to be screenwriters, but they do need to grab their audience’s attention, keep it and provide a fresh eyed analysis that leads to smart business decisions and value creation for the whole enterprise.   In fact, as AI continues to evolve the real value-add for the Office of the CFO will be on financial planning and analysis.  Data can become a powerful asset when transformed into actionable information; otherwise, it is just numbers.

Times Have Changed:

The Chief Financial Officer (“CFO”) role has changed dramatically over the last decade.   It is not enough to be the purveyor of the finance and accounting group, delivering solid financial reporting with a sustainable control and governance environment.  That is now just table stakes.  The CFO must have a good handle on the operations. For companies that do not have a Chief Operating Officer (“COO”) role, the CFO tends to be the de facto COO.  The CFO must be one of the most well-rounded members of the C-Suite because the Office of the CFO reach extends across and down through the organization.

In the age of Big Data and Data Mining, you want to be able to present a case that influences decision-making.  Being able to tell a story while using data in a business setting is critical for any financial executive today.  It is about the “WHY” behind the numbers. 

Creating a culture of financial literacy across the enterprise is the goal.  As finance professionals we view the numbers as second nature; however, most of the organization, including at times other members of the C-Suite, need a way to better interpret what is behind the numbers.  If you can align the entire organization, from the receptionist to the C-Suite, so that everyone knows how their positions create value and add to the bottom line, then they will be more engaged internally and externally.  That is a value-based culture.

Chief Influence Officer:

As more and more companies have moved away from the old command and control structure and into a flatter connected matrix organization, the CFO must operate principally through influence.  This requires a softer skillset.  So how do you influence a decision without your audience realizing your hand is on the tiller.  One way is through your choice of presentation formats.  Another is how you set the agenda so that the right, and sometimes difficult issues come to the forefront and get discussed.   One of Ronald Reagan’s favorite sayings was “there is no limit to the amount of good you can do if you don’t care who gets credit”.  Putting this concept into practice means that the most effective insights and execution plans are when the audience comes around to conclusions themselves and feel they had a hand in the process.  Influence is the superpower of the CFO. 

Telling Your Story:

• How do you create a story that resonates with all stakeholders?  By keeping it simple, and eschewing the acronyms finance people love to throw out.  Don’t just regurgitate the numbers, get to what is behind the numbers:
• How do you link operational strategy to what you are seeing in the Company’s results?
• Is the strategy working or does the organization need to pivot? 
• What levers does the business pull to make a difference and add incremental value?
•  What measurements or Key Performance Indicators (KPI’s) do you need to track and report against?
• If you have multiple locations performing the same service or making the same product, how do they line up in terms of performance?
• Can you extrapolate best practice insights from the top tier performers?

As stated earlier, keep it simple, you can over-measure and over-report, then the message gets lost in the data.  Realistically, a business has only a handful of KPIs that really move the needle in a meaningful way.   Getting too much into the weeds can lose your audience’s attention and you end up with that blank stare.  That is why financial storytelling is essential because it helps make sense of the vast amount of financial data and information that is available.   

Keep the Risk Environment Top of Mind:

Evaluating risk is job one for the CFO.  Every business decision has an element of risk.  The CFO’s financial analysis must put that risk in perspective.  For example, in M&A decisions there are different levels of risk, such as proforma numbers may be difficult to achieve and then there is the bet the Company risk.  Identified risk should be countered by potential mitigating responses if the risks become reality.  It is human nature to want to please the boss and present positive analysis.  While no one wants to be labeled the “NO CFO” the way you present your analysis and conclusions matters.  In fact, the risk message carries its own level of risk for the CFO as you do not want to appear to dampen the entrepreneurial spirit of the Company. However, in some cases, you may be the last line of defense for irrational decision-making.  This is when you let the financial analysis tell the story for you.  That story must be built on valid assumptions with sound reasoning and supported by facts.   Hopefully, the Company’s processes have a risk register, or acceptable risk levels have been embedded into the strategy and approved at the Board level.    

You are probably now asking the question… Okay I get it, but where do I start?

Structure Your Storytelling:

Tailor the Message to Your Audience:  Who is your audience: the Board of Directors, a Private Equity group, the rank and file, or the investment community?  The one constant across all audiences is to keep it simple; however, the level of detail required may vary.  What message or insights do you want to convey?  How does the data support your findings?  For example, any CFO that has dealt with Private Equity owners knows that they crave data and transparency.  Providing timely, consistent reporting and analysis around key value drivers, both financial and operational, will go a long way to validating the Company’s strategic execution or point to corrective actions needed.  When done right, in Board meetings, the CFO will spend little time looking at data in the rear-view mirror. Instead you will be focusing your audience on capital allocation, strategy, and identifying and discussing opportunities and risks facing the business. 

Crafting Your Story:  Construct a narrative that ties the data with the analysis to support your conclusions.  This is the WHY behind the numbers.  Put the story into context for your audience; provide clear easy to grasp concepts that make the numbers come to life.   Where is performance solid and what areas need improving?  Is a 10% growth rate good? You might think so, until you realize the market and your competitors are growing at 20%.  What challenges must be overcome and what opportunities need to be exploited?  How do you want the team to respond to the message?  The heart of business is about choices and the allocation of capital resources (financial and human).  The most successful CFOs provide the right information at the right time that allows the CEO and management teams to optimize results. 

Transparency: One of the key tenants of the Office of the CFO must be transparency.  You want to ensure you have” one version of the truth” across the enterprise.  The CFO’s role then is to establish and communicate the truth of performance.  A KPI in Division 1 compares succinctly to the same KPI in Division 2.  This provides the organization with faith in the numbers so that business decisions are grounded in sound and consistent analysis.  Once you lose that trust it is incredibly hard to regain.  You probably know the saying “bad news does not age well.”  So why does good news travel at the speed of light and the CFO tends to go digging to uncover the bad news?  Communication is key and having integrity in the numbers and its analysis will help drown out the noise from the naysayers. 

A Picture is Worth a Thousand Words: However, too many pictures can muddle your message, especially if there are inconsistencies or they are not important to the story.  Using visual aids can highlight data in a way that words cannot.  Some people are just better visual learners; therefore, present visuals that capture data and metrics that drive the business and speak to execution.  If you want to create a culture of execution, then you better be measuring the right stuff.  Again, all charts and graphs should support your hypothesis. 

Connecting the Dots: Make sure the presentation connects with the audience and all the data and analysis comes together. This is where you tie a bow around your findings that hits the right notes with your audience.  One of the best compliments a CFO can hear is “I never really had this level of appreciation for the numbers and what they are telling me.”  This is especially relevant when you have people who have had long careers in the industry; therefore, they have gotten comfortable and used to making decisions based on their gut feeling.

Conclusion

Storytelling is an art not a science.  In the current age of texting and sound bites of information, the art of great written communication seems to be lessening in business.  The CFO’s that can dial in and craft a story around the numbers will be able to differentiate themselves internally and externally.  Operational executives will view you in a different light, because your analysis and insights will help them run their businesses better.  Make heroes of your peers.   They will make sure you are pulled into the tent, which in turn gives you a deeper insight into the business.  Make the numbers jump off the page and the story will come to life just like in the movies.