What’s behind the rise of the chief performance officer?

The chief performance officer is a new and influential position emerging among C-suite ranks

The chief performance officer is a new and influential position emerging among C-suite ranks, in response to increased demands from boards and greater levels of complexity and sophistication in business.

The role of the chief performance officer (CPO) is an evolution of the chief financial officer role, which is evolving to play a more strategic role which is focused on value creation at the executive level, said John Sheldon, partner and co-founder of executive search firm Sheldon Harris.

“From an old-fashioned ‘financial controller’ tactical role, CFOs now have carriage for all finance related functions within a business (recording, reporting, treasury and tax),” said Sheldon.

“Many now also have larger remits encompassing corporate development, strategy, investor relations, risk, capital management and major transactional projects.

“What’s more, in today’s digital world, real-time predictive data is now available which makes decision making far more accurate and targeted; CFOs are harnessing this for the benefit of the corporation.

“But the demand is moving beyond that,” observed Sheldon, who pointed out that CFOs now have to focus much more on the key business drivers and information flows that help predict business performance quickly and consistently.

“That’s a chief performance officer’s role and is no less challenging to achieve.”

The chief performance officer role goes beyond the CFO skill-set and demands additional complex responsibilities, as it contains CFO responsibilities along with carriage of the strategic agenda.

A chief performance officer must be able to provide insightful and predictive reporting focused on delivering intended strategic outcomes, run the internal productivity process based on “business driver” style reporting, and ensure that necessary capital is available and correctly allocated in the business to support its future direction.

“In today’s digital world, real-time predictive data is now available which makes decision making far more accurate and targeted”

As the role of the chief performance officer stretches into productivity and realising transformational efficiencies, Sheldon said there will be a need for the lead HR professional(s) in the business to be positioned right beside the chief performance officer as they deal with the inevitable people disruption which such programs cause.

“Long term capability planning is a second area in which HR professionals need to be involved,” he said.

“As the business predicts its resource and capital needs into the next decade, long-term capability planning is required to ensure that the prerequisite skills and capabilities are available, as and when required.”

If the HR group does not harness this need, Sheldon noted that the chief performance officer may look outside for such help.

“But in a very pragmatic way, HR should look to ensure the future generations of chief performance officers are being equipped with the skills and experiences to take on the highly challenging role,” he said.

“From a developmental perspective, this will need to cover a wide range of experiences, and be a long time in the planning, if it is to be successful.”

Sheldon noted that the chief performance officer will also have a number of major hurdles to overcome – the first of which is knowledge and information management.

“How do they harness the mass of data now available to organisations and synthesise this into meaningful, insightful information?” Sheldon said.

“How do they efficiently integrate the internal company data with the vast quantities of data flowing around in cyberspace?

“And how do they become the internal information champion and facilitator of insights when each executive will feel the right to own their portion of the data?”

“The CFO does not always have the necessary skills and attributes to make the transition to this new role”

Another related challenge involves futuristic reporting systems.

“Having harnessed the data challenge, how does the CPO then design appropriate reporting systems which influence outcomes through detailed insights – in other words how do they move away from more traditional forms of cost and revenue style internal reporting into more of a ‘business driver’ based reporting approach,” said Sheldon.

Most current systems are geared towards the more traditional forms of reporting, so a rethink on systems, structures and information collection and collation will be required.

“Changing the focus of the reporting system may also aid in stopping the “deep dives” which many businesses get stuck in and force them to focus on those key drivers of business results,” he said.

A third challenge for the chief performance officer revolves around transformational efficiencies.

“From the insights they will be able to provide, the logical extension for the CPO is to begin driving the productivity/efficiency program, providing feedback on achievement and challenging the business to think outside the box in a collegiate and consultative manner,” said Sheldon.

“If the chief performance officer is also measured against exactly the same achievement criteria as operational executives, this transition should be more readily attained as all parties are focussed on driving towards the same outcomes.”

Long-term capabilities are a fourth hurdle for chief performance officers, and Sheldon said this involves taking responsibility for running the long-term resource capture and allocation process for the business.

Most companies have strong approaches for the short and medium term (from one to three years) but this new approach requires a five to 10-year horizon.

With the availability of better, more pertinent and predictive data, Sheldon said this task becomes more “doable”.

“This may mean that the CFO does not always have the necessary skills and attributes to make the transition to this new role”

Companies are increasingly looking for individuals with skill-sets to fulfil the challenging position of the chief performance officer, Sheldon noted.

“This may mean that the CFO does not always have the necessary skills and attributes to make the transition to this new role,” he said.

“However, in today’s rapidly changing business environment, where advances in digital capability and disruptive technologies are challenging fundamental norms in many businesses, this evolution is becoming more necessary.”

Sheldon also noted that it is unlikely the chief performance officer will take on the responsibilities of the COO, who will continue to focus on the operational aspects of the business but without the broader remit of the chief performance officer.

“What does the emergence of the chief performance officer mean for the CEO?

“Probably not much. The CEO will still be the leader of the business, managing performance internally and focussing on the external stakeholders.

“The emergence of the chief performance officer should allow them to better focus on the external challenges, knowing that the internal needs of the company are being better addressed in a more holistic and complete manner.”

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