CFOs have a chance to help their organizations move forward in a way that syncs with their overall financial goals.
The role of a chief financial officer is often linked to conservative thinking, financial prudence, and being cautiously skeptical when it comes to annual budget meetings—this mindset can lead to CFOs being seen as a hindrance when it comes to company innovation, according to a research article from McKinsey & Company.
CFOs have a chance to shake off these old perceptions and become innovation allies, helping their hospitals and health systems move forward in a way that syncs with their organizations' overall financial wellness and strategic growth initiatives.
"At base, the innovation process is about allocating resources toward initiatives that create value for a company and, ideally, change an industry," according to the McKinsey research. "To innovate successfully, companies must identify the most promising projects and set clear goals for realizing them, regularly measure progress in reaching those goals, and change hearts and minds—internally and externally."
McKinsey researchers say CFOs can become champions of innovation through these five steps:
Step 1: Incorporate innovation goals into company growth plans. Through greater collaboration with the C-suite as well as hospital staff, CFOs should answer two questions critical to building innovation: Where, and how does the company expect to find growth? And what role should innovation play in securing that growth?
By establishing a "green box"—or what McKinsey describes as "an effort to quantify how much growth in revenue or earnings a company's innovations must provide in a given time frame," the CFO can establish new objectives that center on innovation.
Step 2: Explore and validate new and untested innovative ideas. CFOs should focus less on cost and more on "creating a new mechanism to explore the most promising ideas," according to the McKinsey research. Once identified, the CFO and other leaders can test ideas, learn their merits, and move forward with the innovations from there.
Step 3: Accelerate the typical budget process. Innovation can't be limited to once a year. There is often a delay between the budget and innovation cycles, and that means changes in the market or technology could hurt the innovation project.
Step 4: Clearly establish performance metrics for each innovative project. One issue that can creep up when attempting to innovate and establish new initiatives is trying to report and measure the performance of new projects. Frequent communication about the status of innovative projects will help CFOs and other leaders understand the value of these initiatives better than sporadic reviews.
Step 5: "Upskill and empower the finance team." Teams may be hesitant to bring innovative ideas to the CFO because of the assumption the CFO will be too focused on the numbers to approve projects. Therefore, CFOs need to make it clear that they are allies of innovation and that they understand strong innovation can have a positive impact on the organization's overall financial well-being. The CFO should be willing and eager to get involved with projects at their earliest stages, so they can incorporate those needs into their financial plans, and help the project succeed.
Amanda Schiavo is the Finance Editor for HealthLeaders.