CHIEF VALUE OFFICER – THE IMPORTANT EVOLUTION OF THE CFO | 1. WHAT DO WE MEAN BY ‘VALUE’
imperative, it falls increasingly to the CFO to ensure that there is a balance between financial and non-financial drivers. As an all-embracing concept, value optimisation may necessitate taking decisions that are not, in strict terms, financially optimal. In facilitating an understanding of the concept of value it is necessary to consider each of the three levels of value listed above.
Considering whether the CVO role is an evolution of the CFO role and therefore one that is naturally the role of the finance and accountancy profession requires the examination of two aspects, firstly, what we might consider in line with the concept of value and, secondly, how the CFO role is itself developing. If there is a CVO role, what is the value that the role is managing? The CVO role is clearly a discussion point in several professions, however. For example, the Next Level Purchasing Association posted an article in 2018 entitled ‘Could CPO [Chief Purchasing Officer] Role be Replaced by Chief Value Officer?’ (Next Level Purchasing Association 2018). 1.2 A model of value For organisations, there is no single definition of ‘value’ covering either how it is generated or the nature of the stakeholders who may be considered as its consumers. Many of the roundtable participants were keen to stress that value itself is highly contextual for the organisation, its sector, size and location. A CFO from mainland China noted that value, besides the economic value that everyone thinks it can bring to enterprises, also includes the remaining value that lies in the sustainability that it can bring to society, the environment and the talent employed in the enterprise’s operations, all of which benefit from the enterprise’s activities. The so-called value brought to society and the environment is not directly obtained by the enterprise but is generated through the principles established by regulatory markets and authorities. There are, nonetheless, some fundamentals that must be included in a model of value. The model in Figure 1.1 defines three levels of value: n the enablers – the facets of the organisation that represent the assets used to create value n the convertors – the processes by which the organisation combines inputs and creates products and services, and n the recipients of the value that the organisation generates.
Creating and maintaining value is a cyclical activity, so there is a process of return of value from the recipients to the enablers. This process is also summarised in Figure 1.2. The generation of value is a continuous process and this makes it a longer-term activity than, for example, an annual profit or loss calculation. This factor was not lost in comments made by many of the roundtable participants. While for many the financial perspective may be the key
FIGURE 1.1: A model of value
Investors and other financial stakeholders
Customers
Employees
Community
Regulators
Performance management and measurement
Operations and processes
Data
Technology
Social and relationship
Financial
Manufactured
Intellectual
Human
Natural
FIGURE 1.2: The value cycle
Defined
Created
Delivered
Sustained
What people perceive as value
Vision and values of organisation
Products and services
Measured and reinvested
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