{"id":20105,"date":"2020-01-16T05:00:00","date_gmt":"2020-01-16T12:00:00","guid":{"rendered":"https:\/\/www.salesforce.com\/?p=20105"},"modified":"2020-09-18T00:35:18","modified_gmt":"2020-09-18T00:35:18","slug":"why-cfos-need-to-rethink-what-it-means-to-create-value","status":"publish","type":"post","link":"https:\/\/www.salesforce.com\/news\/stories\/why-cfos-need-to-rethink-what-it-means-to-create-value\/","title":{"rendered":"Why CFOs Need to Rethink What it Means to Create Value"},"content":{"rendered":"\n

Editor’s Note: This story was first published<\/a> on the World Economic Forum site.<\/i><\/p>\n\n\n\n

As the Fourth Industrial Revolution makes business more and more complex, many executives feel the pressure to focus on satisfying the immediate demands of shareholders and delivering the current or next quarter’s results.<\/p>\n\n\n\n

In this climate, it is tempting to take an ever more short-term view of financial performance. It\u2019s also tempting, especially for CFOs, to try to limit the number of groups you\u2019re seeking to please, prioritizing shareholder interests above the interests of others.<\/p>\n\n\n\n

In fact, there are many forces that encourage business leaders to work this way. Those include quarterly financial reporting and its associated analyst and media attention, and the thoughts of early business leaders and academics.<\/p>\n\n\n\n

A great example of the latter is the Nobel Prize-winning economist Milton Friedman. In his now-famous statement about corporate responsibility, Friedman argued in 1962: \u201cThere is one and only one social responsibility of business \u2013 to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.\u201d<\/p>\n\n\n\n

However, I believe there is both a moral and business imperative to do more than increase profits. My fellow CFOs and other leaders should respond to today\u2019s rapid technological and societal change by taking a long-term view.<\/p>\n\n\n\n

Companies that take a long-term view and consider a wide range of stakeholders \u2013 such as customers, employees, partners, the environment, and the communities in which we serve \u2013 have been shown to be more sustainable, innovative, and profitable.<\/p>\n\n\n\n

In 2017, the McKinsey Global Institute published research<\/a> showing that \u201ccompanies deliver superior results when executives manage for long-term value creation\u201d. The group analysed the performance of 615 large US non-finance businesses from 2001 to 2015 and found that those with a long-term focus had delivered 47% higher average revenue growth, and 36% better earnings growth than those with a shorter-term focus. They also outperformed on market capitalization growth and their contribution to society through job creation.<\/p>\n\n\n

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