This is an excerpt from a blog post from our partner Workday Adaptive Planning. In It, A McKinsey & Company senior partner lays out five elements that help drive performance, and finance leaders from Adobe, e.l.f. Beauty, and TD Bank share their individual approaches to growth, in a Fortune virtual event.
For CFOs, a growth mindset means the ability to help their companies thrive by firing on multiple cylinders.
That’s according to Ishaan Seth, a senior partner and co-lead of global banking and securities practice at McKinsey & Company, who outlined a three-pronged approach that includes customer acquisition and retention, innovation, and building new businesses.
“The mindset that personifies the best growth leaders, be they CFOs or CEOs, are those who can help the company operate across all three of those areas at once,” Seth said in a Fortune webinar sponsored by Workday. “That’s the essence of the growth mindset.”
Developed by Stanford University psychology professor Carol Dweck, the concept of a “growth mindset” was based on research that found people enjoyed greater success when they believed their talents could be developed “through hard work, good strategies, and input from others.” The research also found effects for organizations: “When entire companies embrace a growth mindset, their employees report feeling far more empowered and committed; they also receive greater organizational support for collaboration and innovation,” Dweck wrote.
In practice, a growth mindset can be seen in the C-suite of successful organizations. Seth said McKinsey surveyed 2,500 public companies over the past two decades and found five variables that drive outperformance in relation to their peers.
- 1. Resource allocation. “How dynamically or fluidly are you reallocating resources to newer businesses and opportunities?” Seth said.
- 2. Mergers and acquisitions. “M&A and a constant portfolio pruning both on acquisition but equally on divestiture” is critical, Seth said. “Are you regenerating the base?”
- 3. Productivity and efficiency. Outpacing peers is important.
- 4. Technology and technology innovation. “It’s a space where the arms race to keep current has in many cases across industries outstripped the ability for companies to invest at the level to be on the leading edge,” Seth said.
- 5. Margin expansion. This is accomplished by refreshing the value proposition, he added.
When it comes to technology, finance leaders are uniquely positioned to drive innovation at scale by making the right investments and establishing the pace necessary to more quickly benefit from that technology—whether it’s artificial intelligence (AI), machine learning (ML), or generative AI.
Seth cited a McKinsey study that found generative AI could potentially add $2.6-$4.4 trillion per year to the global economy, noting that the United Kingdom’s entire GDP in 2021 was $3.1 trillion.
Finance leaders, then, must understand how to invest intelligently in technology and help set the pace at which to do so.
“Is there a competitive advantage in getting to a higher-quality capability around whatever the technology may be 12 or 20 months sooner than your competitors?” Seth said. “The CFO can play an outsized role in driving speed as a source of competitive advantage.”
Seth added that calculating the return on investment (ROI) on technology spending might well require organizations to rethink their key performance indicators (KPIs), with CFOs driving the conversation around growth metrics.
The CFO, he said, owns the value creation story of a company. “We see the role of the CFO as being able to describe what it would take to double the market cap of the company in five years.”
Creating an Atmosphere of Innovation
To Mandy Fields, senior vice president and CFO at e.l.f. Beauty, leadership means promoting an organizational growth mindset by creating an environment that fosters innovation.
“It’s not the manager’s job to prevent risks, but it’s the manager’s job to make sure it’s safe for others to take them,” she said, attributing that ideal to the company’s 17 consecutive quarters of net sales growth—with a fourth quarter that saw sales growth of nearly 80%. “A lot of that has been not being afraid to take risks.”
As an example, Fields said e.l.f. Beauty in 2019 decided to invest in growing their presence on social media video platform TikTok, a move that resulted in “amazing” engagement. “As we went into the pandemic in 2020, when everybody was rushing in to figure out how to get on this platform, how to engage with the consumer, we were already there.”
Fields said the company holds annual off-site meetings to align its people to its priorities. “It helps us think about how we set an annual budget, but it really is an opportunity for inspiration, imagination, and possibility to converge,” she added. “That’s motivating for the team—not just for finance but for the entire company—to know that even though we’ve experienced this tremendous growth, there’s still so much more ahead of us.”
‘Be Constructively Unreasonable’
For enterprise software company Adobe, innovation is part of its DNA, according to Dan Durn, CFO and executive vice president, finance, technology services and operations.
“We are consistently reinventing the company and engaging with customers in a way that’s very relevant for them,” he said. “Status quo is not a business strategy.”
Durn said understanding Adobe’s products “with granularity” helps the company innovate in order to serve customers better, making its growth and market position sustainable for the long run. He added that there’s “a velocity within the company” and clarity about innovation, as well as how to achieve growth via acquisitions.
“We’re going to primarily be an organic, innovation-driven company,” Durn said. “But we will complement from time to time, and you can see that speed play out not only in our decision-making but the way we want to enable customers as well.”
The concept of a growth mindset—and continuous learning—is critical within a technology company, Durn said, offering a guiding leadership principle: “Be constructively unreasonable, which is that sweet spot of stretching people to more than they thought was possible and getting them to lean into problems and deliver more than they thought was possible.”
Growth on Personal and Organizational Levels
The variability in the macro environment, along with competition for customers in the retail banking space, keeps TD Bank CFO Xihao Hu focused on innovation on the customer-facing side as well as the back end.
“We are working on enhancing our strategies to make sure we not only defend our turf but can continue to speed up our customer acquisitions, bring new customers in, and retain the loyal customer,” he said, adding that the bank had recently launched two new, unique credit card products and is looking at expanding its commercial banking into new geographies.
TD Bank’s growth mindset, Hu said, shows up on organizational and personal levels. “Once we had the strategy set, we embarked on a journey to tell the story across TD Bank in the U.S.,” he added, sharing in detail the bank’s plans with leaders who would then “take those stories back to their teams to cascade that sense of a mindset of growth.”
Hu also described a three-year blueprint for finance employees to improve their storytelling abilities to help TD Bank’s business partners grow. “We want to shift from a traditional role of overseers of past transactions into strategic partners to our finance employees,” he said.
Watch the full Fortune webcast “Emerging CFO: Maintaining a Growth Mindset in Turbulent Times.”
Read the full blog post on the Workday blog.