The Next Great Tax Business Ally – the Chief Transformation Officer

Companies in the consumer-packaged goods (CPG) and retail sectors are taking a fresh look at their digital transformation efforts following pressures caused by tight margins, persistent inflation and the ongoing shift to digital and omnichannel business models. They’re looking for foundational, enterprise-wide, long-term strategies that avoid the need for “yet another change program” every two years. And they’re creating a new C-suite role – the Chief Transformation Officer – to make it happen.

That’s the development described in this McKinsey article. Although the consulting firm’s data is from the CPG and retail sectors, my impression is that the trend will spread to other industries and companies. Among top CPG and retail companies in North America, 35% have a transformation officer at the VP level or higher. According to the article, 86% of those transformation executives stepped into their role in 2020 or more recently.

What exactly does a chief transformation officer do? It varies. Some are tasked with specific financial mandates, such as reducing supply chain costs by a specified amount. Others might be asked to contribute to growth goals or help shift the business model. Some are charged with achieving broader organizational or cultural goals, such as advancing digital adoption or breaking down silos between corporate functions.

The article explores the challenges that chief transformation officers face and how companies can help them succeed. A discussion on the personal characteristics critical to making the role a success will interest tax leaders. Chief transformation officers naturally think across business functions and groups, according to McKinsey. “Those we surveyed told us that when initiatives were led out of a particular function, they would fall prey to the biases and preferences of that function, making true transformation more difficult.” 

This could be great news for tax departments. Many tax leaders have been pressing for their tax team’s early inclusion in larger transformation efforts involving the systems that lie at the heart of companies’ digital ambitions. The current round of upgrades to enterprise resource planning systems is a good example. And, of course, nearly all companies would benefit from increased input from tax in discussions of the wider business and strategic landscape. Your new chief transformation officer could be a powerful ally in making that happen.

Tax leaders can get started advancing their digital transformation goals by first laying out what tax transformation should entail.