The Evolving Role of the CFO: Making the Shift from Reporting on the Journey to Leading the Way

Written by Carol Coughlin. Posted in Business Leadership

The CFO of yesterday is gone. In their place is a completely new breed of CFO, one who is desperately needed at the strategic table, who has earned their seat there and who plays a key role in guiding the company forward.

Rather than strictly focusing on the numbers, they have their eyes on the big picture – and their hands on the wheel. Not only do they help the CEO navigate the road to the future, but they also recognize the interrelationship between their role and that of every department, as well as the interconnectedness of every business need, goal and decision to the financial function.   

In short, they know and do things beyond yesterday’s CFOs.

Why Is the CFO’s Role Changing?

Our fast-changing, technology-driven, data loving business environment has opened the door to disruption on all fronts. Uncertainty, up and down markets, increasing regulations and tariffs, along with the critical need for innovation and access to and reliance on analytics, have all required companies to rethink the CFO’s responsibilities, role and ability to impact the company.

According to a survey conducted in April and May of 2019 by The Wall Street Journal Custom Content group and Coupa, “…in the past two years CFOs have needed more focus on technology (66%), more extensive participation in strategic business decisions (60%), more diverse types of risk management (59%) and more use of data analytics (57%).”

So what does the new role of the CFO actually look like?

No Time for Honeymoons

The new role of the CFO means there’s no time for the traditional “honeymoon” period when first starting the job. In fact, the most successful CFOs indicate the need to simultaneously develop relationships with the leadership team and the finance staff, work to understand key business drivers and operations and communicate with external shareholders, all within the first 90 days.

To accomplish this, this new type of CFO prepares for the job well before the first day and comes in with their action plan already developed. They are able to hit the ground running, rather than spend valuable time getting up to speed on the basics.

Cross Functional Collaborator

To be highly effective today, a CFO needs to spend more time out of their office than in it. Specifically, collaborating with the IT department, human resources, marketing, sales and operations.

It’s the CFO’s new role to ensure these departments have the financial and operational tools needed to measure performance, steer technology management and improve talent acquisition, retention and development. Additionally, CFOs need to identify the interplay of one department’s decisions on another department and on the company as a whole, as well as understand what’s happening in the larger world in order to help the company leverage trends, seize opportunities and prepare for challenges.  

Today’s CFO also leaves their office door open. They’ve built or inherited a financial team and worked hard to make that team strong, filling knowledge and skill gaps as well as regularly tapping into their team’s knowledge about what’s happening within the company.

More Focused on Risk & on More Types of Risk

Traditionally, CFOs have had more focus on the rearview mirror than today, taking on largely functional financial responsibilities and risks. Now CFOs need be forward focused and also take responsibility for:

  • Operational risks, including those related to business operations, fraud, cyber attacks and suppliers.
  • Strategic risks, including those related to brand reputation, capital, the macro-environment and industry dynamics.

In other words, CFOs no longer meet a company’s needs if they focus largely on the functional financial arena (ensuring compliance, performing audits and managing the budget), simply because these things are not enough for a company to survive, much less thrive in today’s business environment.

Tied to Talent

The new role of the CFO also means expanded responsibilities related to talent because human capital is so tightly tied to a company’s performance, and also because the cost of a subpar retention or development effort is so high.

Specifically, today’s CFOs work on increasing their organization’s attractiveness to top talent and its ability to keep that talent. Even before that, though, this new type of CFO would have also played a larger role in identifying and developing a strong talent strategy in the first place.

Today’s CFOs must also keep a watch out for performance decreases related to talent and be on top of talent management because of its relationship to accuracy in forecasting and budgeting. They also need to take on the responsibility of managing areas of talent risk and improving the strength of the company’s talent pool. Especially improving the strength of those players working on critical corporate functions.

Taking on Tech

The importance of technology in business today cannot be understated and, because of that, CFOs have typically played a role in developing and managing technology strategy. But the line between tech and finance is becoming less and less visible and companies need their CFO to take on even more responsibility related to IT, including contributing even more to technology strategy development.

In response, CFOs are developing financial teams that include experts in analytics, including predictive modeling. They are working with IT on how to best use advanced analytics, automation and the cloud in service of reducing the cost of the financial function and increasing the financial team’s performance. Not to mention, reducing the cost of delivery and increasing employee performance across all departments.

As we discussed previously, the new role of the CFO also includes identifying risks related to technology, along with ensuring transparency related to investments in IT and the ROI of technology initiatives.

Lead on Major Moves & Milestones

CFOs have always needed to know how to effectively guide a company in making key growth decisions, as well as how to enable the company to act on its growth goals. However, CFOs of the past often did not have the expertise, skills or tools needed to lead growth effectively. But today’s CFOs have to be able to guide growth, especially because as growth continues, the stakes only become increasingly higher and the moves a company makes and the milestones it reaches are real make or break moments for the company.

IPOs, acquisitions and sales are great examples of times when anything less than a CFO with a forward-looking perspective and expanded responsibilities won’t do. This CFO may still not have all the experience needed to manage every aspect of these ventures, but they know what’s needed and they prepare by bringing in other experts to play various roles, such as an IPO-experienced tax adviser. Ensuring all critical skills are within the company during an IPO, acquisition or sale, frees the CFO to work more closely with the management team in executing these corporate growth and/or end-game strategies and to work more diligently on investor relations.

There’s Nothing Today’s CFO can Afford to Ignore

We’ve covered just some of the ways the CFOs role is changing and expanding to align with the realities of today’s business environment. But there’s virtually no area of business that the CFO should not influence. Whether they are sharing or receiving insights, collaborating on strategies, making success-critical decisions, reducing risk or preparing the company for the future, a top-notch CFO who meets the demands of today’s business world adds immeasurable value to a company.

So, how do you find this new type of CFO? We’ll leave that question for next time.

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Carol Coughlin

Carol Coughlin founded BottomLine Growth Strategies, Inc., in 2006 as a way for small and medium-sized businesses to access the same high-level financial and operational expertise that gives large companies a distinct advantage. Using her own extensive corporate experience and willingness to sit in the hot seat as a catalyst, Carol helps BottomLine Growth clients climb to the summit of their success.
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