The evolving role of today’s CFO
(As originally published in FEI Canada F.A.R. member e-newsletter, October 2012)
By Kevin McKenzie, partner and Canadian Business Development Leader, Ernst & Young LLP
Corporate CEOs are relying to a greater extent on CFOs to help them develop strategy and support growth and operations initiatives at their companies, according to a new report from Ernst & Young.
Views. Vision. Insights. The evolving role of today’s CFO is based on interviews with CFOs from companies in the Americas including Coca-Cola Enterprises, Nike and TD Bank Group. The report supplements earlier research with CFOs in other parts of the world.
The report indicates that while boards and external stakeholders see CFOs as a vitally important objective voice on financial performance, many of today’s CFOs have a growing influence in enabling operations, including reaching into business decision-making on the commercial side.
While CFO roles and responsibilities are rapidly evolving, fundamental skills in finance are still paramount. Many of the respondents indicate that the necessity of controlling cost, managing risk and maintaining liquidity were brought to the foreground by the financial crisis.
Findings also show that CFOs in the Americas are extremely satisfied in their current roles, but are more likely than their peers in other parts of the world to aspire to taking a CEO position at some point.
However, one of the biggest challenges facing contemporary CFOs is communicating complex issues in ways that a variety of audiences can understand when making important decisions about their role or stake in the company. These audiences include investors, financial analysts, customers, partners and employees. In today's 24/7 world, where stakeholders demand accurate information and transparency in real time, the pressure is on the CFO to be a world-class communicator.
Broad responsibilities and contribution
When asked to describe their roles, the CFOs interviewed outlined a broad range of responsibilities and agreed that these comprise six inter-related principal activities (summarized in the wheel below). CFOs contribute in all of these areas. However, they prioritize tasks differently based on market conditions and their company’s progress toward realizing its strategic agenda, as well as how their role operates within the organization.
The CFO’s role
Six principal activities lead to the success of today’s top finance executives Views. Vision. Insights. The evolving role of today’s CFO, Ernst & Young, 2012.
Today’s successful CFO has a breadth of experience across the business, in addition to his or her in-depth knowledge of finance. Those aspiring to a CFO position must present a skill set vastly more varied than the traditional career path has entailed and focus their development in the following areas:
- Gaining a breadth of finance experience
- Developing commercial insight
- Building a balance between traditional finance and other skills
- Looking for leadership opportunities and team-building skills
- Gaining international exposure
- Participating in or leading finance transformation initiatives and major change programs
- Seeking M&A experience
- Getting exposure to the market and its stakeholders to develop the communication skills that are becoming a differentiator
- Proactively building effective relationships with the board
The common elements
Today’s CFOs are engaged, focused, strategic and versatile. They are thoughtful and entrepreneurial on behalf of their organizations, while remaining focused on maintaining the integrity of the finance function.
While different CFOs prioritize different activities, our interviewees agreed on what CFOs must do to be successful:
- Maintain a strong relationship with the CEO, have a role in supporting strategy and help to develop it.
- Have a variety of experience outside finance — including in international and operational/commercial roles.
- Have the ability to monitor compliance and controls, which have become more complicated in today’s global environment and remain a vitally important responsibility.
- Realize that developing the skills of the next generation of financial leaders is an ongoing process.
- Be strong communicators. CFOs not only address the needs of external stakeholders but also translate complex ideas for different audiences internally.
- Focus on business value.
What is certain is that the CFO role in today’s leading companies continues to evolve, and CFOs must be adaptable with the talent necessary to meet a continually changing set of circumstances.
About the report:
Views. Vision. Insights. The evolving role of today’s CFO is the result of interviews conducted with CFOs in the Americas (Canada, the US, Mexico and Brazil) during 2011 and 2012. Respondents are CFOs from ADT, Archer Daniels Midland, Baker Hughes, Coca-Cola Enterprises, Delta Air Lines, Guess?, LyondellBasell, Molex, Navistar International, Nike, OfficeMax, Quintiles Transnational, Ralph Lauren, TD Bank Group, Tetra Pak, S.A. de C.V., United Stationers, Votorantim Metais, W.W. Grainger and Xerox.
Our research correlates with findings in other parts of the world and supplements The DNA of the CFO: an Ernst & Young study of what makes a chief financial officer and Finance forte: the future of finance leadership.