Paul Ainsworth
Paul is an international CFO with experience at large multinationals, and who has led simplification projects across multiple geographies.
Over the last few decades, the role of the CFO has undergone a profound shift. The historical tasks of the finance function such as books and records, financial reporting, and statutory compliance continue to be important but are now taken for granted by CEOs. The CFO of today and tomorrow must be able to take financial data and use it to influence operational decision making and strategy. But how?
Over the last few decades, the role of the CFO has undergone a profound shift. The historical tasks of the finance function such as books and records, financial reporting, and statutory compliance continue to be important but are now taken for granted by CEOs. The CFO of today and tomorrow must be able to take financial data and use it to influence operational decision making and strategy. But how?
Paul is an international CFO with experience at large multinationals, and who has led simplification projects across multiple geographies.
Almost one in three CEOs worry that their CFO isn't prepared for the challenges ahead. The View from the Top, KPMG/Forbes survey of 549 top executives from six continents
Almost one in three CEOs worry that their CFO isn’t prepared for the challenges ahead – The View from the Top, KPMG/Forbes Survey of 549 top executives from six continents
Thirty years ago, when I was a freshly minted graduate entering the corporate world, the role of the CFO was, in essence, fairly straightforward. The CFO fundamentally had three main tasks: the books and records of the company, financial reporting, and statutory compliance. CFOs tended to be number-crunchers who operated behind the scenes and were usually the ones who said “no” to things due to budgetary reasons. Strategy and decision-making were left to the rest of the C-Suite, while the CFO was confined to more of a “sign-off” role than anything else.
But in the thirty years that I have been operating in this function—in which I have worked in large multinational corporations ranging from $250-$900 million in turnover, and where I have led simplification projects across geographically disparate finance teams in countries like the UK, Germany, Belgium, and Hungary—I have seen a significant shift in the expectations placed on the CFO and finance team. Today’s CFO is fundamentally different from the CFO of yesterday in very important ways. While the CFO of yesterday was more of a support function, the CFO of today and of tomorrow is of strategic relevance to a company. Today’s CFOs drive the direction and success of the organizations they work in, and rightly so, given the ever-changing business environment we operate in.
The purpose of this article is therefore to outline the roles and responsibilities of the modern CFO. I will first run through an overview of the position to answer the questions “What is a CFO?” and “What does a CFO do?” Then, I will share some of my own personal insights that I have developed over my thirty-year career.
People used to think the CFO was there to tell you there isn’t enough budget when you needed something or to simply report financial results after the fact. Today’s CFOs must break away from the number-cruncher stereotype and think of themselves as more of a strategic player in the company. CFOs today need to be creative, understand best practices, and know how to create more value for the company. There will always be a need for someone to balance the books, crunch the numbers, and perform critical routine tasks but the CFO role is much more dynamic today. – Bill Tobia, LLR Partners’ Managing Director of Strategic Finance
There’s no doubt that the historical tasks of the finance function such as books and records, financial reporting and statutory compliance are still of fundamental importance. These tasks continue to be mission critical and fall squarely under the duties of the finance team, and consequently, the CFO that leads the team. But while these CFO responsibilities continue to be relevant, these tasks are now taken for granted by CEOs. This does not mean they are any less important, it’s just that they are now seen as minimum requirements for finance.
What has significantly changed, however, is that the CFO of today and of the future must be able to take financial data and use it to influence operational decision-making and strategy. CFOs must possess many more skills than just the technical accounting background of the past. Today’s CFOs are also effectively Chief Operating Officers in addition to their finance role. They are business partners to the CEO, who help guide and influence decision making using the financial context as an integral driver of such choices.
Given the changing role of the CFO, what are the key skills and competencies that a CFO must possess in order to fulfill their duty? The day-to-day financial focus is still necessary but is diminishing in proportion to the demands of business leadership. Fundamental finance skills are still paramount, but other skills are necessary to provide the service that the CFO of today and tomorrow is expected to provide. I believe that the required skillset of the modern CFO rests on the following four fundamental pillars:
With the above in mind, I’d like to add my personal perspective and advice on what differentiates the best CFOs from the rest.
Behavioral competencies are key to the business partnership role—a “seat at the table” must be earned. A CFO needs to be a visible leader in the business, an excellent communicator, and an influencer. Curiosity is an attribute often highlighted as a required skill—a previous CFO boss of mine would turn up to meetings he had not been invited to, just in order to find out more about what was happening in the business and challenge where he felt decisions were being taken without the necessary finance input.
Finance needs to be embedded throughout the business, providing decision support to key functions such as commercial, operations, manufacturing. The most effective finance teams I have worked in had dedicated finance analysis and support attached to the most important functions in the business. This opens up the dialogue between finance and operations and it fosters a better flow of data between areas of the business. This makes the functions more accountable for their financial metrics and also allows the finance team to provide more insightful commentary through a better understanding of the business. Another previous CFO boss of mine gave me one of the best pieces of feedback I have received—“Don’t be a postbox,” meaning that it’s not enough for finance just to produce static snapshots of the company’s financial health. The CFO must paint the picture for the business and translate the financial data into meaningful commentary, trends, and actions.
Access to timely, accurate data is a key enabler to finance productivity and decision support. Automated reporting and analytics allow more time to be dedicated to forecasting and predictive analysis. Technology will play an increasingly important role for the CFO, but its effectiveness depends on the accuracy, availability, and consistency of data, and on robust, integrated technology infrastructure. Many companies are still struggling to put these foundations in place. To succeed, CFOs will have to be champions and stewards of digital technology. CFOs must adapt to new technology and be at the forefront of ERP implementations and cloud-based solutions. A common mistake I have observed in large scale ERP implementations is that the project does not get resourced with the right skills. Often, an ERP project is seen as an opportunity to “park” underperforming finance talent when the opposite should be occurring—the very best and brightest finance talent should be placed into ERP project implementation teams to ensure success.
CEOs want “more for less” from their finance function. The finance function is now increasingly being assessed in terms of its effectiveness (its ability to deliver what the business needs) rather than a narrower focus on its efficiency (its cost in serving the business).
As we have seen, the role of the CFO is developing and expanding. The CFO of the future will add most value as a business and strategic partner to the CEO, being commercially savvy and managing external relationships. But are CFOs ready? Do they have the necessary skillset to meet the new requirements of the role? What do CEOs and other key stakeholders/peers think?
The answer seems to be a cautious “yes.” According to the 2014 Accenture High Performance Finance Study, “CFOs have taken the right steps and finance is advancing. We see evidence of a stronger and more capable finance function and CFO, which contributes to their growing influence.” In the same report, Accenture found that high-performance businesses:
However, the picture is not always rosy. In their 2018 Survey, The New CFO Mandate, McKinsey found that “CFOs and their peers have diverging views about where CFOs create the most value; non-CFOs most often note the value generated in traditional areas.”
KPMG, in their survey “The view from the top,” also noted the top concerns that CEOs had with regard to the CFO skillset.
In order to gain the skillset required to perform the role, the finance career path looks very different than it did previously. One must:
Investment in digital technology will be vital in managing complexity and driving productivity. The CFO must raise their game in managing, analyzing, and presenting data in a way that yields the greatest value for the business. According to Accenture, “Technology will play a key role in business transformation. It is already transforming the role and expectations of the finance function. Digital technologies present finance leaders with a powerful opportunity to improve and accelerate decision-making, but their effectiveness depends on the accuracy, availability, and consistency of data, and on robust, integrated technology infrastructure. Many companies are still struggling to put these foundations in place. To succeed, CFOs will have to be champions and stewards of digital technology.”
Finally, and perhaps the most important element for me, the increased expectations on the CFO mean increased demands on the whole finance function. The very best CFOs that I observed surrounded themselves with the best talent they could recruit and made a big effort to retain them. They made coaching, mentoring, and leadership development a big priority through all levels of the finance organization. They not only spent time on individual succession planning for key roles in the organization, but also on ensuring the right balance of technical, analytical, and leadership skills within their team. They judged their own capability on the strength of the team they had around them.
This executive is in charge of a company’s financial operations. A CFO's responsibilities include internal and external financial reporting, stewardship of a company’s assets, and ownership of cash management. Increasingly, the role is more forward-looking and expanding to incorporate strategy and business partnership.
In a typical company structure, the CFO reports into the CEO, although it is common for both roles to be part of the board of directors.
Most CFOs have experience covering disciplines such as financial planning and analysis, controllership, and treasury. This may can be obtained via training programs with a company before taking on increasingly senior roles within the business and/or time spent with an accountancy firm before moving into industry.
Typically, a CFO would have a university or college degree followed by a technical accounting qualification such as a CPA, ACCA, CIMA. Increasingly, as the meaning of "CFO" is evolving, leadership and communication skills are assuming more importance.
As well as the requisite technical skills and qualifications, a CFO should have leadership, communication, and influencing skills. A breadth of experience across different finance disciplines and either industries or geographies should enable a CFO to be a business partner and add strategic value.
A CFO looks to contribute outside of the confines of the traditional CFO role, using financial analysis to support and challenge decision-making as well as involvement in strategy. A business environment that enables this is important as well as one that offers the opportunity to undertake different challenges.
Paul is an international CFO with experience at large multinationals, and who has led simplification projects across multiple geographies.
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