Over the past few years, we’ve seen an evolution in the role of the CFO from a technical accounting whiz to a forward-thinking performance leader who helps to lay a strategic path for growth.
However, while CFOs are continually advancing to the front lines, they’re still expected to be focused on the accounting health of the business, including bottom line cash flows, controls, costs, risks, and more.
So how can a senior financial leader embrace this growth and evolve their roles without losing their minds? In September, The CFO RoundTable NYC presented “The Evolving Role of the CFO: From Finance Expert to Operational Leader,” where a panel of CFOs, CEOs and board members discussed why this evolution got started it the first place, business scenarios where we are seeing this evolution play out, and how today’s CFO can manage these multiple roles successfully.
CFO and COO,
|M. Tatum Pursell,
Before we can answer the question of how to deal with the evolution of the role, we must first address why the role of the CFO is changing in the first place. And according to our panel, there are two sides to this, one which is a little less complicated than the other.
First, thanks to SOX, the CFO has become a key player on the management team who absolutely must understand all aspects of the business. As one panelist stated, “The CFO is now not only the Chief Financial Officer, but also the Chief Accountability Officer.”
Secondly, thanks to our new working economies and leaner organizations, all members of the leadership team have had to evolve and take on more responsibility outside of their normal skill sets. And while once upon a time the CEO might have relied on the COO to run the company, their reliance is now shifting to the CFO, or the “Inward facing CEO,” as referred to by our panelists.
In fact, the panel urged attendees to embrace this role of the ‘Inward facing CEO.’ Successful CFOs are those who are jumping in to help improve all business units, including sales and client resources, investor relations, helping to define corporate strategy, and more.
Evidence of Evolution
The panel cited several key areas where they see their CFOs advancing, including:
#1 Capital Management Strategies
Gone are the days of just reporting on the numbers in the past tense. Rather, our panel stated that CFOs must understand the necessity of how to manage cash at a finite level, including why you need it and how to put it together. Regardless of whether your goal is a merger, acquisition, IPO or selling to a PE firm, the CFO must be sophisticated in dealing with these scenarios and the capital needed to pull them off successfully.
For example, if you are on the acquiring company side, you must be ready at all times to articulate to your investors how you are going to unlock the value of your business. A great example of this is the acqui-hire strategy that we’ve seen as of late. You must be well-versed in the skill set of the talent you’re looking to acquire, the types of companies that this talent belong to, and must be able to articulate your understanding of the business to demonstrate synergies and benefits.
Not only should you be able to articulate these benefits, you should be on the hunt for these companies and talent early and often.
#2: The IPO Process
Carrying on in the area of capital management is the greater focus in IPOs. In fact, one panelist stated that “the preparation of an IPO is more challenging than a sale to a private equity firm. Everything about your personally must be amped up – your professionalism, your vocal and written communication skills, and especially your interaction with your board.”
Why? It’s not just your CEO that’s on the roadshow – it’s you, the CFO. In fact, even before the roadshow happens, the CFO is the one relied upon to establish relationships with investment banking firms and to identify the operational metrics that will be presented to those firms. Further, it’s usually the CFOs responsibility as well as build up the backend infrastructure of the company to support an IPO process (i.e., supporting financial team, systems and reporting infrastructure, etc.)
And when does this preparation happen? At least 24-36 months out. That’s three years of planning and building that the CFO must do to help carry off this feat.
#3: Risk Management
Ever more pressing for strategic CFOs these days is a thoughtful and actionable risk management strategy. Today’s CFO must know what is going on in their sphere of influence, and be prepared for worst-case scenarios.
CFOs must also be ‘enforcers’ within their companies, and understand ROI and investments within their business. For example, one of our panelists stated that he regularly asks his CFOs to put together plans on how their investments will prove out ROI over time.
#4: Internal Business Partnerships
Today’s business relationships require a high level of emotional and political intelligence to carry off successfully. And quite frankly, those two attributes are not ones that precede the role of the CFO.
One of the areas that our panelists stated that they’re seeing a higher level of involvement by the CFO is in sales and marketing. After all, it is absolutely critical that the CFO understands the sales and marketing process, and becomes a business partner to these units. As one panelist put it, “Stop being a sales prevention department, and start being a sales partner.”
A bit of advice from our panel – a good step in the right direction is for the CFO to clearly illustrate what a good sales deal looks like. Set the standard, but allow fluidity.
Ready To Move Forward?
Our panelists offered several key pieces of advice to help manage the evolution of your role as CFO, including:
- Set realistic expectations of your role up front, and align them with your CEO and board. Be careful not to expand beyond what your company needs.
- Be clear as to who has authority. One panelist puts together an authority spreadsheet with a present ‘huddle’ of go-to executives.
- Have a clear understanding of your role and long-term goals, and try to over-hire as roles frequently change and expand.
- If a CEO role is a career goal for you, build up your salesmanship and push yourself. Get in front of your customers and sales team, and build your finance team like you are building a business team.
Ultimately, remember that it’s not your job as CFO to please people. You need to trust people and make them feel like they own the plan.
- Know who you are – your strengths and the trajectory of what you want to do.
- Be disciplined and understand management team and your role.
- Have clarity with the CEO and COO, set expectations with board and management. Define your role in writing.
- Define goals and successes.
- Don’t ignore problems.
- Do unto others
Our thanks go out to our fantastic panelists and our moderator, David McCann, Deputy Editor of CFO Publishing, for sharing their time and advice with our attendees.
We’d also like to thank the members of our CFO RoundTable NYC leadership team who built and produced this program, including Annette Nash McGovern, Bruce Cooperman and Karyn Egeland.
Photos and More Information
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