The modern CFO is a far cry from the number crunching of days past. In today’s fast-paced, highly competitive business climate, CFO’s are expected to do much more than just manage the financial state of the company. Overseeing IT, strategic planning, hiring, training and even working directly with sales staff are just some of the “other duties as assigned” in their current job description.
A recent study from KPMG surveyed more than 500 chief executives, business owners and chairmen of large organizations asking them about their opinions and insights on the changing role of the CFO in today’s business. The results of the survey show that in addition to ensuring finances are aligned in an organization, CEO’s expect their CFO’s to leverage the latest technology, use data and analytics to drive strategy, increase their talent management skills, think globally and consider the increase in regulatory requirements as an opportunity, not a burden.
Let’s explore the traits for each type of CFO - financial, strategic and operational. Then ask yourself two questions: As the current CFO, knowing what the future holds for my business, where do I fit in? How can I ensure I’m relevant in 2016 and beyond?
The Financial CFO
The Financial CFO is the most “traditional” type of CFO and has a vital role in the overall function of the business. Financial planning, cost benefit analysis, forecasting and managing risk are a few of the items that the financial CFO is responsible for in the organization.
One key area of focus in the Financial CFO’s role falls within the management of increasing regulations and compliance. Each year, more and more of a CFO’s time is spent addressing regulatory changes and requirements, yet these changes can present opportunities. In KPMG’s recent study (referred to above), 48% of the CEO’s surveyed felt that deriving competitive advantage from the regulatory environment was an initiative that could bring the most strategic value to the organization.
Armed with data and an intimate knowledge of the regulatory environment, Financial CFOs can leverage their expertise in monitoring and analyzing both financial and non-financial data. Financial CFO’s have the ability to add value by identifying new opportunities for businesses based on their knowledge.
The Strategic CFO
Energized by growing the overall business, the Strategic CFO works constantly to provide strategic value and insight for the whole business, based on the financial data that’s collected internally and from outside sources. They can:
- Offer advice on how to allocate resources to provide the best value for the business.
- Become intimately involved with mergers and acquisitions (M&A), advising on the best opportunity for growth and advising when to say no.
- Understand the financial performance of each area within the business and provide strategic direction on best practices moving forward. As customers and technology change, they can refine and update performance data and shift direction as needed.
- Provide integrity, transparency, skillful communication and a teaching mentality to their department and throughout the organization.
- Invest time and leadership training in hiring the best person (not necessarily the best finance person) to meet the needs of their staff.
The KPMG study showed that 97% of CEOs stated, “...talent management is the most or equally important factor in improving the finance function, yet only 33% give their CFOs a passing grade in talent management.” This is not solely the job of human resources anymore. The strategic CFO – all CFOs for that matter – need to be sure that they are completely hands-on when developing their team.
The Operational CFO
The operational CFO not only has a clear understanding of the finances for the organization, but also understands the business from the ground up. Having a clear understanding of where and how your product is made, or the reasons why your service is performed can provide valuable insight into financial management. In addition, knowledge surrounding operations will offer insight into the capital expenditures associated with a certain product or service.
This Operational CFO is typically involved with the IT function of the organization, working with systems management and the enterprise resource planning (ERP) function within the group. Their strong financial industry knowledge and operational intelligence can provide invaluable information when developing new software or making decisions on new technology within the business. In addition, their interest in new innovation can help with cost management.
Recent data suggests that Operational CFO’s are filling the gap left by previously eliminated Chief Operating Officer (COO) roles. At the end of 2013, only 35% of companies in the Fortune 500 or S&P 500 had a COO, according to a recent analysis by Crist Kolder Associates; down from 48% in 2000. For some businesses, finance and operations simply go hand-in-hand.
Sink or Swim?
What does your business need for the future? Which area best describes your CFO strengths? It’s clear that the role of the CFO is evolving and a change in mind-set and skills is critical in keeping pace with the competition. Work with the CEO to define the overall business strategy, and then develop a financial plan that incorporates the financial, strategic and operational approach required.
You may discover that in order to reach your organizations goals, business process outsourcing (BPO) may be a viable option but when BPO is executed poorly, the costs to your organization can be staggering. The risk of BPO is mitigated because when executed the right way, BPO can provide the support a CFO needs to improve quality, productivity, reduce costs and increase the time available for an organization to focus on their expertise. . Download the viewpoint document, 5 Reasons Outsourcing Fails and What to do About It” today to learn how to leverage BPO to achieve your company’s goals.