Go Ahead and Remain a Traditional CFO. Just Be the Best You Can Be

The traditional CFO who gets the accounts out and makes sure the company has enough money to pay its bills and fund operations and expansion is dead in the water. That’s the impression you get when you listen to management consultants and actual CFOs themselves.

So it’s refreshing to read in EY’s latest report, Do You Define Your CFO Role? Or Does It Define You?, a measured take on the issue of the CFO’s role in modern business.

“There are three domains in the CFO role: finance, operations and strategy,” says the report. “Many CFOs will have a natural inclination toward one or another of these areas, depending on the skill set, experience, relationships and personal interest.”

In other words, there is still room for a skilled CFO with a firm grasp of finance fundamentals, deal-structuring expertise and a handle on risks and controls – even if he or she may not be highly informed about business operations, do not have strong relationships with business-unit leaders, and is not a big-picture counselor and guide to the CEO.

So long as you are aware of and accept the career limitations of being a traditional CFO, deciding to keep within the confines of that lane is a valid choice

Traditional CFO

The caveat: “That role is in danger of not being seen as part of that core executive group in the future,” Simon Kelly, Outgoing CFO and COO of Australia’s Nine Entertainment, told the EY researchers. “It has the potential to become a service function, because a lot of the traditional role of the CFO is almost a commodity these days.”

That’s fair enough. But so long as you are aware of and accept the career limitations of being a traditional CFO, deciding to keep within the confines of that lane is a valid choice. You just need to be at the helm of finance in a company whose CEO and the board expect no more than expertise in the finance domain. 

And there are still enterprises whose particular needs, at the present time, require that the CFO focus on the finance domain. In certain industries, notes EY, CEOs and boards may ring-fence functions “so the CFO focuses exclusively on core finance responsibilities.” EY did not specify what these sectors are, but they probably include some financial services firms, family-owned companies, tightly regulated enterprises, and start-ups.

Some large conglomerates may also prefer that the CFO focus on finance, given the complexities of capital-raising, budgeting and global regulatory oversight. “Chief strategy officers may limit the opportunities or need for CFOs to move into strategy, and chief operating officers may lighten the CFO’s operating responsibilities,” adds the report.

But EY stresses that the traditional CFO should go beyond just accounting, compliance and reporting, and focus as well on risks and controls, deal-structuring and “acting as the public face of the company on financial performance, including sophisticated communication and influencing skills with stakeholders such as the media.”

“Over the next five years, so many companies won’t have enough capital or will have made wrong acquisitions,” says Jacques Tierny, CFO of digital security company Gemalto, who was one of the finance leaders interviewed for the study. “The CFO will more and more need to be a very skilled corporate finance person.”

Finance Plus Operations

But it is also true that many CEOs and boards expect more from CFOs. In the EY study of 769 finance leaders across the world, 272 of them from Asia Pacific, 64% agree that CFOs will be increasingly asked to take on wider operational roles beyond finance.

Many CFOs welcome a greater role in operations, write the EY researchers, because it broadens their management and leadership skills across disciplines, helps establish the finance function’s credibility and build relationships with line managers, and gives key members of the finance team development opportunities, a key tool for retention and building a talent pipeline.

Just as some organizations are happy with a traditional CFO, there are those that would like a finance-plus-operations finance leader. And increasingly, there are also companies that ask CFOs to “help identify and assess fresh strategic alternatives”

From the CEO’s point of view, having the CFO involved in operations can be a plus because this arrangement “can help make sure that available resources go to where they will generate greatest value,” write the researchers.

The CFO also brings “a wealth of proven experience in delivering cost and operational efficiency targets,” and is well equipped “to challenge the long-held assumptions that encourage bureaucratic practices.”

These expertise and experience, of course, have to be nurtured. EY says it is important that the CFO also focusing on the operations domain:

  • should be highly informed about business operations and underlying company performance
  • should be highly visible within the business and has established strong relationships with business unit leaders
  • should possess change management expertise
  • should have the ability to manage cost vs. service levels

One pressing issue is time. Focusing on both the finance and operations domains can consume so much of the CFO’s working week. “Respondents at all levels, particularly at large corporations, are concerned that extensive operational responsibilities take up time that CFOs should be devoting to strategic priorities,” the EY researchers report.

Finance Plus Operations Plus Strategy

Just as some organizations are happy enough with a traditional CFO, there are other companies that would like a finance-plus-operations finance leader. And increasingly, there are also those that ask CFOs to “help identify and assess fresh strategic alternatives and help their organizations go on the strategic offensive,” notes EY.

This is particularly important at this time when the global business environment is being roiled by many game-changing developments. “Ambitious competitors from emerging markets are taking on established developed market companies,” EY points out.

“Established digital players – such as Amazon and Google – are encroaching into different sectors. And newer platform businesses – such as Uber and Airbnb – connect providers and consumers to quickly seize market share and change established competitive rules.”

The strategic CFO must have additional skills and capabilities to:

  • bring analytical discipline to strategic decisions and use financial perspectives to frame strategic decisions
  • manage trade-offs between capital resource allocations
  • act as big-picture counsel and guide to the CEO
  • use relationship and influencing skills to act as the CEO’s co-pilot
  • marry judgement with rational data-driven skills
  • have a deep understanding of the industry’s competitive dynamics  

What CFOs can do

Now comes the big question. How do you acquire and nurture these additional skills? EY has a useful set of suggestions. They include

Surround yourself with team members with complementary skill sets. Hire or train up a competent controller who can handle the accounting and oversee transactional areas like payables, treasury and tax professionals, and experts in corporate finance, FP&A and analytics. This should help with the time issues flagged by many respondents, succession planning and talent management.

“You need not be an expert in those areas,” says Gerry Bollman, CFO of Fletcher Building, an integrated manufacturer and distributor of infrastructure and building products. “You just need to have enough understanding, that you can oversee those functions and lead them.”

Seek coaching from external advisors and experts. External auditors, tax practitioners, legal advisers – the company typically engages with many advisors. The CFO can take advantage of these engagements to learn the latest trends and best practices. Management consultants, finance transformation specialists and technologists can also be useful for coaching and advice.

You can also turn “feedback and opinions of stakeholders such as activist investors into learning opportunities,” EY suggests.

One downside is the risk of losing finance’s impartiality, the quality that enables CFOs “to ask difficult questions and maintain a high level of integrity, which is then reflected in their reporting to the market”

Attend executive learning programs. The Continuing Professional Education programs of many accounting bodies increasingly include courses and seminars on business partnering, strategy setting and talent management. Business schools also offer short courses on these areas, as well as Executive MBA degrees.

When attending these programs, “focus on courses that are tailored to your particular context and where the objective of attending is clear,” advises EY.  

Immerse yourself in a new area. Be open to new things such as social media, digital platforms like e-procurement and online business networks and emerging technologies such as block chain and robotic process automation. By doing so, you gain “fresh perspectives and insights into how things can be done differently,” says EY.

Lessons from CFO Innovation events

In the panel discussions and side meetings of our six annual forums and roundtable and other specialist events, CFOs also suggest making a conscious effort to step out of your corner office and walk the factory floor, something that everyone in finance should also do. One finance chief recounted how he observed a patient undergoing a surgical procedure to see how the company’s medical equipment is used.

Another CFO engages with business unit leaders inside and outside the office, learning what their pain points are and how finance can help solve them. She has joined a Viber group set up by operations people and makes a point of attending some operations meetings to learn about the latest issues around marketing, IT and customer service.

One downside, however, is the risk of losing finance’s impartiality, the quality that enables them “to ask difficult questions and maintain a high level of integrity, which is then reflected in their reporting to the market,” as the EY report puts it. As CFOs become more heavily involved in operations, EY warns, “they risk compromising this detachment.”

You just need to be constantly aware of this issue and hold the line, says a telecommunications CFO in the Philippines. Everyone in the organization knows that finance is a friend, but they also know that the CFO and others in the finance team will not countenance ethical short cuts and non-compliance with the rules.

But it’s not a “Doctor No” situation. Rather, finance strives to be “Doctor How” – suggesting ways of approaching an issue that is a win-win for both finance and operations. The art of diplomacy, yet another useful skill for CFOs, usually saves the day.

Another common suggestion is to consider automation, shared services and third-party business process outsourcing providers to handle transactional processes such as accounts payable and posting to ledgers. The retained finance function can then focus its energies on operations and strategy.