The past few decades can mostly be defined by dramatic change. The rise – and rise – of technological breakthroughs, fluctuating change in organizations and the economy, alongside the ever-pronounced edict to do more with less. These changes have affected every aspect of how we do business, especially at the leadership level and especially for finance professionals. Who could understand this better than the modern CFO, who fills an ever-changing role and has felt the effect of each and every one of those changes?
The Evolution of the CFO Role
The chief financial officer has traditionally been tasked with two core functions: managing financial operations and acting as a steward of the company's finances through budgeting, reporting and risk management. In the C-suite, the role of CFO has become a rapidly evolving one that's increasingly pivotal to the key decisions that dictate what direction and shape an organization will take in the years to come. They're being tasked with the management of more moving parts than ever – some of which are entirely novel – yet they're still expected to perform those two core functions.
A Future-Proof Skillset for Today's CFOs
It's true that the only constant in life is change, and now that change has come full force to the back office and boardroom alike, financial leadership has risen to the challenge of keeping up with a pace that shows no sign of slowing. Understanding how the CFO role has evolved and where it's yet to go provides the unique opportunity to develop new competencies while mastering traditional ones – and rising to the challenge of becoming a comprehensive CFO.
The Custodial CFO: An Updated Take on Traditional Leadership Roles
The CFO must still be a custodian. The oversight of operations and the management of financial assets underpin the rapidly expanding métier they're entrusted to take on, but that, too, has changed. CFOs are increasingly asked to play a longer game, adjusting the financial analysis that aids in the financial planning aspect of the role's duties to steward the organization in the long-term. As they’re reporting on the performance of company assets, they're doing it with an eye toward the future. The financial expertise they've always brought to budgeting, forecasting, growth investment decisions and risk assessment must now adapt to a long-term mindset that is more than scalable – it's elastic.
Managing company capital, providing guidance in compliance controls and being the last word on accurate and timely reporting each month, quarter and year are all still cornerstones to a CFO's custodial duties.
The New CFO Must be a Master of Data and Technology
Here's where we begin to see the ways the role of CFO has evolved through the gradual aggregation of bigger challenges and better tools. Thanks to the unprecedented interconnectedness of organizations and industries, as well as technological tools that are either completely novel or speeding through generational iterations, to stay competitive increasingly means that the CFO must take on the role of technologist.
He or she will have to expand their financial expertise to include the integration of applications and software that allow for a deeper scrutiny of data, implement and become subject matter experts on tools and platforms like cloud-hosted ERPs and oversee changes in organizational infrastructure that make these things possible. They'll also be expected to research the ways that competitors are using technological innovations and make decisions about which tools – sometimes costing hundreds of thousands of dollars to adopt -- will be a worthwhile investment of company resources, including the time it will take to learn how to use them.
And using them will prove to be crucial: data allows for data-driven decision making, by which the CFO will be empowered to make decisions about cash flow, create more complete forecasts and drill down into the financial machinery they oversee. Without it, the money coming in and going out of company coffers are just numbers on a page. The ability to use data and data-visualization will become a key differentiator among effective CFOs before eventually becoming table stakes.
As robotic process automation (RPA), artificial intelligence (AI) and machine learning all begin to take root in finance departments and back offices across the globe, CFOs are finding themselves in crucial decision-making units as they attempt to determine which ones will grow and which ones are just expensive hype.
Becoming a Strategic Decision-making Partner to the CEO
In some ways, the adoption and implementation of new technologies has driven another key change to the CFO role: that of strategic advisor and visionary partner to the CEO. Especially in the wake of the financial crisis of 2008, the CFO has progressively acted in tandem with their respective CEOs and must develop credibility through authenticity. As custodian of company resources, they're best positioned to counsel the CEO on what investments to make and which risks to avoid along the path to realizing the executive aspirations the CEO has for the organizations.
This means cultivating an ability to learn enough about the operational, technological and financial avenues that are already established within the organization – and which could be carved out in the long-term – to speak with confidence about how they may be leveraged (or even eliminated) to the advantage of the company. It also means being able to say no. A CFO, having newly been tasked with everything from vendor vetting to hiring decisions must roll these competencies into the financial picture to help create the strategies that will ultimately achieve the company's overarching goals.
Leading an Evolving Finance Department as an Agent of Change
With the addition of these responsibilities to the traditional workload of the CFO, he or she will find themselves taking up yet another mantle: the change leader. As the primary advocate for the pivot away from financial operations that seek only to assess, they'll have their hand in fostering a company culture that allows for agility and innovation. Delivering growth and transformation requires both an analytical and intuitive approach, and CFOs must act as catalysts within the finance department and without.
On top of everything else, CFOs will have to act as surgeons; making careful and necessary alterations within the finance department to keep the entire organization healthy. There are not unlimited hours in the day and the expectation to develop new skills and take on new duties does not come accompanied with more time to do either. CFOs will have to be adept at spotting underperforming areas of spend, eliminate bottlenecks within the finance department and leverage the talented individuals that rely on their leadership by allowing those individuals to add value in the work that they do.
When the focus is on drudgery, transactional rework and flat-out waste, there is none left to spare when it comes to strategy and innovation. Often this requires taking a moment to look backward – or rather, within -- to orchestrate a return to the organization's raison d'etre by bringing core competencies to the forefront and allowing the rest to fall away, be improved or entrusted to capable and reputable third parties.
A CFO wishing to create a lean and effective finance department that works strategically and dynamically can see a dramatic return on investment when the action plan they develop includes a finance and accounting outsourcing (FAO) partner. Providers that have the ability to procure and train supplementary bookkeeping talent are becoming crucial tools in the CFOs growing toolbox, especially providers with the flexibility to create these solutions at any size without sacrificing the ability to scale.
Personiv has been building legacy partnerships with organizations across every industry and the globe for over 35 years, and we specialize in creating custom accounting solutions that are well-suited to meet the needs of evolving finance departments. Beginning with teams as small as one, we work with comprehensive CFOs to deliver efficiency and help execute the vision businesses have for their future operations and achievements. Learn more about our FAO solutions, or get in touch today to see where we fit in to your strategic plan by using the form on our contact page.
Want to share your own experience with the ever-changing role of the CFO? Personiv would love to feature you as a guest expert on our financial leadership podcast, CFO Weekly. Learn more by scheduling a one-on-one with the podcast's host and our VP and General Manager of FAO Services, Megan Weis.