The Strategic CFO
* * * *
The Chief Financial Officer (CFO) role has traditionally been a custodian of financial acumen, integrity and shareholder value—selecting indicators to measure organizational growth and ensuring value.
Inflation, stricter regulations and governance requirements have caused the CFO position to exist in nearly every organization these days. However, this wasn’t the case in the last quarter of the twentieth century. Fewer than 10% organizations in the U.S. had CFOs prior to 1978.
After the year 2000, the percentage of CFOs in the U.S. grew to 80% or higher each year. The status of the finance unit lead has been elevated to the level of business partner and a permanent member of the top management—a member of the board at some corporations.
The CFO position is experiencing significant Transformation in almost all industries across the globe, lately. PWC conducted exhaustive research and interviews at multiple organizations and industries to gauge these drastic changes.
Research revealed that today’s CFO is responsible not just for tracking and managing company financials, but also plays a key role in Strategic Planning and Value Creation. In particular, the CFO must make certain the organization is selecting and investing in the right initiatives—where the deployment of financial resources is tied to the distinct organizational capabilities. The CFO role, today, needs to serve as a leader and facilitator of change. These additional responsibilities bring the CFO closer to other units, i.e.—IT, Marketing, R&D etc.—and aid in developing a formidable capabilities system.
Today’s CFO has to have a bigger picture perspective to ensure that the firm is headed in the right direction and there is a sound Business Case with realistic expectations to every initiative. Executives aspiring for the CFO role should possess the soft skills that are not taught during studies, but can be developed under the guidance of right mentors and in the right environment.
Research and executive interviews by PWC reveal that there are 5 core characteristics required for executives to become Strategic CFOs:
- Understanding the Holistic Value Chain
- Insight into Business Drivers
- A Keen Eye for Talent
- Cultural Engagement & Change
- Integrity & Interpersonal Skills
Let’s delve a bit deeper into the first 2 of these core characteristics.
1. Understanding the Holistic Value Chain
Aside from optimizing Performance, CFOs must assign time assisting the leadership, developing a well-rounded point of view of the value chains, identifying critical areas, and develop strategic initiatives. The Strategic CFO supports developing unique capabilities, long-term investment, and customer value. She/he has an in-depth knowledge of what other functions do in the enterprise and is in a better position to develop greater cross-functional collaboration, and assist other business units in uncovering areas of opportunity vis-à-vis efficiency, Performance, and Customer Experience.
The Strategic CFO ensures the entire finance team gets to know the operations performed by other functions, understand the Business Models, and frequently interact with the customers to develop deeper insights critical for prioritizing initiatives and broadening their competencies. This facilitates in enhancing shareholder value and bottom line.
2. Insight into Business Drivers
Its part and parcel of a CFO’s responsibility to identify indicators to measure Performance of the organizational value propositions and units. This is integral to analyze the competitive environment, potential risks as well as key drivers of business. The business drivers should be continually evolved to facilitate in setting the direction right and achieving the strategic objectives.
The Strategic CFO puts in place the right metrics to track performance. These metrics should include the usual financial Key Performance Indicators—e.g., EBITDA or share price—as well as the markers to indicate Value Creation and Strategic Decision making. She/he should set up relevant, dynamic, industry-specific indicators—market share vis-à-vis percentage of market potential, market rating, revenue-weighted resource allocation—that are consistently tweaked in line with external environment.
Interested in learning more about the other Core Characteristics of a Successful CFO? You can download an editable PowerPoint presentation on Strategic CFO here on the Flevy documents marketplace.
Do You Find Value in This Framework?
You can download in-depth presentations on this and hundreds of similar business frameworks from the FlevyPro Library. FlevyPro is trusted and utilized by 1000s of management consultants and corporate executives.
For even more best practices available on Flevy, have a look at our top 100 lists:
Readers of This Article Are Interested in These Resources
About Mark BridgesMark Bridges is a Senior Director of Strategy at Flevy. Flevy is your go-to resource for best practices in business management, covering management topics from Strategic Planning to Operational Excellence to Digital Transformation (view full list here). Learn how the Fortune 100 and global consulting firms do it. Improve the growth and efficiency of your organization by leveraging Flevy's library of best practice methodologies and templates. Prior to Flevy, Mark worked as an Associate at McKinsey & Co. and holds an MBA from the Booth School of Business at the University of Chicago. You can connect with Mark on LinkedIn here.
Top 2 Recommended Documents on CFO
» View more resources CFO here.
» View the Top 100 Best Practices on Flevy.