{"id":12202,"date":"2022-11-25T09:39:16","date_gmt":"2022-11-25T14:39:16","guid":{"rendered":"https:\/\/flevy.com\/blog\/?p=12202"},"modified":"2022-11-29T13:07:27","modified_gmt":"2022-11-29T18:07:27","slug":"the-strategic-cfo","status":"publish","type":"post","link":"https:\/\/flevy.com\/blog\/the-strategic-cfo\/","title":{"rendered":"The Strategic CFO"},"content":{"rendered":"

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The Chief Financial Officer (CFO) role<\/a> has traditionally been a custodian of financial acumen, integrity and shareholder value\u2014selecting indicators to measure organizational growth and ensuring value.<\/p>\n

Inflation, stricter regulations and governance requirements have caused the CFO position to exist in nearly every organization these days.\u00a0 However, this wasn\u2019t the case in the last quarter of the twentieth century.\u00a0 Fewer than 10% organizations in the U.S. had CFOs prior to 1978.<\/p>\n

After the year 2000, the percentage of CFOs in the U.S. grew to 80% or higher each year.\u00a0 The status of the finance unit lead has been elevated to the level of business partner and a permanent member of the top management\u2014a member of the board at some corporations.<\/p>\n

The CFO position is experiencing significant Transformation in almost all industries<\/a> across the globe, lately.\u00a0 PWC conducted exhaustive research and interviews at multiple organizations and industries to gauge these drastic changes.<\/p>\n

Research revealed that today\u2019s CFO is responsible not just for tracking and managing company financials, but also plays a key role in Strategic Planning<\/a> and Value Creation<\/a>.\u00a0 In particular, the CFO must make certain the organization is selecting and investing in the right initiatives\u2014where the deployment of financial resources is tied to the distinct organizational capabilities.\u00a0 The CFO role, today, needs to serve as a leader and facilitator of change. \u00a0These additional responsibilities bring the CFO closer to other units, i.e.\u2014IT, Marketing, R&D etc.\u2014and aid in developing a formidable capabilities system.<\/p>\n

Today\u2019s 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.\u00a0 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.<\/p>\n

Research and executive interviews by PWC reveal that there are 5 core characteristics required for executives to become Strategic CFOs<\/a>:<\/p>\n

    \n
  1. Understanding the Holistic Value Chain<\/strong><\/li>\n
  2. Insight into Business Drivers<\/strong><\/li>\n
  3. A Keen Eye for Talent<\/strong><\/li>\n
  4. Cultural Engagement & Change<\/strong><\/li>\n
  5. Integrity & Interpersonal Skills<\/strong><\/li>\n<\/ol>\n

    \"\"<\/a><\/p>\n

    Let\u2019s delve a bit deeper into the first 2 of these core characteristics.<\/p>\n

    1. Understanding the Holistic Value Chain<\/strong><\/h2>\n

    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. \u00a0The Strategic CFO supports developing unique capabilities, long-term investment, and customer value. \u00a0She\/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-\u00e0-vis efficiency, Performance, and Customer Experience<\/a>.<\/p>\n

    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.<\/p>\n

    2. Insight into Business Drivers<\/strong><\/h2>\n

    Its part and parcel of a CFO\u2019s responsibility to identify indicators to measure Performance of the organizational value propositions and units.\u00a0 This is integral to analyze the competitive environment, potential risks as well as key drivers of business.\u00a0 The business drivers should be continually evolved to facilitate in setting the direction right and achieving the strategic objectives.<\/p>\n

    The Strategic CFO puts in place the right metrics to track performance.\u00a0 These metrics should include the usual financial Key Performance Indicators<\/a>\u2014e.g., EBITDA or share price\u2014as well as the markers to indicate Value Creation and Strategic Decision making<\/a>. \u00a0She\/he should set up relevant, dynamic, industry-specific indicators\u2014market share vis-\u00e0-vis percentage of market potential, market rating, revenue-weighted resource allocation\u2014that are consistently tweaked in line with external environment.<\/p>\n

    Interested in learning more about the other Core Characteristics of a Successful CFO?\u00a0 You can download an editable PowerPoint presentation on Strategic CFO here\u00a0<\/a>on the\u00a0Flevy documents marketplace<\/a>.<\/p>\n

    Do You Find Value in This Framework?<\/strong><\/h2>\n

    You can download in-depth presentations on this and hundreds of similar business frameworks from the\u00a0FlevyPro Library<\/a>.\u00a0FlevyPro<\/a>\u00a0is trusted and utilized by 1000s of management consultants and corporate executives.<\/p>\n

    For even more best practices available on Flevy, have a look at our top 100 lists:<\/p>\n