Historically, the post of Chief Financial Officer (CFO) has functioned as a steward of financial expertise, moral integrity, and shareholder value, selecting criteria to analyze organizational development and ensuring value.
Due to inflation, a greater number of rules, and more governance obligations, the CFO position is now present in practically every company. However, the final quarter of the 20th century was distinct. Prior to 1978, less than 10% of American corporations employed chief financial officers.
After the year 2000, the annual growth rate of CFOs in the United States was at least 80%. The post of finance unit head has been elevated to business partner, a long-term member of top management, and in certain companies, a board member.
The CFO role has recently seen a remarkable Transformation in virtually all sectors throughout the world. For a comprehensive understanding of these key developments, PWC conducted extensive research and interviewed professionals from a variety of enterprises and industries.
In addition to overseeing and managing the company's finances, research indicates that the modern CFO is essential for Strategic Planning and Value Creation. Particularly, the CFO must guarantee that the firm chooses and funds the right initiatives, with the allocation of financial resources based on the organization's unique capabilities. Today, the CFO must be an agent of change and a leader. These new responsibilities contribute to the development of a robust capabilities system by bringing the CFO closer to other departments, such as IT, Marketing, R&D, etc.
To ensure that the firm is heading in the right direction and that each initiative has a solid business case and fair expectations, the CFO of today must have a broader view. A candidate for the CFO position should possess the soft skills that are not taught in the classroom but may be developed with the proper mentors and in the appropriate environment.
PWC's research and CEO interviews indicate that in order to become Strategic CFOs, executives must exhibit the following five qualities:
- Understanding the Holistic Value Chain
- Insight into Business Drivers
- A Keen Eye for Talent
- Cultural Engagement & Change
- Integrity & Interpersonal Skills
Let's delve deeper into the first two of these essential qualities.
- Understanding the Holistic Value Chain
In addition to increasing performance, CFOs must commit time to assisting the leadership, acquiring a thorough understanding of the value chains, identifying critical areas, and developing strategic initiatives. The Strategic CFO promotes long-term planning, customer value, and the growth of exceptional capabilities. Because he or she has a comprehensive awareness of what other corporate functions do, he or she is in a better position to create deeper cross-functional collaboration and assist other business units in identifying efficiency, performance, and Customer Experience improvements.
The Strategic CFO ensures that the entire finance staff is conversant with the responsibilities performed by other units, understands the Business Models, and connects with customers frequently to gain the essential insights for prioritizing initiatives and enhancing their skills. This contributes to an increase in net income and shareholder value.
- Insight into Business Drivers
Finding performance indicators for organizational value propositions and units is a critical component of the CFO's responsibilities. This is necessary for understanding market competition, prospective threats, and key business drivers. To aid in selecting the proper direction and achieving strategic objectives, the business drivers must be continuously enhanced.
The Strategic CFO creates suitable KPIs for success monitoring. In addition to the conventional financial KPIs, such as EBITDA or share price, these assessments should also include value creation and Strategic Decision-making indicators. She or he should construct relevant, dynamic, sector-specific measures, such as revenue-weighted resource allocation, market share relative to market potential, and market evaluations, which are routinely modified in reaction to the 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.
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