What You Need to Know this Year to Level Up as a Chief Finance Officer
Largely driven by advances in technology, the CFO role has changed dramatically in recent years. Corporate portfolio management and capital allocation are among the areas in which CFOs are taking on greater roles. Communication skills have gained currency as CFOs are increasingly called upon to detail the long-term financial picture to the board of directors and shareholders in simple, clear terms. Effective communication with financial institutions also is critical.
Because business decision-making increasingly requires budgeting and forecasting data, future-oriented CFOs – aided by technology – have extended their reach into all corners of the organization. That means CFOs must excel at building relationships.
In a 2016 UK study by Ernst & Young, almost 70 percent of survey respondents reported they were spending more time providing analysis and insight to support senior leaders and decision makers than they were five years ago. The survey also revealed that CFOs seek an even greater role in formulating strategic and organizational decisions. “Over the last decade,” writes Ian Hong of KPMG, “the CFO’s role has shifted from number crunching to co-driver of corporate strategy focusing on long-term growth strategies.”
The role can be seen from a past, present, and future perspective. The controllership piece looks at historical financial information, while the treasury piece oversees the organization’s present financial condition, and the economic strategy and forecasting portion of the role, of course, deals with the future. In fact, the CFO can be seen as a futurist rather than a reporter, notes George Rotsch, a sales and marketing leader for Intellitec Solutions.
Joining the traditional core areas of the CFO role – financial reporting, audit and compliance, planning, treasury, and capital structure – are business strategies such as mergers and acquisition.
The changes are so profound that two major consulting firms have conducted studies on the role, each concluding the CFO role is actually four roles, and each identifying a different set of four roles:
Deloitte: Four faces of the CFO
McKinsey: Today’s CFO: Which profile best suits your company?
||Finance expert: Taking both leadership and ownership of the organization’s financial results.
Generalist: Engaging heavily in business operations and strategy and often contributing strong industry and competitive insights.
Performance leader: Leading transformation both within the finance function and throughout the organization.
Growth champion: Externally hired professional often seen in industries that plan to grow considerably.
Yet another four-role perspective, from the organization behind the Chartered Global Management Accountant designation, emanates from the concept of “value.” CFOs, according to the organization, are Creators of Value, Enablers of Value (by supporting decision-making and performance), Preservers of Value (assets and liabilities management, risk management, internal controls), and Reporters of Value.
Key Competencies for the 2019 CFO Role
Here are the skills experts say are key to the evolving CFO role. In your career-marketing communications, showcase the competencies on this list you possess:
- Leveraging system capabilities
- Performance acceleration
- Project management
- Problem solving
- Business planning
- Leadership, especially of talented teams achieving exemplary financial performance
- Risk intelligence: Understanding, management, communication, and mitigation of risk
- Change management
- Conflict management
- Business-partnering skills
- Stakeholder-management skills
- Open and transparent communication skills, especially in difficult times
- Critical thinking
- Global vision and financial perspective
- Strategic thinking and agility
- Capital formation and structuring skills
- Merger targeting, due diligence, and integration skills
- Understanding of digital, smart technologies and sophisticated predictive data analytics
A few suggestions for those seeking to break into the CFO role or expand their horizons in an existing CFO role:
- Leverage your background. Working at a Big Four accounting firm is no longer the primary route to CFO. If you are looking at transitioning into a CFO role, you’ll find certain types of background especially helpful. The McKinsey report notes that externally hired CFOs brought in as growth champions often come from the realms of investment banking, consulting, or private equity.
- Absorb the big picture. Connect with operations and strategy teams throughout your career so you can grasp the organization from an operational perspective. Ask questions and attend meetings outside your area. You might even consider stepping up for special project beyond the scope of finance.
- Build collaborative relationships. You will be better equipped to lead change if you have shored up relationships with operational colleagues.
- Polish your communication skills. “The best finance leaders use the numbers to tell a clear and coherent story,” writes Tom Bogan in his Adaptive Insights blog.
CFO Trends to Watch in 2019
- The role of finance continues to grow: With many organizations eliminating the COO role, CFOs are increasingly called upon to ply their strategic and operational skills, especially in the areas of risk management and technology.
- Technology makes finance smarter and faster: Finance professionals are at the forefront in the adoption of new analytics tools and techniques and are increasingly integrating artificial intelligence and machine learning.
- Companies face new risks and challenges: Amid demands for greater transparency and better stewardship, organizations must also contend with social responsibility, the demand for privacy rights, as well as the need to protect data and confront data breaches.
- Businesses are living in the age of uncertainty: The polarized political climate is just one impetus for change and challenge. Regulation, trade policy, and data protection also play a role.
[Source of trends: Microsoft Dynamics 365. (2018). 2019 Finance Trends Report. Retrieved from http://axdata.no/wp-content/uploads/2018/11/2019-Finance-Trends-Report.pdf]
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