The Changing Role Of A CFO – New Competences And Skills Are Necessary To Face New Challenges

The role of a CFO has been changing recently. A CFO can no longer be seen as someone who is responsible for cutting costs as a means of maintaining the profits. It is not a matter of dominating the financial principles; instead, CFOs must develop a strategic discipline to be effective financial leaders (Caglar, Mani & Peters 2015). Although a strong background in accounting and compliance is still important, there is a tendency for CFOs to improve their non-technical skills through financial planning and analysis, treasury and capital markets experience. As this change in competences becomes more relevant for aspiring CFOs, some job titles, like Chief Accounting Officer or Corporate Controller, lost weight on their resumes (Proctor 2014). Johnsson (2002) stated that the globalization of supply chains, competition, and markets complicate resource allocation decisions. Information technology reshapes value chains and restructuring mechanisms, through mergers and acquisitions, disrupts business

processes, being the drives of unprecedented levels of complexity, and changes in a CFO’s role. Financial managers have to put their effort in better allocating their resources in other company’s areas, which have substantial participation in the value chain. They must recognize opportunities to connect and disconnected parts of the company in ways that may create value (Johnsson 2002).

Moreover, a CFO needs to become a good builder of cross-functional, results-oriented work teams. Managing this human capital requires new ways of thinking about roles and responsibilities, compensation, performance measurement, and staffing (Johnsson 2002). A McKinsey’s (2015) report confirms the role of a CFO creates broader expectations, leading them to some unconventional experiences beyond the traditional finance, comptroller, and accounting career paths. The ability to deploy the company’s strategic plans is in the charge of a CFO, therefore the best professional for this position must have the right capabilities to drive change. The CFO today needs a balanced set of skills that combines a focus on long-term success with the ability to be a change agent for the organization (McKinsey 2015).

A strategically oriented CFO must increase other skills, experience, and new talents. The role is an interconnected position that is responsible for making sure the right investments and the relevant consideration are managed (Caglar, Mani & Peters 2015).

When a company is expanding service offers or entering new markets, CFOs must exercise the necessary skills to deliver expected results (Proctor 2014). Hyper-growth companies need CFOs who have a holistic view of the entire business and are able to develop new capabilities as a means of striking the balance between risk and investment in innovation, as affirmed by Spencer Stuart (2016). Ted Prince (2008), in his research, developed a model that calculates the value of people in a company, which is based on a financial signature of its managers. Then, it calculates its behavioral assets, which in turn will allow for predicting the firm’s valuation.

These capabilities are cross-functional, bringing finance together with marketing, IT, operations, R&D, sourcing, and so on. Besides, they give the company an identity and proficiency that consistently lead to success (Caglar, Mani & Peters 2015). Another important skill is the commercial experience. The CFO of Heineken, Mr. Hooft Graafland, asserted in a report released by Ernst & Young (2013, p.22) that “Stepping outside the finance function will help to give you the principles and the capabilities to become a real business partner”. Today, there is growing concern regarding which CFO’s profile best suits a company’s strategy. The management role will depend on some company’s characteristics that can encompass its history, its industry, and the demand of its investors (McKinsey 2013). That is the case of Private Equity Fund operations, which are driving the growth in many companies in the modern economy, where the figure of a CFO gains importance. The main characteristic of this operation is based on a hyper-growth expansion. In a report released by Spencer Stuart (2016), it is cited that to support skyrocketing company growth, the CFO must blend good financial technique, knowledge, entrepreneurship, and insights into the broader business, to achieve a good performance well beyond the initial surge of growth.

In addition, the author emphasizes that a CFO with a holistic business perspective will be able to achieve the right balance between risk and investment in innovation and hence give the company a competitive edge in pursuing on their high-growth trajectories (Spencer Stuart 2016). It is worth to say that it is expected from a CFO to challenge the CEO and another member of the top team on key strategic and financial decisions and thus foster the company’s performance (McKinsey 2013). As a result, CFOs must have an understanding of today’s complex business environment and its components, not just the finance function (Spencer Stuart 2016).

In summary, as written above, the necessary skills to be an effective CFO may vary by industry (Proctor 2014). Moreover, many companies perceived that the new demand for their business strategies requires a CFO with specific skills. Financial knowledge loses ground, and now a holistic view and leadership competence to stimulate behaviors across the firm is necessary. The consulting firm (McKinsey 2013) stated in its report that in some companies there is a disproportionate share of leaders with a few areas of deep expertise so that there is a need that managers develop new competencies to compensate for one another shortfalls. Considering this scenario, I will try to understand the role of a CFO in luxury fashion companies and the necessary skills this professional must have to conduct the company to higher performance.

References:

Caglar, D., Mani, M. and Peters, J. 2015, The redefined no of the CFO. [Online] New York:

http://www.strategy-business.com/ Available from:

http://www.strategy-business.com/article/00307?gko=ff56f [Accessed March 12th 2

015]

Johnsson, M., 2002. The changing role of the CFO. Strategic Finance, 83(12), 54.

Journal of Management, 32, 991-1022.

McKinsey & Co 2015 The strategist CFO: A conversation with ADP’s Jan Siegmund.

[Online] EUA: http://www.mckinsey.com/ Available from:

http://www.mckinsey.com/insights/corporate_finance/the_strategist_cfo_a_conversati

on_ with_adps_jan_siegmund [Accessed 18th August 2015]

Proctor, B., 2014. The changing role of the CFO: new demands require new

fundamentals. Financial Executive, 30(2), 23-25.

Spencer Stuart 2016. The Dna of hyper-growth CFOs [Online] EUA:

https://www.spencerstuart.com/ Available from:

https://www.spencerstuart.com/research-and-insight/the-dna-of-hyper-growth-cfos

[Accessed January 31th 2016


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