The role of Chief Financial Officer (CFO) has experienced a significant broadening in recent years. And not just in the big corporations. In SMEs, too, the CFO’s is increasingly shifting towards that of business partner. Whichever way you look at it, the CFO has to keep pace with the rapidly changing management tasks, fulfil a more strategic role and deal with more stakeholders. This makes the overall responsibilities a lot broader and more challenging. So prepare for that changing role because the CFO 2.0 requires new competences.
CFO increasingly important
The new role of CFO is not always acknowledged yet, or even recognised. This is what we see in practice. But the job is definitely evolving. This isn’t simply an observation on our part. A study conducted by Nyenrode Business University in 2022 supports this conclusion after interviewing 20 CFOs working at medium-size and large companies. The researchers were able to distinguish seven roles of the CFO 2.0: data manager, economist (continuity), business partner, strategist, gatekeeper (guarding boundaries), employer and stakeholder-manager. Let’s take a closer look at those roles.
Co-responsible for business strategy
The ‘new’ CFO is jointly responsible for the operational performance and not just for ensuring the accounts are in order. The CFO’s role is more commercial and strategic; control and reporting are less demanding. That means the role has shifted from financial accounting afterwards, to responsible forecasting of both financial and non-financial results. What’s more, the finance position now has a more external orientation. No longer are the banks and consultants the CFO’s main business relations. With the growing focus on sustainability, corporate social responsibility, data security, transparency and integrity, building solid contacts with more and especially other external stakeholders are becoming at least as important.
In touch with the shop floor
As a strategist, the CFO looks closely at the financial and organisational structure in order to shape the company’s growth. But no longer from an ivory tower, but in touch with the shop floor. As a business partner, he or she works together with the operation, understands the views and logic of the business, the developers, marketers and HRM. And because all these matters are directly related to the revenue model, the finance position plays a vital role. Incidentally, it appears that CFOs are (still too) modest about their strategic role, according to the aforementioned survey: “Understandable because CFOs often don’t necessarily want to operate in the limelight. CFOs don’t see themselves as prima donnas, visionaries or artists. That’s more cut out for the CEO or DGA. The role that the CFO prefers is to develop a solid approach, with the aim of turning all the promising ideas into actual business successes.” Sound familiar? Or is this picture too generalising?
New competences and ethical dilemmas
Either way, it’s clear that the CFO 2.0 needs different competences. To support operations adequately, it is essential for the CFO to develop in the breadth. More and wider knowledge of data and IT, for example, seem evident. And the emphasis on communication and collaboration will increase, for example at times when the CFO tells stakeholders the story behind the numbers.
But don’t forget the increasing ethical dilemmas either, which are inherent in working with high stakes, with sensitive information in a complex environment with many different stakeholders. The Nyenrode study names HR-related issues in particular (to fire staff or not, hire new staff or not, the bonus policy), manipulation (conflicts of interest, bringing turnover forward, fraud, blackmail, being asked to act against the rules or concealing something), the trade-off between short-term versus long-term (profits or expensive investments in sustainability), and conflicts. Whether or not in consultation with the DGA … These are moments that the CFO’s impartiality is the greatest asset combined with a backpack filled with tools: experience, reliable data to weigh the interests, laws and regulations, and norms and values of the RA or RC profession. Influencing is allowed, manipulating is not. Anyone trying to straighten what is crooked should not come knocking on the CFO’s door.
The power of Integrated Finance
Do you recognise the picture we have outlined? More than likely. The transition from senior financial partner to strategic business partner demands a lot. That new role needs a robust and proactive finance position/department. First, the basics need to be in order. Just think of standardising, automating and professionalising the financial function. Only when the structure is strong enough across the whole organisation can the CFO excel into a business partner role. A role in which the data that is used and shared are collected and processed using reliable, standardised and automated methods. Organising and implementing all this is precisely the added value of Joanknecht Integrated Finance. It’s how we help you go from 1.0 to 2.0 as a CFO.
This blog was written by Niels Lubse
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