What are the orientations of a strategic CFO?
As times change and running a business becomes more and more complex, the responsibilities of CFOs (Chief Financial Officers) now go far beyond making sure that all the numbers add up right. Many oversee other departments such as human resources, IT and the legal.
This doesn’t even include the ever-expanding strategist element to the role. Company boards seek the advice and expertise of CFOs regarding effective regulation and risk management. Research has indicated a significant increase in the strategic role of a CFO. In addition, the influence of a CFO in business partnering has also risen
A senior executive from a leading research and consulting firm has explained the role of a company’s top finance person in the following words.
“A CFO today has to juggle all the pieces and none of them are optional. In a globalised marketplace that is getting ever more complex, a CFO’s job is to drive continuous growth while effectively navigating this complicated landscape.”
Given the varied expectations, this raises the question of where should the CFOs put their focus and how should they make themselves strategy-oriented? One research report has identified four different types of ‘orientations’ for CFOs that will enable them to become better strategists…
In such a role, the CFO will provide the platform for strategic progress by helping business leaders evaluate the financial implications of the strategic choices they make. This an orientation takes place when a chief executive limits the CFO’s role to that of quantitative support.
CFOs can be very effective by gathering and presenting the most relevant data to their boards with the help of a robust financial planning and analysis setup.
A “challenger” orientation amplifies the strategic role of a CFO and they are seen as a “value enforcer in the future.” Apart from the financial capabilities that the “responder” orientation brings, a challenger has the license from the CEO to challenge and push business unit heads with regard to strategic initiatives.
In this orientation, the CFO’s responsibility is to generate agreement on vital business projects. Collaboration between finance and other business unit leaders is instrumental in making strategic choices as well as getting the most value out of those choices. If a CFO wants to be an effective architect, he/she must have a very competent finance team assisting him/her.
Here, the CFO becomes a prominent partner of the CEO, helping them design and implement future strategic initiatives. They have a major say in addressing the core functions in a strategic process while they create and execute different options in an effective way.
One good example comes from Deloitte where the CFO and the rest of the finance team successfully changed the company’s debt-equity mix with the help of lease models and structure financing that freed up funds for use in future growth initiatives.
These four orientations can help not just CFOs, but also others in setting targets and expectations for the role that a CFO will ultimately play. They aren’t supposed to be “static” approaches and will tend to vary with the changing performance and needs of an organisation.
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Date Posted: April 25th 2019
Posted By: Phil Scott