The changing role of the CFO

The senior finance officer’s job isn’t what it used to be. This leader might once have functioned as the “CF-No,” or someone who held the purse strings and often blocked plans or expenses that didn’t fit the budget. Today, the role has transformed into that of the “CF-Know,” someone with a holistic grasp of the entire business and how it creates value and who uses that knowledge to provide insight, according to Tom Hood, CPA/CITP, CGMA, executive vice president–Business Growth & Engagement at AICPA & CIMA, together as the Association of International Certified Professional Accountants.

Once, the CFO led a team that prepared information on historic financial results and trends and set limits on spending. Now, management and other stakeholders are increasingly turning to CFOs to be value-adding business partners who can provide greater insights on emerging trends and on how best to use financial reporting data in decision-making.

“During these challenging times, the lines of business are really depending on our finance team to look forward, not just backward,” said Paul Young, CPA, CGMA, senior executive vice president and CFO at Liberty Bank of Middletown, Conn.

WHY THE CFO’s ROLE IS CHANGING

A number of factors have come together to change opportunities and expectations for CFOs.

New concept of value

This reassessment of the CFO role is happening in tandem and as a result of a reevaluation of the basic concept of enterprise value. It is no longer based purely on earnings per share or another financial metric, according to Joseph Radziewicz, CPA, CGMA, vice president–corporate controller, Stanley Black & Decker. Instead, it has been expanded to encompass a wide range of rapidly evolving trends and key considerations, including environmental, social, and governance (ESG) concerns; information technology; and human resources. “Our role as value creator and steward of value has not changed,” he said. “But how value is determined will change, and we need to be sure we’re protecting that new concept of value.”

Technology

A total of 82% of CFOs said their investments in digital are accelerating, exceeding their investments in areas such as talent, supply chain, business services, or fixed assets, a 2022 Gartner survey found. CFOs are aiming to use artificial intelligence, machine learning, and robotic process automation as part of an ongoing effort to automate team members’ old jobs to make time and space for their new jobs, Hood said. “We have to learn how to perform while we transform,” he said. “We can’t do one or the other, we have to do both at the same time. And we have to learn at a rate that’s faster than the pace of change.”

Accelerating digital transformation can enhance efficiency and productivity, but it has also put new pressure on finance to keep current. When using digital tools, finance “must be able to quickly sift through large amounts of data to find those jewels of insight that you can really use to help influence business decisions,” Young said.

Rapid change

Agility is also critical because of constantly emerging threats to companies. “The unprecedented level of change drives our businesses to move faster, but it also creates new types and magnitude of risks,” Radziewicz said. He cited uncertainties related to issues such as cybersecurity, data privacy, shareholder activism, international conflicts, and the dysfunctional political environment. At the same time, technology and innovation are advancing at an exponential speed, outpacing what institutions and process were built to handle. The trick, once again, is to maintain core capabilities while advancing the edge, he said.

When navigating the worst months of the pandemic, Nancy Furr, CPA, CGMA, the CFO of Ted’s Montana Grill, was fortunate in having a team of 10 people who were already quite agile. “Because of our size, we all have to wear a lot of hats, so we’re very open to doing whatever needs to get done,” she said. Among other important steps, the team had begun embracing efforts to automate processes, and that work has continued with steps such as greater document imaging within the finance team and throughout the organization. “Automating core processes makes the team more efficient,” she said. The goal is to move team members into analytical roles to provide greater value.

Expanding role of finance

Finance is also taking a range of new functions under its oversight. Young’s organization has created a chief digital officer position that reports to him. “We see the CFO role expanding beyond the traditional accounting, finance, and treasury, taking on more digital functions,” he said. He also agrees that finance will play a large role in ESG, especially given the existing range of ESG reporting frameworks and ongoing efforts to enhance disclosure. “Finance is uniquely positioned to take a leadership role,” he said. With many organizations working to achieve net zero by 2030, the finance team can contribute to developing the necessary control environment to support that goal and to ensuring reporting integrity, he said.

As finance broadens its reach, maintaining a sense of unity within the team also gains importance. After making an effort to break down silos in his group, Young is seeing greater communication and collaboration across the team. “We have a clear set of strategic priorities that are aligned with the overall strategy of the business,” he said. “Everybody understands how their job contributes to company success. We know that we’re all in it together with a one bank customer-focused mindset.”

EVOLVING EXPECTATIONS

Due to these and other factors, the very nature of the CFO’s job is being reconsidered. Young regards CFOs as chief future officers. “You have to see what’s happening in business in real time, but you also must have the foresight to look ahead and anticipate what will happen and how the business will react under various scenarios,” he said. For example, at a bank like his, the net interest margin is critical and strongly affected by the Federal Reserve Board’s actions as it attempts to rein in inflation. As a result, his organization is concerned about issues such as the potential impact of the depth and duration of a possible recession that might result from the Fed’s actions. “The ability to forecast quickly and perform scenario planning with the right technology is very important,” he said.

Foresight is only one of the capabilities CFOs are now expected to offer. “Collaboration and understanding of the business — that’s where you provide value,” Furr said. “It’s very exciting to be in a position where you know what’s going on in all the different departments.”

In other words, the CFO is being called on to be a change agent who can help drive new initiatives and a storyteller who can paint a meaningful picture of where the organization stands and what lies ahead.

CFOs also have a unique perspective to add when decisions are being made. “When you’re the trusted adviser and at the leadership table, you can question the status quo and present data to support your arguments,” Furr said. “It’s healthy to have someone on the leadership team who is able to do that. And what better person than the CFO?”

THE NEED FOR NEW SKILLS

The days of working at a single company in the same role using the same skills for 30 or more years have faded well into the past. As a model for today’s CFO, Hood points to the T-shaped professional, someone with business, people, leadership, and digital skills, as well as agile strategic and critical-thinking abilities that can be applied in a wide range of situations (see the chart, “The T-Shaped Finance/Accounting Professional,” below). This professional also has deep technical and functional knowledge and expertise, all based in ethics, integrity, and professionalism.

As part of that effort, a commitment to lifelong learning is critical. Incorporating new technologies involves far more than simply acquiring and learning new systems. “Even more important is changing the cognitive capacity and capabilities of your teams,” Radziewicz said. That includes nurturing nontraditional skills, such as strategic and critical thinking, empathetic leadership, and communication abilities.

The ability of organizations and their people to absorb and implement new skills is now a competitive advantage, he believes. “How we learn and operate today may be obsolete in three to four years,” he said, “so we may have to unlearn and relearn.” That can require making a personal and organizational commitment to staying relevant.

Upskilling may also require going outside the organization to acquire new insights from new sources. Radziewicz’s team has built a strategic partnership with the University of Connecticut. It engages with a group of 30 to 40 data analytics students each semester who work on applying advanced technologies to problems the company is facing. That provides the business with access to advanced technology skills that even newer finance team members may not have learned in school.

RIDING THE WAVES

“We are at a pivotal point in the profession,” Furr said. And CFOs should definitely be ready for ongoing disruption.

“As leaders, we have to prepare our teams to learn how to surf and ride these waves of transformation,” Hood said. By doing so, and equipping the team to address continually changing expectations, “our jobs will continue to get even better, and we will be more valuable to our organizations.”

The finance executives interviewed for this article are all members of the Future of Finance Leadership Advisory Group, senior leaders who have been working with AICPA & CIMA to redefine and reimagine the Future of Finance in a post-pandemic world. For more information, go to the Future of Finance resource center.

About the author

Anita Dennis is a New Jersey-based freelance writer. To comment on this article or to suggest an idea for another article, contact Courtney Vien at Courtney.Vien@aicpa-cima.com.

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AICPA RESOURCES

Articles

“Finance’s Transformation Into a Value Partner,” FM magazine, Sept. 16, 2021

“Finance Leaders: Skills for a Career in the Digital Age,” FM magazine, Sept. 2021

Top Finance Skills series, FM magazine, June–July, 2021

Podcast episodes

“Future of Finance: A Beyond-the-Numbers Focus on People, Process,” FM magazine, Dec. 16, 2022

“Future of Finance Takeaways: Talent, Transformation, Trust,” JofA, Dec. 14, 2022

Report

Re-Inventing Finance for a Digital World