The Role of the CFO

More than ever before, CFOs are being called upon to stretch the finance chief role far beyond crunching numbers—and for good reason. Traditional finance-team functions like tracking and reporting results, allocating capital, ensuring control and compliance and supporting decision-making have always been critical components of business strategy. But today’s increasingly complex and competitive business environment demands that CFOs work even more closely with their CEOs in charting a strategic course and steering the company along it.

Take Zurich North America, an insurance firm currently seeking a CFO. “I’m looking for a business partner,” CEO Daniel Riordan told participants in a recent roundtable discussion held in partnership with the American Institute of Certified Public Accountants (AICPA) and the Chartered Institute of Management Accountants (CIMA). “I’m looking for someone who can create a non-siloed environment where we bring an entire executive team together to face growing challenges.”

Like many companies, Zurich faces regulatory requirements, tax considerations and cyber security threats. Still, Riordan shuns the notion of an office-bound CFO toiling behind the scenes to churn out financial reports and control costs. “I want a marketfacing CFO,” he asserts. “One who is comfortable in his own skin dealing with customers, being out in the marketplace, standing in for me or for sales—to be the face of the company. That’s very, very important.”

It’s a sentiment that resonates with Arleen R. Thomas, senior vice president of management accounting and global markets at the American Institute of Certified Public Accountants (AICPA), who notes that her organization recently surveyed 300 CEOs on current global challenges and top priorities. “Seventy-six percent of respondents said that they were spending too much time on the financial system and financial reporting,” she said. “Seventy-five percent said, ‘If we could spend more time measuring and demonstrating the nonfinancial value of our businesses, we would be in a better place.’ The bottom line is that the CFO of today and the CFO of the future need to bridge their knowledge from finance to include a more holistic view and all aspects of the business.”

Intensifying regulatory scrutiny, rampant mergers and acquisitions, shareholder activism, increasingly demanding customers and cyber security threats represent a wide range of factors contributing to the need for this broader interpretation of the traditional CEO role. Still, it can be tough to achieve, noted Kurt Schneider, CEO at Harlem Globetrotters. “Our CFO comes from an accounting background and is great at generating reports,” he said. “That doesn’t help our operating guys because they’re trying to live in the future and he’s trying to justify the present by reporting on the past. So we’re focusing on trying to find the vision of where we want to go and work toward that.”

Getting There From Here
Bringing your CFO up to speed on an expanded role may take some nurturing, noted Eric Apelfelbach, CEO of ZBB Energy. “You can stretch CFOs to get better and better by making sure they understand what you need to hear from them and challenging them to make decisions,” he said. “What I find most valuable is making sure that they understand they will sit with me on a monthly basis and give a report on the context of the entire business globally. It’s almost like mentoring.”

Broadening an existing CFO’s role requires changing the mindset of not only the finance chief but the rest of the organization, as well. “You have to truly empower them to be sure they have a seat at the table and that everyone knows it,” says John Lundgren, CEO of Stanley Black & Decker. “When someone says, ‘what did [Mr. CEO] say,’ they have to be comfortable saying, ‘I haven’t talked to him. Stop wasting my time.’”

Spending time in the field is another way to give your CFO the confidence to step out of his or her comfort zone. For Roger Shedlin, CEO of health services company OrthoNet, that meant taking a leap of faith. “The way we really got our CFO up to speed was by putting him in charge, soup to nuts, of a cardiology management company we acquired,” he explained. “I knew I had succeeded when other fellow employees had medical questions and our CFO would raise his hand and answer them. Getting him embedded both operationally and intellectually in the business was incredibly helpful and tremendously improved his performance as CFO.”

Ideally, companies that work toward growing the CFO’s skill set will apply the same concept to broadening the financial skills across the rest of the organization, noted David Cote, CEO of Honeywell. “I’m looking in both directions,” he said. “I want the finance guys to be able to have a strategic insight; and by the same token, I would like the general managers to have a fundamental understanding of finance.”

Toward that end, Honeywell has developed a five-day basic financial course for non-financial employees. The course helps the company’s general managers to truly understand terms like operating income and how cash flow differs from net income. “While all of us get measured on financials, many general managers in the organization really don’t understand the financials,” explained Cote.

“It’s really kind of surprising how there’s a fundamental lack of understanding in a lot of this among people who are being measured on it.”