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Will the CFO become more important than the CEO?
07 March 2016
In recent years, the role of Chief Financial Officer has undergone a significant shift. Where previously the CFO function was viewed almost exclusively as a technical accounting role, albeit at the highest level, we're observing an expansion of their remit and responsibilities, transforming the role into something more complex and central to an organisations' ability to change and adapt. This significant change is highlighted as one of our Seven Executive Trends for 2016.
The market is demanding CFO candidates to be more commercial, and this demand is increasing every year. This reflects the fact that CFOs are now valued business partners, and this requires them to possess solid interpersonal skills and the ability to work closely and add value to non-financial stakeholders while driving strategy are now the key requirements.
As businesses became more lean throughout the GFC, we now see a lot of CFOs take responsibility for a number of functions outside of finance, with IT, HR and procurement the most common areas that are absorbed into their remit.
But has the career track of CFOs to this point equipped them with the skills to manage this fairly rapid expansion of responsibility?
Personally, I believe so. The career path to CFO is typically a long one, and many candidates remain at the Financial Controller level longer than they would probably prefer due to the scarcity of CFO roles. With the finance function becoming more commercial and strategic in recent years, this experience ensures that the strong candidate progressing to this level are gaining more exposure to the wider business, which is positive.
When looking for strong CFO candidates, the experience and skill sets that companies demand include: CA qualified and ideally Big 4 trained; strong team-building and management experience; experience working through systems implementations of large ERP’s, process improvement & streamlining processes; experience partnering with senior stakeholders and department heads across the business; ASX reporting and IFRS/USGAAP reporting; and experience reporting to an overseas parent company. But the most critical skills to be able to display are strong commercial acumen and strategic thinking ability.
As the CFO role continues to increase in strategic importance and influence, some have questioned whether it will eventually supersede the CEO role as the most important C-suite position. While I feel that the CFO is certainly now recognised as a strong business partner to the CEO, from my observations the CEO is still the key decision maker and strategic leader. And so while it is conceivable that this shift could eventually take place, I don't necessarily think we're there yet.
One of the most important functions of the CFO is to ensure value for an organisation's shareholders. In the wake of the Global Financial Crisis, many companies have understandably been trying to secure their finances and accumulate cash as a defence against further turmoil. This has also led to increased scrutiny from shareholders, and it is the responsibility of the CFO to ensure that a company is delivering value and being fiscally responsible. To provide this, many business leaders now expect CFOs to have a robust investment background in addition to an accounting MBA, providing them with the experience needed to skilfully manage a diverse portfolio of investments.
According to Keith Springer, president of Singer Financial Advisors, "never before have derivatives, alternative investments and hedging been so important. Currency transactions such as futures and dollar hedging is critical because many of the big companies with lots of cash are international and have much of it hoarded overseas".
As businesses across the board recognise the crucial need to be nimble, adaptable and open to transformation, the CFO is emerging as a key agent of change, and their combined skills in the areas of finance, leadership and business acumen are highly valued.
To learn more about the exectutive trends we predict for the upcoming year, download your free copy of our Seven Executive Trends for 2016 report.