Trending Topics summarizes news, information and perspective on matters affecting businesses and business leaders today. This insight is being provided to keep you up to date on the latest developments and trends influencing these topics. These views do not necessarily represent the views and opinions of PNC. For additional research on these topics, please consult the sources cited in this article.
There’s a shifting dynamic in the C-suite. The image of the chief financial officer (CFO) as a career grinder, rising from faceless accountant to the head of a sprawling but narrowly defined group of like-minded financial professionals, is fading. Today’s CFO is more likely to be described as a corporate co-pilot, with responsibilities and duties pulled from the unfashionable chief operating officer portfolio as well as strategic expectations once reserved for the CEO.
The shift is already apparent in the profile of a contemporary CFO hire. Search firm The Alexander Group reports that just 40% of candidates selected in its recent CFO searches are CPAs or hold similar certification.
And it’s visible in the way CFOs are reorganizing their duties, including offloading basic financial operations to other departments. In a 2018 Accenture CFO survey, 67% of respondents said their goals include pushing “finance activities such as reporting, planning, budgeting and forecasting” to nonfinancial executives. “We’re convincing them that it’s beneficial to self-report, so finance people can spend their time enhancing other areas of the business,” said one multinational financial controller in the survey.
Whether you’re mid-career in a financial discipline, considering various branches of executive leadership, or a sitting CFO today, the changing CFO role affects you and your business. Here’s a look at some of the most important developments.
CFOs Are Eyeing Opportunities
Very few CFOs are completely satisfied and willing to sit still with their current skills and responsibilities. In a 2016 EY survey, only 9% of CFOs said their current role satisfied all of their ambitions.
And opportunities are definitely coming to the CFO beyond the traditional power of the purse. A McKinsey survey found that the average CFO today is the reporting authority for 4.5 business functions, including some unconventional departments like IT (38% of CFOs), board engagement (24% of CFOs) and physical security (13% of CFOs). This gives CFOs a stake in operations well outside the traditional boundaries of moving money in a responsible fashion.
New Opportunities to Manage Fraud, Risk
Evolving business models are amplifying and expanding the CFO’s classic fraud prevention duties in nontraditional ways. Day-to-day operations that once required teams of trained professionals are being automated or consolidated in shared service centers, a shift that CFOs are keenly aware of.
Ernst & Young’s 2018 CFO survey found that 69% of financial leaders see their role shifting in the face of increasing automation. As a result, EY Global Performance Improvement Finance Leader Tony Klimas predicts that, “as finance and accounting processes are increasingly automated, the finance back office will shrink, as a virtual workforce begins to replace large numbers of full-time employees in shared service or outsourced arrangements.”
A CFO with vision can engage these nontraditional financial workforces in more broadly defined fraud prevention and risk management tasks, in line with the CFO’s growing responsibilities for big-picture IT projects and strategic input.
CFOs are managing risk with long-term strategic perspective, including the cultivation of sustainable business practices. “CFOs are gradually becoming more involved in the management, measurement and reporting of sustainability efforts of their companies,” writes Ian Hong of KPMG.
Strategy Beyond the Numbers
The CFO has become a trusted source for strategic insight and long-term planning equal to, or in some cases even greater than the chief executive. The Economist in the aptly-titled article “The Imperial CFO,” notes that CFOs are gaining an increasing amount of power by taking more roles on corporate boards, participating in CEO search, and being heard in executive evaluation. And in up-or-down matters of corporate direction, their voices can win out. Writes The Economist, “Leo Apotheker’s days as CEO of Hewlett-Packard were numbered when his CFO, Cathie Lesjak, told the board that she strongly opposed his decision to buy Autonomy, a software company.”
Earning and keeping that empire does mean today’s CFO is expected to show more than just careful attention to detail. Nurturing corporate and individual growth are now important gauges of CFO success as well. “A CFO is expected to be an outstanding leader, so you will need to show the board that you understand how to recruit, motivate and develop the best people,” writes EY in a CFO career development guide.
A Transformative Force
A significant number of CFOs are looking for the highest corporate offices available: that of the CEO (27%) or corporate chair (9%). But even those who are satisfied in the CFO office are using it to steer their organizations in entirely new directions as business transformation leaders. CFOs are increasingly put forward as ideally suited to direct these fundamental overhauls of goals, direction and execution.
In the absence of the CFO, McKinsey writes, business transformation “will lack a meaningful benchmark to gauge success, managers will be tempted to focus on the biggest or most visible projects instead of those that promise the highest value, and expected transformation benefits won’t make it to the bottom line.”
That’s because a CFO with a reputation for strategy projects both numerical assurance and innovation in his or her voice. “Among the members of executive committees, CFOs are probably best positioned to challenge the businesses,” said Nicolas Tissot, former CFO of Alstom, in a McKinsey panel discussion. “They are independent from operations. And they are the only ones, apart from the CEO, who have a comprehensive vision of the company.”
CFOs are clearly rising to the challenge and owning their new opportunities as transformation leaders. In the 2018 Accenture CFO survey, 80% of respondents said they consider the finance department better than nonfinancial peers at forecasting long-term value of technology, compared to just 7% of respondents who believe finance is less well-suited than others. CFOs will not simply sit and count: They will stand up to be counted as active leaders in the future of business.
Ready to Help
At PNC, we combine a wider range of financial resources with a deeper understanding of your business to help you achieve your goals. To learn more about how we can bring ideas, insight and solutions to you, please contact your Relationship Manager or visit pnc.com/ideas.