CFOs’ role elevated, but face intense pressure

The good ones provide finance efficiency and business insight.

CFOs are taking a more prominent role in enterprise decision-making. “The CFOs are in the boardroom and executive level discussions and carry more weight than ever,” says Gary Obbes, consultant in financial management practice, IBM New Zealand.

Finance in the past was seen as one of the back-office functions, now it is something that can drive value for the enterprise, says Obbes at the inaugural CFO Summit in Auckland, held on March 16.

The one-day event was organised by Fairfax Media Business Group (publisher of CIO, Computerworld, Unlimited and Independent) and Conferenz.

Obbes says the IBM 2010 Global CFO Study revealed that more than 70 percent of CFOs provide advisory roles or are in decision-making roles.

But while CFOs find their roles elevated, the study finds they face intense pressure on three areas - reducing the enterprise cost base, making faster and more accurate decisions, and providing more transparency to external stakeholders. The pressure in these areas is expected to increase dramatically over the next three years.

The survey involved 1900 senior finance executives in 81 countries. Obbes, who led the local survey, says 27 New Zealand CFOs participated and it took place at the height of the global financial crisis.

Obbes says New Zealand CFOs face the same dilemmas as their counterparts across the globe.

While there are signs of stability, the new economic environment is likely to be a period of low economic growth. The question for CFOs, he says, is how to make the enterprise smarter during this period of uncertainty.

One of the survey findings that stood out is the ability to attract and retain talent. Obbes says this is now one of the top five concerns of CFOs.

The IBM study listed four different profiles of CFOs: constrained advisors, discipline operators, scorekeepers and value integrators.

The last group – the value integrators - was found to consistently outperform their peers in all key financial metrics by driving two key qualities across their organisation: Finance efficiency through the use of common process and data standards across the organisation, and business insight capability.

Not back to normal

Another speaker, David Fincher, partner, advisory, Ernst & Young, says the economy may be back from the brink, but it is not back to normal.

For businesses, the new economy is price sensitive, there are funding restrictions and there is a desire for transparency for financial and non-financial information.

Fincher says high performing companies seek to develop a broader and deeper view of their market opportunities today and tomorrow.

So what will this mean for CFOs? He says CFOs should foster an innovation culture in their team. “Be a Trojan horse for innovation in your own organisations,” he says. “Collaborate with your business partners and use your ‘internal customers’ to help.”

CFOs should broaden their understanding of risks and focus on those with the greatest potential impact. Use predictive analytics to measure and monitor risk, not just performance, he says.

The CEO and CFO partnership

Another speaker, Simon Moutter, CEO of the Auckland International Airport, expounded on the theme of the elevated role of the CFO in the enterprise.

Moutter says the CFO is not just a partner but an extension of the CEO. “We are just a tiny dash apart, today, sometimes, the [differences between the] roles are barely discernible.”

This does not mean having a “chummy relationship”, but “doing the heavy lifting together and utilising their complementary skills”, he says.

CFOs today need to develop the qualities of good CEOs – with a heavy emphasis on directional leadership, engaging style and influential with stakeholders, says Moutter.

They bring commercial savvy and entrepreneurialism to the table and “do not get hooked up in the fads of the market”.

The ‘wannabe CFO’ is a functional manager. A modern CFO is customer centric and not numbers focused.

The customer-centric CFO, he says, is part of the sales team, attends customer focus groups and research groups, and has frontline experience.

CEOs are looking for CFOs who will join with them and lead the business from the front, who will create and drive value independently, he concludes.