CFOs are Leaving Finance to Finance

The Evolution of Today’s CFO

In the last decade we have seen CFOs undergo several distinct stages of role evolution, and we have organized our research initiatives around their biggest challenges. Sarbanes-Oxley forced CFOs deep into compliance and assurance activities, with Controllers and CPAs finding themselves ideally qualified for the role. The ensuing efforts to streamline compliance and focus on growth across 2004-2008 saw a shift towards CFOs emphasizing finance transformation and the establishment of global finance centers of excellence. And, in dramatic fashion, the financial crisis and ensuing recession placed a premium on CFOs with strong liquidity management and capital markets expertise.

Now, the struggle of US-based multinationals to find growth in this sluggish economy is effecting a fourth major shift in the CFO role. Core finance processes like transaction processing, accounting, and cash management must still be executed in cost-effective fashion with no disruption, but the challenge of opportunity-spotting requires CFOs to redouble their focus on performance management and business partnership activities. Our studies and our conversations with finance executives have led us to the perhaps paradoxical conclusion that the best CFOs will thrive in this environment by decreasing their time spent within the finance function in favor of nurturing non-traditional-finance responsibilities. That is to say, CFOs thrive when they can leave finance to finance.

Changing the Calendar

One obvious place to see evidence of the shift in CFO priorities is to examine a typical CFO’s time allocation. This summer, we did just that and benchmarked CFO calendars across 120 organizations. Even aggregating time spent with investors, time spent managing finance talent, and time spent in direct management of the finance function, we see CFOs spending less than half – sometimes as little as a third or a quarter – of their time on core finance functional activities. By contrast, over a third of CFO time is now being spent on activities with strong performance management overtones: operational reviews, scenario planning, M&A, and the like.

This shift has real implications for CFO hiring and succession. We see fewer and fewer CFOs take on the role after a track record of excellence in the finance function alone. The perspective that comes with business and operational experience has become an integral part of being an effective CFO. Progressive CFOs are already planning for their successor to have an equally rounded skill profile, and finance talent development is the top issue for our CFOs in our 2012 agenda poll by a substantial margin.

In coming weeks, we will dig deeper into what this shift in CFO priorities really entails, what finance executives are doing to nurture non-financial relationships, and what sorts of finance teams enable their leaders to make the greatest strategic impact.

What CEB is Doing for its Members

• CFO Executive Board members can access our research on effective leadership profiles for finance executives, including best practices in role definition and scoping strategic responsibilities.
• Intelligent Growth Suite members can access best practices on determining the role of the CFO and defining new strategic responsibilities.
• CFO Executive Board Members can also access our study on CFO Performance Leadership, which provides an authoritative look at what CFO roles and characteristics drive the most value. Intelligent Growth Suite members can access the study here.
• Our Executive Advisors speak with upwards of 30 CFOs a week; members can talk with us at any time about emerging trends we’re seeing from our CFO community.