The Evolving Role of the CFO
Chief Financial Officers (CFOs) play an increasingly visible and influential role in the 21st century business landscape. Finance professionals were once mere bean counters; now they’ve migrated to the boardroom, where their leadership is highly valued.
Why are CFOs so influential?
There are four primary reasons that the CFO of today has more clout and more responsibilities.
Technology drives business decisions
Thanks to technology, the volume of data and the ability to manipulate it for a variety of metrics has expanded exponentially. It’s faster and less expensive than ever to monitor, report and data-mine all aspects of finance and production.
We’ve talked about Big Data here recently. As leadership is increasingly able to extract answers to a huge variety of questions from data, they can quantify every aspect of the business. With their financial background attuned to data and hard numbers, CFOs are uniquely positioned to leverage this information. The days of gut-based decisions are largely behind us, especially in large global enterprises. Instead, CFOs armed with hard numbers play a huge role in strategic planning.
75% of CFOs report spending at least half of their time on strategic aspects of their business, according to a recent study by EY3. Also in the study: two-thirds say
that they’re at the forefront of all strategic decisions connected to financial performance.
Technology is within the domain of the CFO
The other side of that coin: technology is increasingly within the responsibilities of the CFO. Over the last 5 decades as computing power has exploded, technology has become an increasing expense and a more significant capital asset, as well as being a vital tool. Better data and improved integration have gone hand in hand. Because the financial branch of a business has traditionally had a broad overview of all the operational units, it naturally evolved into overseeing the technology as it integrates these units.
A 2015 IBM1 study revealed that executives view technology as the single most important force impacting businesses. Taking full advantage of technology has become a top priority for leadership.
CFOs crucial to risk management
Globalism has unveiled vast new business opportunities, which are linked with vastly more complicated risks. Scandals have recently rocked the corporate world, so businesses are paying increasing attention to compliance issues. As CFOs have big data and technology in their realm of responsibility, they’re increasingly accountable for risk management, further cementing their central role in leadership.
The decline of the COO
The role of Chief Operational Officer has been eliminated in many companies. A study from Crist|Kolder Associates states that a mere 33% of Fortune 500 and S&P 500 companies still have Chief Operating Officers, which reveals a decrease of 45% from 2000.
This is probably due in part to the fact that many CEOs in major corporations advanced from a role as COO–a dynamic represented by 40% of Fortune 500 and S&P 500 companies. When the COO roles is eliminated, it’s common for the CFO to take over IT and procurement, and the CEO to absorb manufacturing and supply responsibilities.
CFOs’ role is more central than ever
CFOs state that business model innovation is a major part of their responsibilities. They also state that they play a vital role in selecting the metrics which evaluate the relationship between performance and strategy execution.
In the new global environment, CFOs help companies face new risks and responsibilities with an increasing reliance and expertise in IT and a uniquely integrated perspective of how a company runs.