Tweet This
Compared to five years ago, the role of the CFO looks very different. Once confined to finance and number crunching, CFOs ensured operational profitability and oversaw financial risk management. Today, however, the CFO role has transformed into a strategic role. I spoke with Sandy Cockrell, Global CFO Program Leader at Deloitte, to discuss the evolution of the CFO and how they can develop a company’s talent pool in the wake of such professional changes.
Jeff Thomson: Your latest survey finds CFO confidence is high. What do you attribute to this unprecedented level of optimism?
Sandy Cockrell: The optimism index, which we produce quarter to quarter, showed that 60 percent of the CFOs were more optimistic about their company's prospects over the next year, than they were just a quarter ago. That’s the highest optimism number we've recorded in the history of the survey and we've seen this coming. Looking back on the last, say two, two and a half years, the North American economy was what CFOs really pointed to as the bright light. This first quarter, though, Europe and China made dramatic leaps in terms of the way they were perceived. So, from a global perspective, economies are really coming back and hitting on all cylinders. Additionally, when you look at metrics around revenue, earnings, capex and hiring, you see a great deal of optimism.
Thomson: How does shorter term optimism translate into increased spending for change initiatives, such as technology?
Cockrell: There's no question over the last year this new wave of technologies has had an impact on CFO decision making. CFOs are really working to get their arms around all of it and we've seen this not only through our survey but client interactions. If you think about the CFO’s role in the last five to 10 years, more and more responsibility has been put on their plate. They need to grasp and understand these new technologies because they are ultimately the chief allocator of capital in these organizations. The CFO is in a position where they have to make choices, and articulate their rationale to the CEO and the board as to how they arrived at their recommendations. You didn't really see that two or three years ago, so it's a new world they have to deal with.
Thomson: How has the CFO role evolved?
Cockrell: Today’s CFOs are expected to play four diverse and challenging roles – the steward, operator, strategist and catalyst. At Deloitte, we consider this our Four Faces Framework. The steward and operator “faces” are traditional in that they help get the books right and run an efficient finance operation. However, the strategist and catalyst challenge CFOs to take a seat at the strategy planning table and help influence their companies, while also executing change in the finance function.
We see this especially as it relates to CFOs having strong risk-intelligence. I think a lot of times, when thinking about an enterprise, when thinking about risk management, the CFO is viewed as someone that is obviously responsible for financial risk on all fronts. However, more and more we’re seeing CFOs play this role more broadly – outside of the finance function and in the boardroom as a business partner. Not only are they monitoring for financial risk, but they are now also overseeing enterprise risk management.
One other thing I’d add that’s interesting, is that we’re observing CFOs coming into the role having a much different pedigree than they did in the past. Five years ago, we’d see a higher percentage of people coming up through controllerships, who had technical accounting and controller skills to become a CFO. Today, we’re seeing a significant number of people coming into the CFO role without that kind of pedigree; they’re coming from business and strategy. One reason for that is boards are starting to look at the CFO role as a great place to think about CEO succession planning.
Thomson: If we know the role of the CFO has changed, then surely so has what’s required of the CFO’s team. How do you develop the talent pool?
Cockrell: It’s about envisioning those individuals as CFOs and then understanding what they’d have to learn in order to get there. We help our clients with this often and a popular question we ask is, “Tell us about your ‘ready now’ candidates.” Most of the time we hear from the CFO and they’ll say, “Well, I’ve got two or three candidates that could be ready now, but they’ve never had an industrial relations experience.”
I think talent programs and talent agendas that take potential successors and rotate them through some of the functional areas of finance are critical. The CFO of today is the storyteller of where the company is and where it’s going. That’s an art as opposed to a science. With that in mind, you also have to give finance professionals the opportunity to truly get to know the business. It’s about creating the mindset that they’re contributing more.
Thomson: The future of the profession is being impacted by the growing presence of artificial intelligence and automation. You see CFOs needing to become Chief Catalyst Officers in the future. How can CFOs contribute to a company’s strategy?
Cockrell: The CFO is really in charge of and owns a lot of the activity around allocation of funds, execution and implementation. We even saw that five years ago, when so many companies were focused on enterprise cost reduction. Companies have now shifted to a growth agenda, and it’s not just inorganic growth. That’s where the CFO really has to have a clear understanding, from an operational standpoint, the way the business really works – the levers that can be pulled, the key information that needs to be measured, gathered and forecasted. That’s how you earn a seat at the table.
