Date posted: 1/12/2016 5 min read

The changing role of the CFO

The role of the CFO has changed dramatically in recent years — and it is set to change even more

In brief

  • The role of a CFO is increasingly shifting from a functional role to one of strategy and insight
  • CFOs will increasingly be involved in social media, cyber security, logistics and corporate branding
  • Having access to different sources of data will be critical to provide analysis and insight

By Steve Bray

Once seen as an organisation’s head accountant and primary bookkeeper, the role of chief financial officer has undergone a significant evolution in recent years. Rather than being fully focused on numbers, budgets and reports, CFOs are adopting a much broader approach which is changing the way they add value to their business.

As well as managing finances, today’s CFOs are increasingly expected to provide guidance and advice to the CEO and board on a range of other issues. Instead of being a functional role, the office of CFO has become one of strategy and insight.

In some ways, the seeds for this evolution were sewn during the global financial crisis in 2007. At that time, companies realised the critical importance of prudent monetary management and looked to their CFO to provide additional guidance during a period of significant turmoil. While the dark days of the GFC are now over, the extra responsibilities given to the CFO have remained.

A strategic advisor

The role of the CFO is now very much one of a strategic business adviser. Often this involves analysing how non-financial forces and factors could potentially influence future performance and profits.

For example, the CFO may be asked to ascertain how customer satisfaction measures (such as the widely used Net Promoter Score) may affect future sales volumes. The scores could be analysed before and after a major marketing campaign to determine the effectiveness of advertising spending.

The evolving social media sector is another space in which the advice of CFOs is increasingly being sought. The way in which an organisation is being portrayed on social channels such as Facebook and Twitter can have a direct impact on future expansion plans, product launches and turnover. While the marketing department is likely to have oversight of social trends, layering this on financial performance reports and projections allows the data to add even more value to the business.

Information derived from other parts of the organisation can also be used by the CFO and finance department to glean more insights and offer strategic advice. For example, the performance of an assembly line or manufacturing plant could be matched against factors such as ambient temperature. Perhaps upgrading the air conditioning plant could have a positive impact on outputs. By bringing multiple sources of information together, the CFO is able to suggest opportunities that may previously have remained unnoticed.

The need for data

For a CFO to be able to deliver such benefits to their organisation, having access to different sources of data is critical. It’s through the combination and analysis of large volumes of data that real insights can be gained.

Some of this data will be sourced from outside the organisation. It could be anything from census data on population and demographic trends to research reports on changes in consumer behaviour over time.

Much useful data is also likely to be found within the organisation. Different departments will have data stores relating to their particular areas of responsibility. This could include historical customer data, warehouse inventory levels, fleet maintenance schedules, HR files and call centre records.

A challenge arises, however, because of the dispersed nature of these data stores. To achieve beneficial insights, the CFO and finance department must arrange for the data to be collected and made accessible from a single point.

Creating a digital dashboard

Achieving such a centralised view of multiple data sources may sound challenging however, with the right approach, it can be achieved in both a cost-effective and timely manner. Rather than having to “rip and replace” key IT infrastructure, the approach should be more about filling in gaps and linking existing systems together.

The result will be an information “dashboard” that can provide the CFO and other finance staff with rapid access to data.

Once access has been achieved, a range of analytical tools can be put to work. Different data sets can be combined and linkages and insights spotted that would not previously have been visible.

A digital dashboard will provide an overview of results with users then able to drill down to the underlying information as required.

The CFO will also need to think about the types of collaborative tools that could be deployed to further enhance the ability to derive value-add suggestions and strategies for the organisation. Often the anecdotal observations and experiences of staff in different departments can help to identify opportunities for new projects and ventures. Facilitating better collaboration and communication between departments will allow these insights to be captured and put to use.

The CFO will also need to think about the types of collaborative tools that could be deployed to further enhance the ability to derive value-add suggestions and strategies for the organisation.

A new skill set

The evolution of the CFO and the finance department will require a change in the mix of skills held by staff. Rather than being focused on gathering financial data and presenting reports, they will be more involved in data analysis and delivering strategic recommendations to the business. Their roles will evolve from being focused on processes to a focus on strategy.

In the future, it’s clear that CFOs will have a much broader and deeper skill set than has traditionally been the case. This could cover areas as broad as cyber security, customer service, logistics and corporate branding. Backed by a skilled team in the finance department, their strong business and commercial acumen will deliver clear value to their organisation.

The CFO will also need to spend more time outside the department. Where the role previously could be handled from behind a desk, regular meetings with other departments and visits to company facilities will become important.

The relationship with the CEO will also change. Instead of being in a reactive mode and delivering financial reports and details as required, the CEO will expect a more proactive way of working. In many organisations, the CEO-CFO relationship has become the most important of all.

Overall, the CFO of the future is faced with a role that is much more complex and wide ranging than ever before. Data analysis skills, a consultative approach and the ability to deliver business insights and recommendations will be key for success.

Steve Bray is the manager of ERP Applications at Oracle.

This article was first published in the May 2016 issue of Acuity magazine.