July 2021 | 

The CFO’s Changing Role: Growing Challenges, New Skills

The CFO’s Changing Role: Growing Challenges, New Skills

Steve Presley of Nestlé, Sunil Mathur of Siemens, and Carol Tomé of UPS: they’re just a few of the high-profile CFOs who became CEOs in recent years. Mathur even followed in the CFO-to-CEO footsteps of Joe Kaeser. These three are part of a growing trend that is seeing the role of the chief financial officer move from numbers-only responsibilities to becoming a relied-on strategic partner, whether they make the move to CEO or not.

In fact, those surveyed for the 2021 IBM Global CEO study highlighted the critical need for stronger, more strategic CFOs. When they were asked to identify who in the C-suite will play the most crucial role over the next few years, CFOs were at the top of the list — with a caveat. According to the study, “Financial acumen must be married to human connection. Communication skill requirements have been adjusted and amplified. Mission and purpose, social action, and community awareness are at a premium.”

It’s a blend of big picture strategy with data analytics that’s both in demand and hard to come by. “A strategic mindset is so valued because it is so rare,” says Wharton finance professor David Wessels, who leads The CFO: Becoming a Strategic Partner. “CEOs are looking for a co-pilot who can synthesize the numbers and craft a comprehensive strategy that integrates customer needs, internal capabilities, and competitive positioning. They are looking to their CFOs to do so much more than collect and report the accounting numbers.”

But many finance professionals face a formidable stumbling block to acquiring these skills. Because most CFOs have a background in accounting, they often develop as linear thinkers who excel at solving well-structured problems. But today, organizations face increasingly complex, ambiguous challenges — and the data they have to address them is often incomplete or even contradictory.

Making Data Make Sense

Wessels says the program is designed to help them move beyond their accounting training. “More operating data is available than ever before. It can have enormous strategic importance, but it needs someone to make sense out of it. CFOs are first in line to take on that role, and it requires strategic instincts. For some of them, this is new territory, but others are ‘diamonds in the rough’: inherently strategic thinkers who are excited to have the opportunity to take a holistic, curiosity-based view of the business. They’re interested not just in how things should be done but why.”

Specifically, The CFO helps participants enhance their leadership skills, better communicate with non-financial colleagues, and find and design growth opportunities for their organizations. Wessels notes that those who teach in the program have extensive experience with CFOs, and their content is customized to that audience. “A general leadership or strategy program is geared toward executives from throughout an organization. We look exclusively at the tasks the CFO is responsible for and how those pieces impact the core issues a company is facing.”

Becoming a Value Integrator

Wessels says the term “value integrator,” coined in a previous IBM C-suite study, accurately describes the new and expanded CFO role. Value integrators have a direct effect on their organizations’ performance, helping to consistently deliver superior revenues and earnings, and possess a specific set of skills that go well beyond their accounting training. They include integrating information from numerous internal sources, planning and forecasting, measuring and monitoring business performance, managing risk, and generating predictive insights.

“The CEO, the board, and other leaders are looking for CFOs who can assess disparate data from many areas of the firm and create a long-term path forward,” says Wessels. But that path can be anything but straightforward, as stakeholders respond and circumstances shift over time. “Today, you have to think through the implications of every action and prepare to navigate multiple paths forward.”

That’s especially true as we move into a post-COVID environment. Wessels says the need to pivot toward markets with momentum — an existing trend that accelerated due to the pandemic — is critical. “The momentum of markets is always changing. If you don’t have an open mind, you can get mired in a business that is going backwards. Pivoting means taking risks and identifying the capabilities needed to go after new markets.”

For those with an eye on their organization’s top job, becoming a value integrator is key. “Most CFOs move up to CEO because they are interacting with the board of directors on a regular basis,” says Wessels. “They are the primary conduit between the board and the inner workings of the organization. That means it is vitally important to consider how the board views you. Are you just a repository of data, or a thought partner? Mathematics skills will only get you so far. Your access to the board means you need to be a strategic thinker with a good read of the room. If you’re perceived as a bookkeeper, that’s how you will be treated.”