November 2022 | 

Stability and Transformation: The CFO’s Leadership Role

Stability and Transformation: The CFO’s Leadership Role

The number of CFOs who were elevated to the role of CEO has hit an all-time high (29 percent post-pandemic). According to IBM’s latest CFO study, that number reflects organizations’ preference for “guardians of stability and transformation”: senior leaders who will push them forward, into the unknown, while at the same time providing the security that comes with familiarity.

To bridge the inconsistency, which has “elevated the stakes and the opportunity for the CFO and the finance function,” the study suggests that CFOs “need to optimize their own potential and that of their teams. To excel will require new approaches, new tools, new perspective, new organizational constructs, skills — especially related to data — and discipline in using them.”

It's those new requirements that are the focus of Wharton’s The CFO: Becoming a Strategic Partner program. Since 2002, it has helped over 1,200 CFOs and other finance leaders gain the strategic agility and leadership mindset expected of executives being groomed for the CEO role.  Wharton finance professor and academic director of the program David Wessels says it gives participants a toolbox to enhance their leadership skills, better communicate with non-financial colleagues, and find and design growth opportunities for their organizations.

“Much like great chess players, today’s CFOs have to go beyond being linear thinkers — focused on the next step to capture a pawn or bishop on the board — to being strategic thinkers who plan multiple moves ahead and even encourage competitor reaction in a predictive way,” he explains. “CFOs have always had a place at the table by virtue of controlling the profit-and-loss statement, which serves as a comprehensive ledger of all the firm’s activities. There are very few, if any, people in the organization who have as much access and control over this wide-ranging tool. That gives CFOs the right to play, but in order to have a seat at the table they must go from collecting the data that goes into the P&L to being an expert in each part of their business,” he says.

The CFO program is designed to help them develop that expertise, moving beyond accounting training to include integrating information from numerous internal sources, planning and forecasting, measuring and monitoring business performance, managing risk, and generating predictive insights. “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.”

Wessels notes that CFOs are also under external pressure. “We have seen activist shareholders become involved at some of the most well-known companies in the world about how they plan to use the resources of the firm. The CFO becomes the critical go-between for the investors and management.” The combination of internal and external pressure has led to what Wessels calls the “perfect storm for CFOs to take a more prominent role — but only if they have the skills.”