Wharton@Work

April 2024 | 

Redefining Finance Leadership: CFO as Strategic Partner

Redefining Finance Leadership: CFO as Strategic Partner

Sunil Mathur of Siemens, Carol Tomé of UPS, and Murray Auchincloss of BP: 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 Siemens’ Joe Kaeser.) In fact, 8.4 percent of current Fortune 500 and S&P 500 CEOs were promoted from the CFO position, up from 5.8 percent just 10 years ago.

Research shows that the trend is being driven by the evolution of the CFO role: they are increasingly called upon to provide leadership in areas including risk management, strategy, and adoption of technology such as AI. McKinsey reports that between 2016 and 2021, the number of CFOs who are responsible for their organization’s digital activities more than tripled. Investor relations is another growth area for CFOs: 44 percent said they were responsible for these activities in 2016; by 2021, that number grew to nearly 66 percent. But this developing mandate doesn’t mean all CFOs are ready to step up.

The blend of big-picture strategic thinking with data analytics is 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, Wharton’s CFO program 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 an 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.”

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.”