Traditionally, the role of the chief financial officer (CFO) was to focus on financial reporting, operational efficiencies and compliance. But in the face of an ever-changing business landscape, today’s CFO is expected to do so much more. So, what makes an effective CFO in a modern business? Here, we look at the changing responsibilities and qualities required for this dynamic and increasingly complex and strategic role.
Multiple routes into the CFO role
Firstly, it’s important to recognise that there are many routes into the CFO role. While financial acumen is key, professional certifications such as ACA, ACCA, CMA, CFA, or CPA qualifications are a necessity, and MBA and MSF degrees will help set you apart. There will, however, always be exceptions to the rule.
Some individuals become an “accidental CFO” having worked across different sectors and in various businesses at different points in the business lifecycle. Others arrive at the role through a series of lateral moves, from auditing and accounting, consultancy, global strategy and investment banking. If you’re working with lots of CFOs and CEOs early on in your career, it can shape how you think about future opportunities.
Another route may be to learn on the job from a job in payroll administration, for example, right the way into accounting and upwards from there. Apprenticeship schemes and on-the-job learning teach you skills such as an entrepreneurial spirit, communication, logic and problem-solving which you may not get from a classroom.
“I’d say the big advantage of having come through a commercial route is that I know I can talk through the core finance processes with the team having done them myself; AP, AR, bank recs, BS recs, cash management, etc – I know the challenges they face and can work with them to manage through the processes. This allows me to ensure the ‘engine room’ is running well and not containing any surprises, which is critical. I then converted to financial partnering roles so I know how to translate a P&L into something an operator will understand and can coach my team in those important skills.” Matt Britton, CFO @ Zipworld
How to be an effective CFO
An effective CFO should take strategic initiatives across all departments and partner with the C-suite to build the company’s health. They should manage the company’s financial health and contribute to strategic goals by using financial data and guiding operational decision-making. To achieve this, they must have strong relationships with the rest of the C-suite, especially the CEO, and navigate their needs, balancing both short-term financial constraints and long-term goals to accrue future value.
Being diplomatic, collaborative and transparent will ensure that the CFO’s team and the wider business understands the financial decisions being made. Setting out a strategic roadmap for growth and predicted performance will mean that the CFO can take the whole company with them and realise project buy-in.
Combining strong leadership, the use of business intelligence, and the ability to see the bigger picture all improve a CFO’s effectiveness and ultimately deliver a better outlook for the company. So, when a CFO takes calculated business risks and looks for growth opportunities, these will be seen as initiatives driven for the long-term health of the organisation.
Deloitte defines the modern CFO with “four faces”: Steward, Operator, Catalyst and Strategist. As a steward, CFOs work to protect the vital assets of the company, make sure the business complies with all current financial regulations, close the books accurately and communicate risk profiles to investors and boards.
The operator CFO provides various services to the business such as analysis, treasury, tax and other finance operations.
Acting as a catalyst, CFOs selectively and strategically drive business improvement initiatives like cost reduction, procurement, pricing strategy and execution and other process changes and incremental innovations that create value.
A CFO must also take a seat at the table as a strategist, helping to shape the future direction of the business through aligning business and finance strategy, M&A and capital market strategy and other long-term company investments.
Practical tips
Whilst many would be tempted to focus on the technical aspects of the role, we find that other competencies like commercial skills and strong leadership drive CFO effectiveness more successfully. If a CFO can delegate to specialist teams and subject matter experts, rather than trying to be a jack-of-all-trades, they can then be freed up to focus on the key deliverables of the role.
And you don’t always need to be a technical guru. On the contrary, the rise in the use of AI and other technologies should free up a CFO’s time, allowing them to create a strategy, spot growth opportunities and build relationships more effectively across the organisation.
The role of the CFO is dynamic and challenging but also very rewarding. With a talented CFO in place, a business can navigate today’s business landscape and create profit, growth and excellence.
At The Siena Partnership, we work with our clients to recruit top finance professionals who can guide their organisations through complex economic challenges. If you’d like to continue the conversation with one of our finance experts, Jake Bush, contact us here: jake@thesienapartnership.com