Chief Financial Officer (CFO) roles and responsibilities have long been synonymous with financial stewardship, focusing on maintaining the financial health of an organization through meticulous accounting and reporting – however, over the past decade, this has changed drastically.
The modern-day CFO is expected to navigate a broader array of responsibilities that go far beyond traditional financial management. In fact, 82% of sitting CFOs note that they have taken on additional responsibilities in the past few years that are redefining their role. This expansion reflects a shift towards strategic partnership within the C-suite, where CFOs are responsible for – and critical in – shaping corporate strategy alongside their executive peers, particularly the CEO.
For companies to support the growth of their CFOs and attract top-tier financial talent, it’s fundamental to understand how current and aspiring CFOs must adapt to excel in this dynamic role.
The Evolution of the CFO Role
Traditionally, the CFO was primarily centered on historical data interpretation – guardians of the company finances, tasked with budget management, risk assessment, and financial reporting. That role has undergone a substantial transformation driven by several key factors. Today’s CFOs handle:
- Strategic planning
- Environmental, social, and governance initiatives (ESG)
- Mergers and acquisitions (M&A)
- Data analytics
- Digital transformation projects
With this role expansion comes the need for ongoing assessment of a CFO’s strengths and weaknesses to ensure that they’re contributing to the organization and the company's forward-looking goals. CFOs must be adaptable and, more importantly, willing to change to be successful in today’s business climate.
Adaptability is increasingly essential as CFOs navigate a rapidly evolving business environment. They face expanding responsibilities, managing financial risks while leading strategic investments, and adapting to regulatory changes. Moreover, leveraging technology for enhanced business intelligence is crucial. Successful CFOs transcend traditional management roles to become inspired leaders who guide their teams through complexities with adaptability and foresight. As potential future CEOs, their role demands a strong ethical foundation and the ability to foresee and adapt to the challenges ahead.
New Chief Financial Officer Roles and Responsibilities
There are numerous factors driving all of this change, including:
1. Economic and market dynamics
Globalization and market volatility demand that CFOs adeptly manage financial risks while capitalizing on emerging opportunities.
2. Technological advancements
The advent of big data, artificial intelligence, and machine learning has revolutionized business operations, prompting CFOs to lead the adoption of innovative technologies that deliver analytical capabilities and business intelligence.
3. Regulatory changes
Evolving regulatory frameworks require CFOs to ensure compliance and determine how to best leverage those changes for strategic advantage.
4. Stakeholder and board expectations
Today, stakeholders expect CFOs to engage in broader strategic discussions, significantly influencing the company's direction and decisions.
5. Aspirations to CEO
With the CFO-to-CEO pipeline more viable than ever, CFOs are increasingly viewed as key candidates for the top executive position.
Why the CFO-to-CEO Pipeline is Growing
The trajectory from CFO to CEO is increasingly common and, with it, career motivations are shifting. CFOs are seen as prime candidates for the top executive role due to their comprehensive understanding of financial and operational frameworks, strategic foresight, and close proximity with the CEO, effectively acting as “co-pilots” of the organization. According to Egon Zehnder’s “The Super CFO” survey, 60% of CFOs express a desire to ascend to CEO, with 70% feeling prepared to take on the role immediately. This sentiment is particularly strong among CFOs who serve as non-executive directors (NEDs) on boards, with 80% believing they are ready now, as compared to 67% who are not NEDs.
That readiness varies by industry and company type, with 82% of CFOs in the healthcare and pharmaceutical sectors feeling immediately prepared contrasted by only 55% in technology and communications. Public company CFOs also claim a higher readiness (74%) compared to those in family-owned firms (56%).
Despite this, there are significant barriers to achieving the CEO position. Nearly half of the CFOs surveyed (46%) cited networking and visibility as their biggest hurdles, followed by gaps in customer and market knowledge and operational expertise. These challenges are echoed across regions, with CFOs in Europe and North America highlighting similar obstacles while those in Latin America pointed to a lack of operational experience and strategic visioning as their primary concerns.
Interestingly, while many CFOs are ambitious for the CEO role, the demands of their current position lead some to contemplate early retirement, especially in North America where 50% have considered stepping down due to the role's complexity. This increases with company size and is more prevalent among CFOs of both public and family-owned companies, suggesting that the stress and responsibilities of the position sometimes overshadow the desire for career growth.
The CFO role has evolved from a purely financial focus to broad strategic responsibilities. Today, CFOs are pivotal in driving the strategic agenda, partnering cross-functionally to deliver value beyond the balance sheet. Their role in shaping company strategy, managing complex mergers and acquisitions, and leading digital transformations is indispensable. This shift has positioned CFOs as potential successors to CEOs, equipped with a comprehensive view of business operations and strategic acumen.
It’s crucial for companies to think strategically about their talent pipelines. Do you have a succession plan for your CFO?
What are the Challenges Associated with the Changing Role of a CFO?
As the Chief Financial Officer role becomes increasingly strategic, CFOs face several significant challenges that test their adaptability and resource management skills:
Balancing Traditional Responsibilities with New Demands
CFOs are tasked with overseeing an expanding range of strategic initiatives, from mergers and acquisitions to sustainability efforts, all while maintaining rigorous financial controls and processes. This dual focus demands exceptional organizational skills and the ability to prioritize effectively under pressure.
Navigating Digital Transformation and Data Security
Digital transformation is not just a trend but a necessity, requiring CFOs to lead the charge in integrating new technologies to enhance business efficiency and decision making. Simultaneously, they must fortify data security measures to protect sensitive information against increasingly sophisticated cyber threats.
Developing and Maintaining a Skilled Finance Team
As financial operations become more complex, the need for a highly skilled finance team becomes more critical. CFOs must attract top finance talent while also ensuring their teams are continuously upskilled to handle new technologies and complex regulatory environments effectively.
Managing Unpredictability
External factors such as economic shifts, global crises, and geopolitical tensions add layers of unpredictability to the CFO’s role. This requires CFOs to be exceptionally adept at risk management and scenario planning, ensuring the organization can pivot and adapt swiftly.
Embracing Expanded Responsibilities
CFOs are often required to step beyond financial management and into cross-functional leadership roles that influence the entire organization. This expansion can stretch their capacity and requires careful delegation and the development of strong second-line leadership.
This also provides opportunities for CFOs to demonstrate leadership beyond traditional financial management, positioning themselves as indispensable strategic partners within their organizations.
Looking Ahead: CFO Roles and Responsibilities
CFO roles and responsibilities are poised for continuing evolution, with new areas of expertise becoming essential. Tomorrow’s CFOs will likely be expected to master predictive analytics and decision science, using data to inform strategy while also getting a glimpse into the forces that will shape future strategies.
Additionally, as sustainability and ESG initiatives become more integral, CFOs will need to adeptly integrate these considerations into financial planning and corporate governance. We’re already seeing this with many of our CFOs, and expect it will continue to become more important over time.
How Companies Can Support CFOs with Expanded Job Requirements
Companies can support their CFOs by:
- Prioritizing training and development: Offer continuous learning opportunities in leadership and emerging technologies.
- Creating a supportive corporate culture: Encourage strategic thinking and innovation within the finance function – and beyond.
- Providing access to all facets of the business: Allow your CFO to partner even more closely with the CEO and other C-suite peers leading various business departments to get a firsthand look at all aspects of the organization’s direction. This will prepare them for if/when they decide to take that next step in their career.
- Providing tools and technologies: Invest in advanced tools that enhance efficiency and decision-making capabilities.
How External Partners Can Support Sitting CFOs with Role Changes
To navigate their evolving roles, CFOs can greatly benefit from the support of seasoned partners like those at Egon Zehnder who bring deep expertise not only in executive search, but also in leadership development. Egon Zehnder excels in identifying and developing top-tier financial talent, providing strategic insights, and leveraging the networking opportunities that are crucial in today’s dynamic business environment. Our firm offers robust support in transition and succession planning, guiding CFOs through the next steps of their careers.
As the role of the CFO expands to encompass broad strategic acumen, the need for comprehensive support becomes critical. Organizations and their CFOs must remain adaptable, proactive, and forward-thinking to meet the challenges of today and tomorrow. Engage with Egon Zehnder to leverage our deep expertise and global network in transforming your financial leadership.
Learn more about Egon Zehnder’s CFO support services and how we can drive the growth and development your organization needs.
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