How do you discover what the role of the Chief Financial Officer (CFO) will be in eight years time? Simple, get leading journalist Robert Bruce to interview ten of the world's top CFOs and see what they think.
The good news first. According to the 10 sages, the role of CFOs is a strong one and its growth is assured! That growth, says Robert Bruce, in his forward to The Chief Financial Officer in the Year 2010, will be based on their ability to deal with complex information and its fast delivery. There is also a strong belief that the CFO will have a more pivotal and increasingly powerful role within the corporate entity of the future. And, the bad news, if it is bad, is the fact that the nature of people who become CFOs will have to change - the traditional accountant is dead. Out go the figure-obsessed CFOs and in come leaders with strong personalities with a wide understanding of markets and cultural issues.
The changing role of the CFO
Published by the International Federation of Accountants (IFA), Bruce's book stresses that the finance function will remain a 'bedrock', but has to become more strategy-orientated.
Many interviewees felt the role of the CFO would move towards one where acting as a guardian of financial information, stewards and compliance officers was a central responsibility.
Interestingly, with Enrongate in full swing, the idea of the CFO having a restraining influence and acting as a guardian of the corporate conscience will bring a wry smile to some. Angela Holtham, until recently Nabisco's CFO, suggested that there is a tendency for chief executive officers (CEOs) to underestimate control as part of a CFO's role until, of course, things go wrong. Then the CEO sees it as the heart of the CFO's role.
So the CFO in the year 2010 is going to have to be very good at ensuring that accidents never happen. 'CFOs need to catch the variances early,' she said, and 'spot when things are going in the wrong direction'. That means explaining and correcting things before they get out of control.
As things go more electronic, the potential for things to go wrong increases, explained Holtham. But equally an e-business world enables you to keep tabs on the financial systems using more sophisticated tools.
That means ensuring the process is right rather than making individual checks. It is the same direction as auditors are moving. She stressed that auditors, more and more will audit the system rather than check large numbers of individual outputs to see if they are right.
The Group Finance Director of Jardine Matheson, Norman Lyle, sees the world of the CFO in the year 2010 as not just being tougher than now, but also as about 'being tough'.
Interestingly, Lyle thinks the CFO will always have to be a person apart. He explained that while part of the business team, he/she has to be someone else - the conscience of the business as well. 'They have to ensure that the salespeople, for example, do not get carried away.'
Lyle wants to see CFOs with 'a fair amount of courage'. This is not the case in 2002, he admits, but predicted that the era of all-dominant chairman was coming to an end. 'It will change because people will be more in the public eye,' he said.
'There will be more and more publicity, a tightening of standards and more visibility. So it will become easier for the CFO.'
Lyle is one of those people who sees the end of the finance function as it used to be. Jardine's have a joint venture with Ernst & Young. Called One Resources Group, it does all the number-crunching, bank reconciliations and invoicing. It also negotiates with suppliers for non-trading items, like fuel oil.
Time to outsource?
The finance function is increasingly becoming a process system and this is helping to shape the future role of the CFO. It looks as if many of today's finance leaders believe much of the finance department will eventually be outsourced or 'achieved' through joint ventures.
There is no doubt then that the CFO's role is shifting dramatically to one of transaction manager, communicator and strategist, says Bill Connell, chair of IFAC's financial and management accounting committee. Chief financial officer of Coles Myer, John Schmoll, agreed that 'we have got to get good at communications'.
That means the training and development of a career will have to change and that will mean 'a different type of person coming into the profession'. Schmoll admitted that this change of emphasis turns the old-style accounting world upside down.
Working in retail, Schmoll pointed to recent cost reductions in his stores that upset customers. That means CFOs have to be sensitive to more than the old straightforward financials.
Schmoll also wanted to see greater focus on capital allocation. He views the change as much as one of philosophy as of practical duties. 'Traditionally, we have been controllers and record-keepers. We need to ensure that we still do that well, but we have to extend it to emphasise adding value rather than loss prevention'.
There is a list of other areas in which the CFOs see their roles expanding, which includes:
- Investor regulations and reputation management
- Risk management
- Corporate governance
- Global marketing
- Remuneration policies, especially for senior management
- Treasury functions
Bruce points out that in order to assume the new roles on offer, tomorrow's CFOs will need to possess strong communication skills, the ability to interpret complex financial data, and a broad knowledge of global economic markets and cultural issues.
In truth, CFOs need these skills today as well. But, it never hurts to hear the things you should be good at if you want to make it to the top.