In today’s fast-evolving business environment, executives and employees alike often find themselves taking on different responsibilities than what the position initially required. Chief financial officers in particular often find their talents called on in a variety of business assessments.
“There’s this instant need for information in order to make decisions,” said Jen Rees, CFO of the architectural, engineering and design firm Clark Patterson Lee. “I see the role of the CFO moving toward being able to drive strategic decisions by the demands of having to have that instant information.”
According to Ajit Kambil, global research director for Deloitte LLP’s Global CFO Program—which provides training for CFOs—the highly skilled professionals serve their firms in four basic roles: as operators, stewards, strategists and catalysts. As an operator, a firm’s CFO makes sure the company meets its core financial responsibilities.
“They deliver all of the basic capabilities of finance—tax, treasury, controllership and financial planning and analysis,” Kambil said.
In the steward role, a CFO safeguards a firm’s critical assets and accurately reports its financial position and operations to the company’s internal and external stakeholders.
As a strategist, a CFO provides financial leadership for a firm, helping to determine its strategic business direction.
“The financial strategy has to be well-aligned with the growth strategy of the firm,” Kambil said. “That may mean supporting M&A activity. It may mean supporting investments in critical markets, so they have to think about how they finance all of those growth strategies.”
Finally, the CFO functions as a catalyst, helping a firm to reach its strategic and financial objectives and reduce risks.
“It could be putting in new planning systems,” Kambil said. “It could be cost cuts.”
A CFO can function in any or all of the different roles at a given point, though in the past the emphasis was generally upon the first two. Over the last 10 years or so, that focus has changed.
“I would say the expectations are about 65 percent of the CFO’s time has to be in the strategist-catalyst areas and 35 is probably in the operator-steward areas,” Kambil says. “CEOs increasingly say, ‘I want my CFO to be a right-hand strategic adviser to me.’”
New technologies have helped drive that shift. At onetime, CFO reports took fairly traditional forms.
“They would have a team of financial analysts who would give them a reporting package, and that reporting package was typically on paper,” Rees said. “As we moved through technology, maybe it was an electronic report, but that report was static.”
Nowadays, companies can store huge amounts of data on cloud-based servers and chew through it on demand at incredibly high speeds.
“It’s really being able to sift through the data, look for patterns and understand what is going on,” Kambil said.
With this information quickly accessible, a CFO can help his or her firm develop the means to counter threats, respond to markets and grow.
“One of the most important areas of focus is to improve the forecasting process,” Kambil said. “The tools that we have today can be helpful in that process of forecasting, as well as in closing the gap in performance between the forecast and the reality.”
One program Rees has in her toolbox can help her determine and present some of the long-term effects of Clark Patterson Lee’s actions.
“If you want to look at either making an acquisition, or the opposite, of divesting part of your business, you can do scenario modeling,” Rees said.
Using that program, she can identify the potential risks and rewards of those actions and determine whether they’re worth taking. Such tools can also help Rees examine and report how well Clark Patterson Lee’s different elements are functioning.
“I can identify which markets or offices are not performing as well as we’d like,” Rees said. “I can very easily bring that information forward and start to drive the conversation and drive the decision-making and additional oversight.”
David Kirshner has worked as a CFO for various organizations for close to 30 years.
“It’s changed so much from the early days, when we were guessing at a lot of things and people really had to use telephones for all their contacts,” he said.
As senior vice president and CFO of the University of Rochester Medical Center, Kirshner has much more up-to-date tools at his disposal, including powerful data-gathering and analytical programs.
“We basically have so much more data now than we’ve ever had before—both clinical data and insurance claims information,” he said.
As the CFO of a nonprofit medical treatment and research facility, Kirshner uses those resources in ways that differ to some degree from those employed by for-profit enterprises.
“Wall Street is very focused on quarterly earnings and short-term returns on investment,” he said. “We have so many other measures that we use to identify the success of the organization and its progress toward targets.”
In that context, success might not be measurable in terms of the outputs of the medical center’s physicians, nurses or researchers.
“It may be in the time they’re given to deliberate a problem, or the support we provide to a scientist to investigate something innovative, which may not have a (financial) return,” Kirshner said.
At the same time, Kirshner does fulfill the traditional roles of a CFO, and he and his staff work to boost the medical center’s bottom line. They are using data on the medical care of those in the UR Medicine system who suffer from congestive heart failure to research the effectiveness of the treatments they have received.
“The collective physician community here is working with me as the CFO and our data analysts to try to figure out what’s the best course, the best pathway to follow, and what’s its cost,” Kirshner said.
Such research could produce benefits that transcend dollars and cents.
“We think that’s a very important part of our ability to use data and information to figure out how to take better care of patients,” Kirshner said.
If CFOs—particularly those in business—continue to take on new, less-traditional duties in the coming years, the overall role of such professionals could change.
“I think you will see many CFOs still have primary responsibilities just over finance, but they will be more strategic and drive change in organizations,” Kambil said. “They may not have the title of ‘chief operating officer’ at the same time, but they’ll be very influential in driving operational performance.”
Mike Costanza is a Rochester-area freelance writer.
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