Q&A With Alex Hansen, Hardesty’s Executive Partner, CFO Services
1. How is the role of the CFO changing into being more of global business advisor?
The global marketplace is increasingly complex. Many companies are finding they need to be global to be competitive and open up new opportunities. However, there are serious risks, and regulation and compliance from multiple jurisdictions can be confusing.
Businesses are realizing that the CFO’s knowledge of the financial data and information is a powerful asset that needs to be used to make good business and strategic decisions. They also realize the CFO has inherent disciplines to execute on strategy that others in the organization can’t provide. Unleashing this asset is required to compete in this global market of intense competition for market share, margins, etc.
Specifically, the CFO’s focus on risk management and mitigation is increasingly important as operations and targeted clients become global.
2. How is the role of the CFO changing in terms of being the global keeper of public trust and global ethics watchdog?
The CFO is the natural leader to be the global keeper of public trust. The CFO often serves as the conscience of the organization, and is sometimes in a position where he or she has to deliver a message others may not want to hear. Public trust is earned from the numbers that show the results, but more importantly trust is sustained from managing performance consistently over time. When tough decisions need to be made, ensuring that management is committed to doing the right thing from a fiduciary, ethical and compliance perspective is critical. Companies realize more than ever they need trust from the investment community, and the CFO is the person who best represents the organization on this front.
3. What skill sets are needed to fill this expanding role?
A CFO needs to understand the business as well as the operational leaders. The CFO can no longer just be the numbers guy.
CFOs in today’s market need to manage the massive amount of data now available, and use that data effectively to make better strategic plans and decisions. This also requires the CFO to expand his or her skill set to understanding the systems needed to accumulate, analyze and report such information.
CFOs need the financial experience to manage a company’s capital structure. As financial markets become more complex and transactions move at a faster pace, the board and management look to the CFO to make the right decision the first time. Developing the right team, both in-house and external professional advisors, is critical to success.
4. Are CFOs ready to step into the expanded role?
Some are and some are not. The CEO and Board at many companies today, particularly those that play in the global market, are setting the tone which demands that a CFO have a well-developed and diverse tool kit to manage finance, strategic transactions, M&A integration, systems and data management as well as the controllership function. They are looking not only for a team player, but a leader who will help drive operational improvement and develop strategy. Certainly there are still CEOs and Boards that have limited expectations and are only looking for the numbers. But as the marketplace evolves, and it is evolving quickly, it will be interesting to see how the CFO’s role evolves in those companies that win.
5. What current skills will help them in this expanded role?
The following are some of the types of skills that will make CFO’s successful in years to come in this expanded role:
- Solid leadership skills, including the ability to delegate. The CFO of tomorrow needs to have a solid Controller he or she can trust and not micro manage the numbers. And the CFO needs to develop a team of top professional advisors.
- A broader array of soft skills, especially good people skills. The CFO will need to work with everyone in the company, the Board and investment community in a constructive way and be respected to succeed. Collaboration and the ability to compromise at the right time as also important.
- Strong public speaking skills and presence. The CFO of tomorrow is no longer a back room person. He needs to be out helping tell the story.
- Strong IT background
- Imaginative thinking that challenges the status quo and asks “why are we doing it this way”?
6. How should CFOs best transition to get ready to play this expanded role?
CFOs need to expand their skill set and refine their skills in these areas. This change does not need to be dictated downstream from the CEO or Board. CFOs should step up and expand their role on their own and in most cases this should be a welcome change from within the company.
7. What are some challenges for CFOs in this new role?
Some major challenges would include:
- Other business leaders may be resentful as the CFO may be stealing some of their limelight.
- The CFO’s financial direct reports may feel they are taking on too much financial responsibility on their own. This can be remediated quickly by having the CFO stress their new autonomy and importance.
- There may be a lack of skills in these expanded areas. CFOs may need to go out and get some formal training or help from others.
- The “old school” CEO may not welcome the new changes with open arms and feel the CFO is overstepping his responsibilities.
8. What are some strategies for dealing with the challenges?
- Communicate, Communicate, Communicate. The CFO needs to lead by example and tell his or her story. The CFO needs to demonstrate the value of the expanded approach and sell direct reports on why this is better for them. One way to get this done is to provide the vision for success and specific target goals everyone can see and aspire to.
- Keep learning. Network with other CFOs and other professionals in the investment banking, finance, legal and technical fields.
- Operate globally. For a younger individual, find a way to get international experience. For more experienced CFOs, look for opportunity to take on global responsibilities.
- Promote diversity in your staff and your advisors. As companies become global, the finance organizations need to match their clients and those with whom they interact in the same way that the rest of the organization needs to reflect its client base.
- When you have the opportunity to take an operational roles, jump at them. You see some companies rotate their operational leaders into the CFO chair (e.g. Disney, for example) and vice versa.
9. What will be key to success to being this global CFO?
The key will be realizing the role is changing and you need to step it up to a new level. You will need to be assertive and work hard to be this type of person. But most important, you will need to set your vision and goals so you clearly can measure success at the end.
For all your financial executive leadership needs, call on Hardesty.