The growing importance of the CFO

Constance Minc at IFS argues that CFOs are now revenue enablers core to long-term growth

The role of the CFO within most enterprises used to be more of a support function, crunching the numbers and providing the statistics that helped to back-up the CEO’s decision-making. Often, they worked in isolation, providing senior leaders with key data sets as and when required.

Today, that role has transformed, and CFOs are being much more proactive in driving the growth and expansion of their businesses. That’s especially key in the current climate where the macro-economic disruption – make forecasting based on past performance impossible.

Recent research by McKinsey, entitled Mastering change: The new CFO mandate indicates that the finance leader’s role is ever-evolving. While in 2016, 9% of CFOs polled said that their organisation’s digital functional areas reported into them, for example, that percentage had more than tripled to 31% by 2021. Equally, while just 44% of CFOs surveyed had responsibility for investor relations in 2016, the proportion had grown to just under two-thirds (64%) by 2021.

Taking steps to deliver

This research backs up the key point that as businesses look to develop growth plans and make strategic shifts in line with rapidly-changing market conditions, CFOs increasingly need to be at the heart of the response.

The numbers remain key – CFOs can guide the strategic decisions of the business by giving it the data it needs to make the right decisions to deliver revenue growth. That is just as crucial as it was ten to fifteen years ago. But CFOS need to do much more than just this. They need to have a commitment to growth and profitability and they need to voice that confidently, something which many are now doing. The Deloitte CFO Survey Q2 2021 found CFOs’ expectations for an increase in corporate revenues have hit their highest level in more than six years.

Working in close collaboration

To be effective today, CFOs today don’t just need to master spreadsheets and generate the core figures, they understand what they mean for business and communicate that understanding to their fellow board members. To achieve this, they first need to be able to look into the numbers and use their knowledge to spot opportunities to accelerate growth. Next, they need to become data translators and interpreters, focused on converting technical numbers into carefully-selected business-centric (rather than finance-centric), key performance indicators (KPIs), which can then be used by the leadership team to shape business strategy.

Finance leaders should really be spending 90% of their time translating the data for the CEO and their fellow board directors and, more crucially, guiding their business decisions, rather than just producing and crunching numbers at the leadership team’s behest.

As they look to shape strategy, CFOs need to work in close collaboration with the CEO and other senior leaders across the business, including CSOs, CMOs and COOs, making decisions to drive that growth. They can, for example, collaborate with CMOs to identify the highest value customers and proactively pursue them. They can access all the key data - from product line performance and profitability statistics to annual sales forecasts - and use that to help the sales director shape the sales strategy. And they can build strong and enduring relationships with CEOs to help ensure an influence over the business direction.

All the above is key because if the CFO is to effectively shape business strategy, they first need to understand the whole business. That means being aware of the challenges across different business departments. It means understanding not just hard metrics like cash flow and profitability, but also soft metrics like employee and customer satisfaction to gauge the ability the company has to deliver what the customer wants. And they need to build a strong finance team they can trust to work with them to deliver their core goals

Driving agility

 As they seek to drive growth and revenues across the business, CFOs not only need to work closely with other decision-makers, but they also need to be agile and flexible. With data coming into the business continuously, the CFO must be agile enough to interpret it in real time and, if necessary, use the changed perspective it gives to drive changes in business strategy.

That’s especially important given the economic uncertainty we are seeing today. In these difficult times, the ability of the CFO to rapidly understand what the figures are telling them and communicate that understanding to decision-makers across the organisation can often be a differentiator that unlocks business opportunity. CFOs are now drivers of the top line growth within business and key to the future direction the business follows.

Constance Minc is chief financial officer at IFS

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