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The Changing Role of the CFO

Oct. 2, 2014
As the pace of business gets faster and more complex, CFOs are evolving to satisfy the needs of their companies.

Soothsayer. Transaction specialist. Business value architect. Technology maven. Ask a dozen people to define the role of the chief financial officer in today's economy, and you'll likely get at least a dozen different answers… probably a lot more. Tasked with the responsibilities of managing costs throughout the recession and its aftermath, while keeping their companies positioned for growth opportunities, CFOs have evolved into whatever type of expert their companies need them to be. And that transformation hasn't necessarily been an easy one.

In fact, the biggest challenge facing CFOs right now, according to a recent study conducted by consulting firm Accenture, is managing internal complexity at their companies, which includes things like dealing with legacy systems and environments; managing the complex needs of stakeholders; new and complex business risks; and supporting increasingly complex operating models.

"Following the economic downtown, many CFOs were forced to take a defensive approach to managing the external challenges. Now we're seeing finance executives proactively addressing new internal sources of complexity, which in many cases are the byproducts of growth and strong performance," explains Christian Campagna, global managing director, Accenture Strategy, Finance & Enterprise Performance. "While complexity will never be eliminated, the most proactive CFOs understand that they not only need to manage complexity in all of its forms, but also embrace it as an opportunity."

The study reveals that CFOs have seen their influence in strategic decision-making increase over the past two years, particularly as their role has expanded into providing insightful analytics. However, it would be exaggerating things to say CFOs are leading the charge in the adoption of Big Data analytics, since only 4% of the CFOs surveyed say their companies have fully deployed Big Data and enterprise analytics capabilities.

Meanwhile, it's the ability of a CFO to look forward rather than merely reporting on what's already happened that is held in the highest regard by CEOs, according to a separate survey of financial executives conducted by trade association Financial Executives International and accounting firm UHY. The more a CFO can demonstrate solid business acumen rather than simply performing like a bean-counter, the more valued they are to their companies. Financial reporting is the greatest value-add CFOs bring to the table, said 40% of respondents, followed by strategic development at 32%.

"The most highly valued CFOs are able to blend the production of hard financial reporting data with the analysis and insights needed to develop a dynamic, realistic corporate strategy," says Steve Albert, an audit and transaction services partner with UHY.

Of course, value is a relative thing, and when it comes to salaries, CFOs are paid at roughly one-third of what a CEO earns, based on compensation analysis conducted by consulting firm Mercer. Although the CFO is typically the second- or third-highest paid executive at a company, CFOs in the S&P 500 earn only 34% of what their CEO counterparts earn. However, CFO compensation structures are starting to change, with base salaries shrinking while long-term incentives are growing, as a result of the "increasingly strategic role played by CFOs," notes Stephen Mork, a partner with Mercer's executive rewards program.

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