The making of a modern CFO

Nilotpal Chanda
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The making of a modern CFO – Traits that set them apart
November 22, 2022

I have been fortunate enough to interact very closely with CFOs & Finance leaders, and there’s been a paradigm change in the traits of a successful CFO over the past decade & half.

Back in the day, all business decisions were taken by CEOs and business-facing leaders. CFOs would only validate & manage back-office operations. So the skills back then were mostly transactional.  However, during my recent interactions with CEOs & Investors from the world of business around the globe, a constant question I have had for them is this – What do you think makes for a great CFO?

And hundreds of interactions later, I came to the 5 Top points, which almost got the nod from every interviewee – this blog is all about those points.

A central point that drove all the below “Ingredients of a Modern CFO” was this – the word ‘modern’. All the business leaders, experienced and greenhorns agreed on this – The world has changed dramatically and is going to change faster. Hence, it was the most important thing to realize that leadership roles are now facing a paradigm shift – and only the fittest will prosper.

The CFO role is no different; it is no longer restricted to the erstwhile mission-critical activities -‘books’ and ‘compliance’, but taking up and leading strategic initiatives in the organization.

“The CFO of today is like the perfect Swiss knife – Jack of all and master of many.”

What Makes for a successful CFO (what I heard during the conversations) 

  1. They Own Business Growth and do not just spectate

Given their strategic position, CFOs are driving and managing top-line growth in all organizations. Small teams dedicated to sales pipeline health and growth are not uncommon amongst CFO offices.

CFOs are often involved in initiatives that are focussed on top-line growth and customer experience. The finance function is increasingly getting involved in a host of ways – from a risk identifier in deals to a productivity improvement consultant for teams.

I think the reason for this is – Change in how success is measured is due to the hyper-focus of CEOs and Investors on business health and market share expansion.

The CFO role of a spectator of operations and reporter of financial results is a thing of the past.  

  1. Strategic Partners

CFOs have become strategic partners today, guiding both financial and organizational initiatives.

As strategists, CFOs will bring financial initiatives and planning into sync with those from other business units and create a cohesive whole that drives innovation and growth for their organizations. They also provide essential context and support for long-term investments and develop new ways of providing complete and transparent financial insights for investors and other stakeholders.

Based on a KPMG CFO survey, 93% of CFOs expect themselves to be actively involved in the next five years, either directly leading digitalization projects (33%) or partnering with CIOs (60%).

CFOs must be Co-Pilot with the CXOs to lead business model and cost structure transformation.

Given their proximity to and deep understanding of data and the correlation of KPIs, CFOs of today are often leading the charge when it comes to organizational transformation. CFOs ought to have a leadership mindset – taking risks and new challenges to deliver value.

  1. They lead on all fronts – especially in Technology

The redefinition of the CFO role has come with newer expectations – finance leaders include in their top priorities the upgrading of technology solutions to drive digitalization, integrating emerging technologies into their company, and developing products and services.

This is evident in a CFO survey conducted by the Everest Group, where 63% of the respondent CFOs agreed leveraging technology is one of their top priorities.

As strategists, CFOs bring financial initiatives and planning into sync with those from other business units and create a cohesive whole that drives innovation and growth for their organizations. This is where a technology focussed CFO takes the cake!

Let me put a limb out and say this – There is no organizational transformation possible without the involvement of Finance today.

The finance department is increasingly turning into a ‘testbed’ – fuelling and incubating innovation for the rest of the organization to follow. The proximity to data that a CFO has is unparalleled and is truly a strategic asset in the right hands.

  1. Astute Risk Navigator, especially during rough times

Cases like the FTX debacle recently and all the other financial imprudence MBA case studies we have all read will tell you this – Manage business risks proactively. Period.

This risk focus creates a heightened responsibility for the CFO – possibly more than most other CXOs would. The role of a CFO has shifted from being an accountant to one of managing risk and strategy.

This is a significant shift as CFOs need to be able to bring in their experience and knowledge to reduce, identify, quantify and mitigate potential business risks – and boy, those risks are changing by the day!

Based on a Gartner CEO and Senior Business Executive Survey 2022, around 25% of the 88 CFO surveyed, 25% of respondents looked to increase their budgets to manage risks and improve compliance.  

The key question CFOs need to ask is “What is going to happen” and not “What happened”.

  1. The Data Wizard – Spreadsheets over wands

The CFO of today needs to be as comfortable with data as wizards are with their wands. The CFOs have become the fiduciary owner of not just accounting data but data from all sources and departments.

This helps CFOs improve an organization’s situational awareness. The Modern CFO steers the organization through predictive models and advanced analytics across departmental data, connecting the dots and getting a 360-degree view of business situations.

The CEOs I spoke to told me a secret – A CFO who can connect the dots between data across systems helps them in 2 ways – identifying and solving problems fast and automating cross-function solutions.

Based on a Gartner survey across companies, 71% of the skills needed for Advanced analytics capabilities are already Familiar with Finance – higher than any other department.

The CFOs of today must be able to interpret financial information while connecting the dots with Operations in real-time. What organizations need are multifaceted professionals that breathe and strive for cross-functional data.

Conclusion :

I hope you found this blog helpful on your journey for readying yourself for the journey of the Finance of the Future. I would also like to thank all the people I learned from and who contributed to these thoughts through lively interviews and discussions.