Indeed, today’s CFOs see themselves as strategic activists. “The growth agenda is of equal or even greater importance” compared with solid cost management, Johnson & Johnson CFO Robert J. Darretta Jr. told us.
Our study shows that, to a large extent, chief financial officers are now viewed by their chief executives as CEOs’ primary aides in driving company-wide transformation efforts. Although this development has occurred over a period of a decade or more, we observed at least eight trends that underscore how profound that evolution has been:
CFOs are more closely engaged than ever in designing, adapting, and implementing their organizations’ business models. “I am involved in all important operational and strategic group planning decisions,” said Karl-Gerhard Eick, who is both CFO and deputy CEO of Deutsche Telekom, the German telecommunications company.
With capital markets now as global as companies, CFOs increasingly take lead roles in tying their firms’ business strategies more closely to models of shareholder value. “We have had to spread this culture of how to create value, how to get the best return on assets, throughout the company,” said Renault CFO Thierry Moulonguet, a member of the multinational management team that helped revive the Japanese automaker Nissan.
To ensure strategic alignment, finance chiefs find themselves serving additionally as “chief metrics officers.” Robert L. Lumpkins, CFO of the food and agriculture giant Cargill, said, “Measurement drives behavior, and we need to know that we’re getting the behavior that we want and that people are focusing on the right things. That’s part of the job of the CFO.”
Chief financial officers say their role includes more and more performance management, as they work toward the goal of securing what Robert J. Dellinger, CFO of the telecommunications company Sprint, called the “execution premium” accorded by shareholders to top performers.
CFOs increasingly are taking line management responsibility in operating businesses. For example, in addition to overseeing the finance organization, Caterpillar Group President Douglas Oberhelman manages the Peoria, Illinois, manufacturer’s diesel engine business.
The ability to communicate to various internal and external constituencies is now a critical competency for chief financial officers. The CFO “should be half accountant and half strategist and, to an increasing degree, an efficient communicator in both roles,” said Siegfried Luther, finance chief at Bertelsmann AG, the German media firm.
CFOs are consumed with creating finance organizations stocked with men and women proficient in nontraditional skills, including experience in operations, in addition to traditional finance experience and acumen. “I encourage people within finance to leave the division and work elsewhere in the company,” said Cathy Ross, CFO of FedEx Express, the largest division of Memphis-based FedEx Corporation. “It helps the company, and it broadens the individual.”
Finally, with senior managers and boards of directors taking a more expansive view of risk, chief financial officers are overseeing the increasingly tight linkage of risk management to the firm’s strategic agenda. “A more appropriate notion of value creation — post-9/11, post-Enron, post-WorldCom, post-Tyco, and so on — starts with the realization that risk matters as much as return does,” said Thomas A. Fanning, the CFO of Southern Company, the U.S.’s second-largest electric utility by market capitalization.
Perhaps the greatest transformation in the CFO role, however, is a transcendent one. As Pfizer’s Mr. Shedlarz put it: “People are asking the CFO, as well as the rest of the management team, to act as change agents.”
Certainly, the chief financial officer position has grown more pressured in recent years. Well more than 10 percent of Fortune 500 CFOs have left their jobs during each of the past two years, according to the executive search firm Spencer Stuart. While some of that attrition may reflect natural transitions, there is abundant evidence that post-Sarbanes-Oxley stresses have contributed to greater turnover than the position experienced in the past.