It wasn’t so very long ago, and it wasn’t in a land very far away, that the professional life of the average chief financial officer was akin to a fairy tale — a fable we might call “Jack and the Bean Counter.” In those days, a company’s chief executive (that would be Jack) could count on steady incremental growth coming from predictable sources. His CFO (that’s the bean counter) helped tally and report the revenues and profits. As in most folk stories, a big, stomping giant showed up — several, in fact. The Sarbanes-Oxley Act, globalization, and the information technology revolution, to name three behemoths, have changed the face of the modern corporation. Beset by complexity; confronted by disruptive innovations from outside the conventional value chain; challenged by fickle shareholders, national and transnational regulatory bodies, and capital markets in a constant state of upheaval, the contemporary company is no fairy tale. The CEO is no longer a carefree Jack.
And the CFO, needless to say, is no bean counter.
Few business roles have changed as dramatically during the last generation as that of the chief financial officer. The classic model — the CFO as chief accountant and technical expert focused narrowly on the firm’s financial statements and capital structure — has been passé for a decade or more. The CFO has long since operated as more of a business partner with the CEO, closely involved in designing and overseeing strategy, operations, and performance.
Over the last few years, however, the pace of that evolution has accelerated sharply. Firms are eliminating the position of chief operating officer; a study of 300 publicly traded U.S. companies, published by the National Bureau of Economic Research, found that 20 percent abolished the COO position between 1986 and 1999. As more business unit general managers report directly to the chief executive, many of the COO’s managerial duties are being reassigned to the CFO, who also increasingly finds himself or herself a vital part of the corporation’s leadership team, with such a profound combination of staff responsibilities — and even line responsibilities — that the title “chief financial officer” seriously understates the actual position. No longer mere business partners, leading CFOs have become active, innovative, and independent transformation agents.
“When most people think about a chief financial officer, they’re still thinking about your father’s CFO — an accounting role, maybe expanded to tax and treasury,” said David L. Shedlarz, the chief financial officer of Pfizer Inc., one of 17 CFOs of leading global corporations we interviewed for this new, cross-industry study of the evolution of the chief financial officer role. “When you take a look at a CFO’s responsibility today, you also have operations planning and analysis, information technology, strategic planning, and M&A. As a member of the senior management team, you have to be able to take off your technical hat when you walk in the room.
“Chief accountant is very important,” Mr. Shedlarz added. “But you’ve got to be a lot more than a chief accountant as a CFO.”
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A Public Voice |
The interviews we conducted during the summer of 2004 with the senior financial officers of Pfizer, FedEx Express, Johnson & Johnson, BASF, Procter & Gamble, Deutsche Telekom, and 11 other U.S. and European companies, have been published in the book CFO Thought Leaders: Advancing the Frontiers of Finance (to order a copy, click here). The conversations revealed that CFOs of leading global corporations spend half or more of their time on activities outside the traditional boundaries of the position. Far from being overwhelmed by Sarbanes-Oxley and the intensifying scrutiny of corporate governance and compliance, they are playing jujitsu with the new regulatory and shareholder attention, using it both to strengthen internal reporting systems and to align them with company strategy.
