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Published: February 15, 2005

 
 

Not Your Father’s CFO

In a 2004 survey conducted by CFO magazine, fully 68 percent of finance executives said they had experienced more job pressure during the past two years than before. Sixty-three percent said job stress had negatively affected their health.

But beneath what the New York Times has labeled “a steady drip-drip-drip of corporate announcements of CFO departures” is another story: the rising importance of the role within the hierarchy of the average large company, the improved qualifications of the men and women sought for the position, and the consequently enlarged expectations CEOs and directors have for their chief financial officer.

Consider the case of Nissan. Mr. Moulonguet, currently the chief financial officer of Renault, was a member of the management group that Carlos Ghosn brought to Japan in 1999 to turn around Nissan Motor Company. That turnaround team prescribed and applied shock-therapy treatment that combined strong growth targets and strict cost containment. “When we started the process,” Mr. Moulonguet recalled, “financial discipline was something we implemented overnight.” The revival of Nissan by Renault, which now has a 44.4 percent stake in the Japanese automaker, has become a well-recognized case study in successful change management.

The Explicit Strategist
“At Procter & Gamble, we have embraced the idea of the CFO as a generalist. I consciously think of myself as wearing two hats. I am responsible for traditional accounting issues: cash flow, capital, and cost structures. But my role is increasingly linked with strategy and operations. At P&G, A.G. Lafley has been CEO since June 2000. A.G. has made a point of defining the CFO role as explicitly strategic.”
—Clayton Daley, Procter & Gamble Company

Another example of nontraditional CFO activism is FedEx. Following the general business slowdown that began in the U.S. in 2001, FedEx devised a transformation program, called I-Service, to realign business processes and improve profitability and staff efficiency in the U.S. organization. In 2003, the company announced two voluntary incentive programs for eligible U.S. salaried staff and management employees, and took other steps to further reconcile expenses with revenues, such as reducing aircraft orders, consolidating facilities, and limiting hiring and discretionary spending. FedEx Express CFO Ms. Ross said the finance organization was deeply involved. “We’re right in the middle of transformation, and often we are driving it, because we have the tools, the resources, and the mandate to look out beyond the here-and-now,” she said.

As the business environment has begun to improve over the last two years, CFOs’ priorities have shifted. At FedEx, with the I-Service reorganization well under way, Ms. Ross said, “I would identify my role more as managing growth: Where is our next growth opportunity coming from and how do we capitalize on that?”

Board of Leaders
All eight of us on the management board deal with all aspects of BASF strategy and decision making. There is very intense interaction and discussion. Basically, we expect that every board member is more or less able to speak to every topic.”
—Dr. Kurt Bock, BASF AG

Clayton Daley, the chief financial officer of Procter & Gamble, has experienced a similar reorientation in his role. “I consciously think of myself as wearing two hats,” he told us. “I am responsible for traditional accounting issues: cash flow, capital, and cost structures. But my role is increasingly linked with strategy and operations.”

Value Creators
In years past, most CFOs of large companies completed a successful transition from being stewards of value preservation to being business partners in value creation. Today, the increasingly determined focus on creating shareholder value is yet another prompt that encourages a chief financial officer to elevate his or her identity from reporter to executor.

 
 
 
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Resources

  1. Paul F. Kocourek, Christian Burger, and Bill Birchard, “Corporate Governance: Hard Facts about Soft Behaviors,” s+b, Spring 2003; Click here.
  2. Kris Frieswick, “Hard Times: Why Finance Executives Are Overworked and Under Stress,” CFO, Nov. 1, 2004; Click here.