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Published: May 16, 2005

 
 

The Rise of the Activist CFO

3. Turnaround Surgeons (12 percent): CFOs who step in under close scrutiny to make difficult decisions that others often will not make — with the goal of restoring ailing companies to financial health. Most often found in automotive, capital goods, consumer durables, food/beverage/tobacco, and telecommunications. Top barriers to change: outmoded business intelligence, inability to change corporate culture, and resource constraints.

4. Business Model Transformers (8 percent): CFOs who identify opportunities for strategic innovation and take advantage of them by recasting their companies’ business models and organizations. Most often found in health care, consumer goods, real estate, and diversified financial services. Top barriers to change: despite external problems, these companies wrestle with both internal barriers, such as an intractable corporate culture and unevenness in their finance teams’ “consultative smarts,” and external barriers, such as outmoded business intelligence and fragmented technology.

An intriguing aspect of the new CFO agenda is the correlation between activism and higher expectations in a company, and how that correlation may translate into a greater degree of career mobility for CFOs. Of respondents indicating increased board interaction — a key sign of activism — 38 percent also acknowledged a need to overhaul their company’s operating model; 30 percent revealed external pressure from analysts for change; and 27 percent reported significant executive turnover. The respondents with no change in board relations indicated significantly less company distress.

Although we don’t believe that a trend is under way for the CFO to usurp power from the CEO, recent executive appointments suggest that activist CFOs, because of their increasing work in dealing with the business’s most fundamental strategic problems, are ideally positioned for a promotion. A growing number of companies — Smith Barney, Pacific Gas & Electric, Pfizer, Metro-Goldwyn-Mayer, Philips-Van Heusen, EMI, and Disney Cruise Lines among them — have promoted CFOs to top spots to guide their companies through strategic change. And recently, in the case of two of the highest profile CEO vacancies, at Hewlett-Packard and Boeing, corporate boards chose their CFOs as interim chiefs while they searched for a permanent replacement.

To take the CFO survey, go to www.cfoagenda.com. After filling out a brief questionnaire, financial executives receive instant feedback about which CFO profile they fit into and which CFO agenda is right for them.

To download a PDF of the full report, The Activist CFO — Alignment With Strategy, Not Just With the Business, based on the initial 1,600 survey responses, click here.

Author Profiles:


Vinay Couto (couto_vinay@bah.com) is a vice president with Booz Allen Hamilton in Chicago. He works with Fortune 500 companies on restructuring their organizational models and business processes in response to major strategic shifts, such as acquisitions, spinoffs, and globalization.

Frank Galioto (galioto_frank@bah.com) is a principal with Booz Allen Hamilton in Chicago. He assists clients with organizational transformation, finance and corporate headquarters effectiveness, corporate planning, and performance management.

Mark J. Moran (moran_mark@bah.com) is a vice president with Booz Allen Hamilton in Cleveland. A specialist in strategic leadership, he helps clients design and implement management systems that improve corporate performance.
 
 
 
 
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Resources

  1. Vinay Couto, Irmgard Heinz, and Mark J. Moran, “Not Your Father’s CFO,” s+b, Spring 2005; Click here.
  2. Paul F. Kocourek, Christian Burger, and Bill Birchard, “Corporate Governance: Hard Facts about Soft Behaviors,” s+b, Spring 2003; Click here.
  3. Kris Frieswick, “Hard Times: Why Finance Executives Are Overworked and Under Stress,” CFO, Nov. 1, 2004; Click here.
 
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