Business Growth Strategies
The modern challenges for CFOs
Between the pandemic and emerging technologies, CFOs limiting themselves purely to the finance realm is a way of the past. This time of dramatic change and economic downturn, has forced finance leaders to shift the way in which they lead.
The role of the CFO has been shifting for about five or seven years now, Mike Kelly, America’s Finance Consulting Leader at Ernst & Young said in an interview. “Historically, CFOs have been the data stewards, but now, the role has evolved into deal making analytics,” he said.
CFOs today are not only focused on an organization’s finances and accounting, but are also considering a wider scope of responsibilities that span across many avenues of the business from talent acquisition and retention, strategic planning, mergers and acquisitions and more.
The CFO role is ever evolving, expanding to include non financial responsibilities. The pandemic in particular, brought about new challenges surrounding talent acquisition due to remote work. There is increased attention on social and environmental issues and emerging technologies can address myriad business problems.
All this to say, the job description of today’s CFOs are very different from that of 10 years ago and even as recent as pre-pandemic, Kelly said.
“If you think about it, a few years ago, CFOs were fighting for a seat at the table for M&A and due diligence. They’ve now got the seat, they’ve earned the seat, and now they’re starting to move upstream,” said Kelly.
According to Kelly, there is now a greater propensity of CFOs who are helping to drive deals that help meet the strategic objectives of the company.
Whether it is taking on a dual role in the C-suite or tapping into the company culture more, many CFOs have expanded their leadership to take on a managerial shape outside of finance.
“I have a lot of CFOs that are more than just finance,” said Kelly. “It’s all based on personalities — some are control oriented and really good at compliance aspects, operational efficiency, and then you get the deal type CFOs who are much more geared towards making a difference,” he said. These types of CFOs are driving deals with the CEOs and trying to change the game and move up.
There is a dichotomy of mixtures of personalities of CFOs, but they are all evolving and will continue to evolve because of the importance of data, said Kelly.
Among the greatest points of concern for CFOs is talent retention and acquisition, partly due to the remote nature of work brought on by the pandemic.
Besides remote work forcing CFOs to change the way they think about talent retention, inflation has put a wrench in the issue as well. “You can’t pass all the price increases on your customers and CFOs are trying to offset that,” said Kelly.
The reality is, hiring someone today costs more than it would have last year and even last month. “In the past, sourcing of people has always been geographically based,” said Kelly, “Now with COVID-19 and the advent of virtual, you now have the ability to source people from more locations, which gives you the advantage of cost discrepancies — hiring someone from Fargo versus New York, for example, there is a difference in pay structure,” he said.
Although remote work allows CFOs to take advantage of cost differences, you still have to make sure hires fit the structure of the company. “It’s a catch-22,” said Kelly. “Your talent pool is bigger, but you have got to make sure it fits.”
Remote work also leaves CFOs vulnerable to workers taking on different opportunities with little to no notice. “We had one client on the East Coast, they made a policy change and were bringing people back into the office last year, and within a month of making that change, 60% of their staff quit.”
Bringing in automation and AI to financial departments is somewhat of a new trend, said Kelly, but he sees the most important shifts in what it can do for forecasting.
“AI can cut time and costs out of the forecasting process and then allow CFOs to play around with what if scenarios,” said Kelly. “We had one client that actually put a lot of use of AI a few years back and they actually predicted COVID-19 in their numbers, but they didn’t understand the data and how it got there, so they kind of ignored it.”
Once AI is truly incorporated, it can make a substantial impact in scenario planning, said Kelly.
Finance chiefs have also been facing increased pressure to implement sustainable initiatives, and the pressure is turning into requirement.
“ESG is a new responsibility that has historically been in other parts of the company,” said Kelly. “What’s happening now with the direction of the SEC, it is right in the CFO alleyway,” he said.
CFOs are going to have to be prepared to stand behind their numbers when it comes to this reporting, something they were not expected to do in the past.
The information above is provided as a convenience, without warranties of any kind and MUFG Union Bank, N.A. disclaims all warranties, express and implied, with respect to the information. You are solely responsible for how to execute your duties and responsibilities as CFO.