It has been said that success is where preparation and opportunity meet. Never has there been a more opportune time for CFOs to have an impact, with CEOs increasingly looking to them to help shape business direction and strategy. Once considered a numbers-only role, the CFO is now balancing traditional responsibilities with growing demand for data-driven analysis and insights that support growth and strategy, all against the backdrop of a global, rapidly changing business and regulatory environment.
All of these forces are redefining the role of the CFO, and driving finance and business professionals pursuing the CFO career track—and current CFOs looking to grow in their careers—to closely examine and improve, if needed, their skill sets, knowledge, areas of focus, and business relationships to become successful CFOs of the future.
In this two-part blog series, we will look at the most important skills and capabilities required of the CFO of the future, based on multiple studies and interviews with finance experts and practitioners.
Broader Experience Beyond Finance
While a foundation in finance is important, CFOs will need broader business knowledge and operational experience as they take on a more strategic role. Kevin Loegering, vice president and CFO at Johnson Brothers Liquor Company, describes a distinct shift beyond pure finance and accounting. “There’s much more operational knowledge, influence, and acumen needed for this role,” he says.
According to the report “Future pathways to finance leadership” from the Association of Chartered Certified Accountants (ACCA) and the Institute of Management Accountants (IMA), current CFOs identified strategy formulation and execution as the most important experience for future CFOs. This will require that CFOs “develop much broader leadership capabilities beyond traditional finance strength, with deep business and sector-specific experience and knowledge.”
“There’s much more operational knowledge, influence, and acumen needed for this role.”—Kevin Loegering, VP and CFO at Johnson Brothers Liquor Co.
Those on the CFO career track who’ve held roles (or at the very least have worked closely with others) in critical business functions outside the finance organization—such as operations, marketing, and sales—will have stronger insights into the business and customers, an advantage when it comes to driving strategy and growth decisions.
Focus on Data and Actionable Insights
Data is becoming increasingly important to business success and helping companies identify new market opportunities, improve customer experiences, drive business planning, and support change and innovation. CEOs are looking to CFOs and finance teams to deliver analytics and insights that support strategy and decision-making. In fact, according to a report titled “The Changing Role of the CFO” from the ACCA and IMA, the finance function and the CFO are expected to be at the heart of this data revolution.
CFOs and finance teams will need to understand how to harness data—beyond just the financial numbers—to tell a business story that explains context and the reason behind a decision, and answers “what if” questions.
Dr. Ilya Strebulaev, professor of finance at Stanford University, started the The Emerging CFO: Strategic Financial Leadership Program to teach current and future CFOs the skills needed to be successful today and in the future. He agrees that this expertise will be critical. “We now live in a sea of data and have the technology to evaluate that data and make decisions about consumers, competitors, markets, and much more,” he says. “CFOs must understand how to use all of this data—not just financial data—to understand the business and drive decisions. The companies that don’t won’t survive.”
The CFO and finance teams will increasingly use advanced analytics to run predictive models and develop better forecasts.
Technology will play an important role in the ability to make data timely, accessible, and relevant. New financial management systems leveraging the cloud, in-memory databases, visualization, and mobility are enabling the CFO and finance organizations to move beyond just analyzing historical financial data to accessing real-time insights about business performance. Even better, it’s making it easier to deliver these insights to other business leaders, further strengthening those partnerships.
Looking ahead, the CFO and finance teams will increasingly use advanced analytics to run predictive models and develop better forecasts. Understanding technology and systems—and whether they are capable of enabling greater efficiencies, agility, and insights—will be critical. According to “The Changing Role of the CFO” report, “Tomorrow’s CFOs and their finance functions will need to be very adept in leveraging this technology. In theory, this means less time on recording and verifying the numbers, and more time making the data connections and explaining the number implications to the business—applying the finance lens on decision-making.”
Close Partnership with the CIO
Building a strong relationship with the CIO will also be critical for the future CFO. Strebulaev emphasizes the importance of the CFO-CIO partnership in creating a more data-driven organization, but says it will require learning how to better understand each other. Working more closely together, they can also evaluate what technologies and financial systems are required to support CFOs and their teams’ expanded responsibilities.
“CFOs need to partner closely with CIOs on this data-driven revolution and help them understand what kind of data they need,” Strebulaev says. “The challenge in the past has been they often speak different languages, so improving that communication channel will be important.”
Loegering agrees. “Part of the role is technology and information—it’s becoming increasingly important to understand systems and data, and understand and use that information.” Loegering says this focus has forged a closer relationship with Johnson Brothers’ CIO. “Together we’ve driven a lot of where things are going, in terms of systems and projects,” he says.
Read the next installment of this blog series, “The Most Important Skills for the CFO of the Future, Part 2.” For a more in-depth look at this topic read, “The CFO of the Future.”