From Ledgers to Leadership-Shifting to a Long-Term Perspective

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A good CFO should be at the elbow of the CEO, ready to support and challenge him/her in leading the business. The CFO should, above all, be a good communicator—to the board on the performance of the business and the issues it is facing; to his/her peers in getting across key information and concepts to facilitate discussion and decision making; and to subordinates so that they are both efficient and motivated. Other priorities for a CFO are to have strength of character, personality, and intellect. I take it as a given in reaching such a position that an individual would have the requisite technical knowledge and financial skills.

—James Riley, group finance director and executive director, Jardine Matheson Holdings Ltd.

According to Dominic Barton, Global Managing Director of McKinsey & Company, the essential element of the shift to a long-term perspective is :

“Business and finance must jettison their short-term orientation and revamp incentives and structures in order to focus their organizations on the long term”.

CFO will need to be positioned to help ensure that strategy effectively connects short-term actions with long-term aspirations and sustainable business success. CFO will also need to be sufficiently competent and versatile in all those areas and functions in which organizations strive for excellence.

Many CFO are in positions of strategic and/or functional leadership, and are well-placed to partner with colleagues in other disciplines to create long-term sustainable value for their organizations.

Many CFOs would love to lead exactly that kind of charge, and often they can. When they can’t, it is frequently because their companies have limited them, almost literally. “CFOs do what the job description tells them to do, and it often says to focus on the numbers,” says John Kotter, professor emeritus at Harvard Business School and author of the new book Buy-In: Saving Your Good Idea from Being Shot Down. “They become very good at this, and at all the sub-aspects of finance, but that makes them specialists, much like chief technology officers.” And, Kotter adds, an ill-conceived job description leads inexorably to the CFO becoming “the ‘numbers person,’ simply because this is what is expected of him or her — and, thus, the stereotype.”

Escaping the stereotype requires a very developed sense of nuance. A CFO is highly unlikely to be able to — or, for that matter, want to — leave behind the analytical role completely in favor of perpetual brainstorming or evangelizing the trend du jour. That task almost always falls to the CEO. For CFOs, being “strategic” often hinges on addressing the many tasks that turn an idea into a reality.

Chris Trimble, adjunct associate professor of business administration at Dartmouth College’s Tuck School of Business and author of The Other Side of Innovation: Solving the Execution Challenge, says that “the typical executive in the thick of launching a new product or moving into a new market needs a partner who can be a little detached and yet insightful. It becomes hard to see the forest for the trees — to know what to pull back or where to move forward. CFOs, both by nature and by training, often provide the essential analytical insights” that drive strategy.

“CFOs,” Trimble adds, “are the executives best-equipped to analyze, test, and elevate the critical assumptions that prove the new product or service will be viable, and to measure progress along the way.” This, he points out, is a very different job than making sure the company hits the numbers every week and every quarter. “With an [innovation] experiment, you’re trying to prove or disprove a theory, and it takes tremendous financial and analytical insights, which only your best finance person can provide,” he explains.

The four distinct profiles of the CFO role have been identified—the finance expert, the generalist, the performance leader, and the growth champion—to illustrate how the CFO role is multidimensional. The type of CFO could also vary depending on whether the role is at the corporate center, in a division or business unit, or within a business line such as operations or sales.

CFOs may also take on oversight responsibility for other organizational functions and aspects, such as infrastructure management, IT, human resources and payroll, operational responsibilities, and administration. This is often the case in small- and medium-sized organizations, where CFOs frequently need to fulfill various roles and responsibilities.

CFOs have to position themselves as primary drivers of corporate strategy along with CEOs. They have to work as a strategist rather than a tactician to ensure the financial health and sustainability of their organizations and, most importantly, to ensure that shareholder expectations are met.

 

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