5 Fundamental Qualities of a Strategic CFO

The Chief Financial Officer (CFO) position has historically served as a steward of financial knowledge, moral character, and shareholder value — choosing metrics to assess organizational development and ensuring value.

The CFO role is now present in almost every firm due to inflation, more laws, and governance responsibilities. The last quarter of the 20th century, however, was different. Prior to 1978, CFOs were only employed by less than 10% of American businesses.

After 2000, the number of CFOs in the U.S. increased yearly to 80% or more. The position of finance unit chief has been promoted to that of business partner, a long-term member of top management, and in some businesses, a member of the board.

Recently, practically all industries worldwide have seen a dramatic Transformation of the CFO role. For a thorough understanding of these significant developments, PWC performed in-depth research and spoke with people at numerous businesses and industries.

According to research, the modern CFO is crucial to Strategic Planning and Value Creation in addition to keeping track of and managing the company’s finances. The CFO must in particular ensure that the company is choosing and funding the proper initiatives, where the allocation of financial resources is based on the unique organizational strengths. Today, the CFO position must act as a change agent and leader. These new duties help to build a strong capabilities system by bringing the CFO closer to other departments, such as IT, Marketing, R&D, etc.

Today’s CFO must have a broader perspective to make sure the company is moving in the correct direction and that each effort has a strong business case and reasonable expectations. A candidate for the CFO position should have the soft skills that are not taught in the classroom but may be cultivated with the appropriate mentors and in the right setting.

PWC’s research and CEO interviews show that there are 5 essential qualities that executives must possess in order to become Strategic CFOs:

  1. Understanding the Holistic Value Chain

Let’s look more closely at the first two of these fundamental qualities.

1. Understanding the Holistic Value Chain

In addition to maximizing performance, CFOs must devote time to supporting the leadership, gaining a comprehensive understanding of the value chains, pinpointing crucial areas, and creating strategic initiatives. The Strategic CFO encourages long-term planning, customer value, and the development of distinctive skills. She or he is in a better position to foster stronger cross-functional collaboration and help other business units identify opportunities with regard to efficiency, performance, and Customer Experience because they have a thorough understanding of what other functions in the company do.

The Strategic CFO makes sure that the entire finance team becomes familiar with the tasks carried out by other functions, comprehends the Business Models, and frequently engages with customers to create deeper insights necessary for prioritizing initiatives and expanding their skills. This helps to improve the bottom line and shareholder value.

2. Insight into Business Drivers

Finding indicators to gauge the performance of organizational value propositions and units is a crucial aspect of a CFO’s job. This is essential for analyzing the market competition, potential dangers, and important business drivers. To aid in determining the appropriate course and attaining the strategic goals, the business drivers should be continuously improved.

The Strategic CFO establishes appropriate KPIs to monitor success. Along with the standard financial KPIs, such as EBITDA or share price, these measurements should also incorporate indicators of value creation and Strategic Decision-making. She or he should establish pertinent, dynamic, sector-specific metrics, such as revenue-weighted resource allocation, market share relative to market potential, and market ratings, which are regularly adjusted in response to the external environment.

Interested in learning more about the other Core Characteristics of a Successful CFO? You can download an editable PowerPoint presentation on Strategic CFO here on the Flevy documents marketplace.

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Mark Bridges

I blog about various management frameworks, from Strategic Planning to Digital Transformation to Change Management. https://flevy.com