Not long ago, the CFO occupied a passive role focused on bookkeeping, financial reporting, and other rear-facing duties. But over the past two decades, the position has undergone a profound evolution. The CFO now sits at the strategy table as an active partner guiding corporate direction.
This transformation reflects larger trends impacting the finance function. Transactional responsibilities like managing the books, filing taxes, and producing financial statements remain core activities. However, these table-stakes tasks no longer define the CFO's primary contributions.
Instead, the CFO has become a proactive strategist, collaborating with business leaders to align financial and operational objectives. As one Fortune 500 CFO put it, "Our job is not just to deliver the numbers, but to deliver insights that drive growth."
Several forces catalyzed this change:
The rise of data - Explosive data growth enabled more predictive modeling, scenario planning, and other forward-looking analysis. CFOs migrated from rearview reporting to insights that inform strategy and planning.
Increasing regulation - Stricter regulatory requirements across industries mandated greater financial oversight. CFOs assumed a more prominent compliance role.
Digital transformation - New technologies streamlined routine finance activities and freed up bandwidth for more strategic initiatives aligned with corporate goals.
Economic turbulence - Volatile business cycles increased reliance on finance's expertise in cost management, forecasting, and risk mitigation during downturns.
With these developments, the CFO organization has shifted from a siloed function dumping data over the wall to an integrated partner engaging across the business. Workflows evolved from linear, one-way processes to iterative cycles enabling continuous improvement.
For example, the traditional month-end close simply produced a snapshot of period financials. But modern Record-to-Report processes incorporate continuous monitoring and reconciliation. This allows real-time financial insights versus waiting until month's end.
Likewise, planning and analysis moved from annual budgeting to rolling forecasts and scenario modeling. This equips executives to quickly pivot strategies as market conditions change.
According to recent Deloitte research, 80% of CFOs now serve as their CEO's closest strategic advisor compared to just 27% in 2011. The recession looming in 2023 will likely accelerate finance's ascendance into a more proactive role.
With economic uncertainty ahead, CFOs will be pressed to manage costs while sustaining growth. This requires partnering with business leaders to align plans and identify the most effective levers to pull. As one CFO put it, "Finance will play a key role in determining what costs we can cut without hampering the business."
For example, finance teams can deploy data-driven analyses to:
- Forecast demand and optimize supply chain investment
- Shape pricing strategies factoring in inflation and consumer sentiment
- Guide workforce and expense planning amid hiring freezes
- Stress test growth plans and recommend resource allocation
- Identify non-essential spending ripe for reduction
To rise to the challenge, CFOs must hone both hard and soft skills. On the hard side, financial acumen, analytical ability, and technical literacy are prerequisites.
But soft skills like communication, collaboration and storytelling determine the CFO's ultimate influence. As finance extends its tendrils throughout the business, stakeholder management and relationship building are crucial.
This means structuring insights in compelling narratives that prompt action among business partners who may lack finance expertise. It also entails influencing without relying on authority by establishing mutual trust and rapport.
Ultimately, the CFO's impact stems from how effectively finance translates data into decisions. As strategic counsel, the CFO must catalyze the behaviors that optimize enterprise value. This requires immersing finance in operations beyond functionally excellent number-crunching.
In navigating economic uncertainty, CEOs will lean heavily on strategic finance partners capable of bridging the gap between financial expertise and business priorities. The CFO role has come a long way from pure scorekeeper. But the journey to strategic leader has only just begun. Those ready to guide their organizations through volatility have an unprecedented opportunity to maximize their influence.