The CFO transformation: From Chief Accountant to Change Agent (page 3 of 3)

Called Transparent Financial Reporting, it aligns the company's internal management reporting system closely with shareholders' returns. Procter & Gamble uses a model of shareholder value called Total Shareholder Return (TSR) as a strategic tool and method for evaluating management performance and calculating bonus payments, as well as for getting line managers focused not just on the income statement, but on the balance sheet and operating cash."

Evolving risks
Risk management is looming ever larger on most companies' — and most CFOs' — agendas. Certainly, the Sarbanes-Oxley legislation in the United States, which strengthened regulatory oversight of compliance, control, and governance programs, and increased the need for strict attention to P&L, balance sheet, and capital structure, has contributed to risk management's higher profile.

The CFOs to whom Booz Allen spoke said that Sarbanes-Oxley has been a less important factor in the evolution of the definition and control of risk than has the pace of change, driven by globalization and technology.

Fanning, the CFO of Southern Company, which provides electricity throughout the southeastern United States, pointed out that in the energy industry, whose colossal risks range from the uncertain future of nuclear power to the effects of potential environmental regulations, risk and return cannot easily be divorced.

Booz Allen's Saddi adds, "Institutions across diverse sectors in the region are now compelled to align their operating models to increasing market sophistication. As part of this evolutionary trend, some sectors where competition is an accomplished fact are experiencing in-depth restructuring and consolidation, while strategic alliances — particularly between domestic and multinational institutions — also are emerging."

Nearly all the CFOs with whom Booz Allen spoke felt similarly about the challenges of keeping pace with the increased complexity that accompanies growth. And they pointed out, as well, that technological advances have contributed to complexity even as they have revolutionized information technology and business processes.

Raising the bar
It should be clear that although the bar has been raised substantially for the CFO, the potential rewards are even larger for individuals and for their organizations. In an environment in which investors demand sustainable growth, precise forecasts, and earnings reliability, executives who can help their companies achieve these goals quickly become valued players.

Fortunately, the CFO is well positioned to play this more dynamic role. A view of the organization from 30,000 feet above ground provides the CFO with an enterprise-wide perspective; indeed, good Chief Financial Officers seem to have an innate ability to understand what makes each business in the portfolio tick. In addition, the CFO's traditional responsibilities in accounting and compliance give a tremendous amount of independence and objectivity to the position.
The CFO has only one core constituency: the shareholder. This fact, combined with the trusting relationships CFOs develop with senior business executives, allows the CFO to move seamlessly into a more transformational role. That role, Booz Allen discovered, is no fairy tale, but the new reality for Chief Financial Officers around the world.