The CFO transformation: From Chief Accountant to Change Agent (page 1 of 3)

Few business roles have changed as dramatically during the last generation as that of the Chief Financial Officer. The classic model — the CFO as chief accountant and technical expert focused narrowly on the firm's financial statements and capital structure — has been passé for a decade or more.

The CFO now is seen more as a business partner with the CEO, closely involved in designing and overseeing strategy, operations, and performance. He or she is an active, innovative, and independent transformation agent. "When you take a look at a CFO's responsibility today, you also have operations planning and analysis, information technology, strategic planning, and M&A. As a member of the senior management team, you have to be able to take off your technical hat when you walk in the room," said David L. Shedlarz, CFO, Pfizer Inc.

For a new, cross-industry study on the evolution of the Chief Financial Officer's role, Booz Allen Hamilton interviewed CFOs of Pfizer, FedEx, Johnson & Johnson, BASF, Procter & Gamble, Deutsche Telekom, and 11 other U.S. and European companies. The interviews have been published in the book CFO Thought Leaders: Advancing the Frontiers of Finance. The conversations revealed that CFOs of leading global corporations spend half or more of their time on activities outside the traditional boundaries of the position.

Indeed, today's CFOs see themselves as strategic activists. "The growth agenda is of equal or even greater importance" compared with solid cost management, Johnson & Johnson CFO Robert J. Darretta Jr. told Booz Allen.

The study shows that, to a large extent, Chief Financial Officers are now viewed by their chief executives as CEOs' primary aides in driving company-wide transformation efforts. Although this development has occurred over a period of a decade or more, we observed at least eight trends that underscore how profound that evolution has been:
• CFOs are more closely engaged than ever in designing, adapting, and implementing their organizations' business models. "I am involved in all important operational and strategic group planning decisions," said Karl-Gerhard Eick, who is both CFO and deputy CEO of Deutsche Telekom, the German telecommunications company.
• With capital markets now as global as companies, CFOs increasingly take lead roles in tying their firms' business strategies more closely to models of shareholder value. "We have had to spread this culture of how to create value, how to get the best return on assets, throughout the company," said Renault CFO Thierry Moulonguet, a member of the multinational management team that helped revive the Japanese automaker Nissan.
• To ensure strategic alignment, finance chiefs find themselves serving additionally as "chief metrics officers." Robert L. Lumpkins, CFO of the food and agriculture giant Cargill, said, "Measurement drives behavior, and we need to know that we're getting the behavior that we want and that people are focusing on the right things. That's part of the job of the CFO."
• Chief Financial Officers say their role includes more and more performance management, as they work toward the goal of securing what Robert J. Dellinger, CFO of the telecommunications company Sprint, called the "execution premium" accorded by shareholders to top performers.
• CFOs increasingly are taking line management responsibility in operating businesses. For example, in addition to overseeing the finance organization, Caterpillar Group President Douglas Oberhelman manages the Peoria, Illinois, manufacturer's diesel engine business.
• The ability to communicate to various internal and external constituencies is now a critical competency for Chief Financial Officers.