The Changing Face of the Chief Financial Officer: Achieving the Financial Imperative

Introduction

The spiraling complexity and velocity of doing business today has dramatically altered the role of the Chief Financial Officer (CFO). What has historically been an attractive career destination and a prestigious senior management position continues to decline in allure with alarming speed. Intensifying performance pressure within both public and private companies is forcing an evolution of the position, rendering the job virtually impossible for one person to do.

This white paper is an update to a study originally published in 2007 that discussed success factors and models for the CFO role. Our updated findings indicate continued deterioration of the career landscape for CFOs. The original study identified causal factors driving extremely elevate frustration levels of those leading corporate America’s financial function. Given these findings, we developed a second study to further explore issues previously identified and to determine key factors influencing success as a CFO.

Today’s high pressure business environment has driven the evolution of CFO from a finance position answering to the Chief Executive Officer (CEO) into a strategic business partner answering to multiple constituents. Increasingly accountable to Boards, shareholders, the government and other executives, the CFO role has become a high-risk proposition with the responsibility to personally assure the company’s financial health.

CFOs now must navigate complex market conditions, meet stringent regulations, mentor staff, support business lines, satisfy investors and provide day-to-day financial leadership and strategic vision. These tasks alone are enough to tax the most talented financial officers, and yet this list does not take into account the ongoing need to provide the CEO and Board with vital information, insightful analysis and counsel.

Based upon identification of a basic shift in how CFOs approach their roles, our 2007 white paper attracted widespread interest among finance executives, industry experts and the business press, including CNBC, The New York Times, The Wall Street Journal, Newsweek, Fortune, CFO Magazine, Strategic Finance and many more. Later in 2007 updated research presented new evidence of challenges CFOs face, as uncovered by a survey of a cross-section of senior finance executives conducted by CFO Research Services. The majority of respondents reported once again a more demanding and stressful work environment and significant increases in the number of hours spent at the office.

We conducted a second round of research in late 2007 and early 2008 to explore critical success factors required for CFOs to “win” in today’s more complex environment. This supposition was driven by statistics indicating an escalation (as opposed to a decrease) of issues: shorter tenures, troubling turnover findings and a reported increase in CFO frustration.

Among the conclusions of the initial 2007 study were recommendations that a) Directors and Officers (other than the CFO) become better educated on the issues challenging the CFO along with b) a recognition on the part of CFOs that their approach to the job needed to change. Since
the intense media coverage generated by the report seemed to suggest progress being made on the first, our focus turned to addressing the lack of progress on the second. The first survey revealed many CFOs find the confluence of changes discouraging, if not downright alarming, leading more than one third of respondents to say they are not up to the challenge and are likely to move to another company within the next year. This is supported by alarming turnover trends, as the average CFO’s tenure has plummeted to only 30 months, according to Forbes.

Understanding the Landscape

The demands placed on a CFO have never been so great. Shareholders, feeling cheated by high-profile ethical scandals, demand more transparency and reliability in the presentation of financial performance. Board members, sensing more exposure and increased liability, demand more extensive reporting and greater levels of detail, often mistaking more detail for better insight. CEOs continue to require operational and strategic support and execution from their CFOs, yet they often fail to fully understand the pressures weighing down their financial officers. CEOs themselves, who also experience stress and high turnover, expect their CFOs to be miracle workers. However, they tend to discount the complexity associated with generating viable/acceptable/pristine financials these days —preferring instead to focus only on the CFO’s strategic/analytical contributions.

Adding to the CFO’s burden, heightened capital market activity requires additional attention (e.g., depth of insight and research), and increased regulation leads to more detailed audit documentation and testing. Layer on additional audit committee demands and the fact that CFOs are being held to higher standards of personal accountability and liability, and it is easy to understand why these oncoming pressure waves are becoming tsunamis, overwhelming many CFOs. Only 25 percent of financial officers have been in their jobs for more than five years. The experience factor is destined to decline further as studies from Liberum Research reveals CFO turnover jumped 35 percent from 2005 to 2007.

The 2007 study demonstrated there are many factors driving the CFO turnover epidemic. The top six include:

1. Tightened Regulations 

The unprecedented complexity and overwhelming number of reporting requirements and changes in today’s regulatory environment force a CFO to spend more time focused on compliance. Requirements such as Sarbanes-Oxley, stock option expensing, as well as proposed changes such as fair value definitions, business combination rules and the adoption of IFRS all pressure a CFO and leave less time for key functional responsibilities. Compressed reporting deadlines have created even more pressure. When combined with limitations placed on permissible consulting with audit firms and tougher SEC enforcement, most CFOs feel some level of discomfort in certifying financial statements. The increased prevalence of criminal enforcement actions has further added to CFO anxiety.

2. Financial Market Conditions

More than just “keeping an eye on the market,” today’s increasingly volatile economic conditions require a CFO to understand the intricacies of everything from IPO activity to hybrid securities, and from Directors & Officers (D&O) insurance coverage to off-shoring. These market dynamics require research and careful consideration. Add in the current market instability, and day-to-day treasury management and operations become even more arduous. The required research to support these decisions takes more of a CFO’s time, while access to external auditor guidance has become more restricted due to potential for accounting conflicts. The increased risk, which often results in poor decisions made under pressure, takes more CFOs away from their jobs. Lack of available information combined with required speed of decisions has led to untenable situations.

3. Audit Committee Demands

Audit committees, under escalating pressure to more visibly oversee the financial integrity of a company, also require more of a CFO’s time and energy. Frequent meetings, elaborate documentation and the public’s demand for greater insight and analysis translate into demands for more attention from the CFO. However, inadequate training in new rules and interpretations makes the often-arduous process even more difficult. Audit committee members look to the CFO to train them, as well as report to them. Many audit committee members themselves are ill-prepared to operate in today’s Board environments. KPMG’s Audit Committee Institute reports that “typical” committees now have six to ten meetings a year lasting one to four hours each. Required preparation time for these meetings alone places an enormous burden on the CFO.

4. Peer Group Pressures

The CFO’s peer group can see that the CFO is stressed and overworked, frequently missing meetings and becoming less timely in responding to their requests. But they often do not comprehend the mounting pressures on today’s financial executive, who is more likely to put his or her head down and work harder than complain and ask for more resources. Consequently, political jockeying and finger pointing often center on and around the CFO, as peers not fully versed in the changing environment have little insight or empathy. They perceive that the CFO is
“in over his head” and are frustrated that needs go unapologetically unmet. Often, they choose to share these perceptions directly with the CEO, instead of approaching the CFO to discuss their
issues.

5. Staff Support and Management

As demands on CFOs increase, less time is available to train and supervise lower and mid-level staff. Fewer mentoring opportunities often translate to a staff lacking the business acumen necessary to support the CFO, not to mention low levels of morale. Meanwhile, recruiting finance staff has become more challenging. Respondents to the CFO Research Services survey indicated that recruiting mid-level and senior-level finance professionals is more difficult today than it was five years ago. These mid-to senior-level finance professionals are the very people CFOs rely upon to handle specialized business situations and technical accounting rules, manage performance and provide sophisticated analysis. In fact, in the first half of 2008 there was less than 2% unemployment in accounting and finance.

6. Lifestyle and Legacy

Widespread media attention regarding major corporate scandals has led to increased public scrutiny and mistrust of the CFO position. Long hours working for superiors, Board members, shareholders and analysts leave the CFO serving too many masters, with too little time. Far from leaving a legacy, most are simply struggling to keep up with day-to-day demands. Work/life balance issues and risk/reward issues are often difficult for a CFO to reconcile.

In the face of these hardships, too many CFOs come under extreme stress. And, as all people do, CFOs revert to their behavioral “comfort zone” under these circumstances. Those who rise through the finance function ranks tend to have strengths in analytical thinking, detail orientation, risk aversion, responsibility and compliance, task orientation and self-reliance. These are admirable traits and certainly serve CFOs well on the way ‘up’.

However, a ‘shadow’ side exists to this profile and it is often this side that emerges as the CFO becomes more stressed. By nature, CFOs are traditionally reluctant to trust, low on empathy and communication to their staffs and peer group and highly suspect of change and risk/reward analyses. Unfortunately in the case of CFOs, their inherent responses are counter-intuitive to the situation itself. They simply are “wired” to respond by working longer hours and delegating less. With insufficient resources and antiquated financial and IT systems, their jobs become exponentially harder instead of manageable.

How can a CFO endure and excel in this highpressure climate? Our second study was completed in early 2008 to determine which skills and qualities enable financial leaders to succeed. It revealed that the technical knowledge which helps accountants climb the corporate ladder is clearly not the primary skill required upon reaching the C-Suite. Success is more likely to stem from a combination of well-executed technical skills reflecting good judgment, interpersonal skills and the ability to enhance velocity. In this day and age, a new premium applies to communication, trust, reliance and change—toward creating an effective environment that can evolve.

The Functional Imperative

Despite the current crisis within the financial function, the reliance and expectations being placed upon a highly functional finance department continue to escalate. What fuels this reliance? Factors such as increased liability, shareholder unrest and regulatory requirements all play a critical role. However, the recent subprime crisis, the sagging economy, weakened corporate earnings and the resultant confounding movement in standard economic indicators has resulted in a dramatic change in the management of the finance function and the emergence of a new economic period which emphasizes finance.

To fully understand this shift, one must look to American industrial history. Corporate management techniques have historically adapted in response to shifts in the competitive business landscape. During the late seventies and eighties, General Motors factory efficiency led the way to operations becoming the functional imperative; in the eighties and early nineties, IBM’s branding book demonstrated how sales and marketing came to dominate as the functional
imperative for success; as we entered the new Millennium, the dot-com boom brought prominence to the IT function. Today, the existence and future success of many businesses certainly hinge on transparent reporting, solid risk management and quality of earnings. A healthy finance function has become the new “functional imperative,” an organization’s direct
link to competitive advantage and profitability.

Put another way, in morphing from an agri-business economy to a networked information-intensive business model where risk increases dramatically (and with risk comes need for control), companies today require a highly proficient finance function.

Shareholders, analysts, Officers and Directors, politicians and regulators can all agree on one basic premise as a result of the global economic meltdown we are currently experiencing: a fully functioning finance department—with appropriate leadership and risk management—is imperative…not only for performance, but at the core existence.

CFOs must adapt to this new imperative, equipping themselves with skills needed to tackle the ever changing roles they play. Research has shown that a comprehensive approach is most effective — one that combines the ability to meet multi-level technical requirements with leadership skills such as collaboration and communication. For example, communication skills have been found to be critical at times when finance is called upon to promote initiatives to other departments.

When it comes to CFO technical skills, the need has never been greater. In recent years, Congress and the FASB intensified regulatory accounting demands on organizations. Boards have responded by demanding a higher degree of reporting sophistication. The sheer volume of technical requirements has created a natural emphasis on controllership skills expected of the CFO. Without commensurate increases in staff, CFOs have retreated into compliance and education mode, which detracts from personal interaction time to exercise organizational leadership. The backlash associated with this unintended consequence is a perception that many CFOs are less engaged in strategic and operational matters of importance to their Company, and in many cases this perception has become reality.

Can these vital leadership skills be learned? With the proper training and on- the job exposure and practice, decidedly yes. But while CFOs can expand their skill sets, they cannot realistically expect to master them all. This idea inspired Tatum to create the concept of the “Office of the CFO,” which posits the idea that the position of CFO is no longer a one person job. It also calls for a multi-level solution: the use of flexible, high-level resources such as executive services to meet specific challenges; the application of enhanced systems and processes to support increasing service levels; and a framework for increased utilization of professional staff augmentation.

Reaching the new functional imperative is not as elusive as it may seem. Combining strong technical skills with well-defined priorities, shrewd use of “soft skills” and value-add tools can enable a CFO to literally transform a failing finance department to achieving its goals. For any organization today, “getting the job done” links directly, powerfully and immediately to improved business performance and long term survival.

The Sphere of Influence

CFOs aren’t the only ones suffering from this perfect storm of pressures, but they are often the first held accountable for poor results. Surely there must be alternatives to simply “shooting the CFO” in response to all manners of organizational shortcomings?

The reality is that the success of many parties is inextricably tied to supporting the CFO. In fact, the new job description for CFOs should include two way communication with these parties to clarify objectives and collaborate on challenges.

CFO turnover and pressure directly affects:

1. The CEO

At unprecedented rates, CEOs have resorted to CFO termination as the solution to their financial challenges. Unfortunately, this decision is premature in many cases and misdirected in others, often addressing the symptom and not the underlying problems. CFOs can become the scapegoats for reporting disappointing results— and too many times Boards of Directors simply go along with the CEO’s recommendation, without investing enough time into fully understanding the circumstances.

In many cases, and several high-profile examples should come to mind, the CEO’s fate is directly linked to his or her financial executive. A costly termination and a lengthy, expensive search often
exacerbate the problems instead of solving them. This is especially true if the new CFO inherits a
situation identical to the one his or her predecessor just left. It is often the function itself that is the problem, not the person, and many good CFOs have fallen victim to this confusion. In several high profile companies, the CFO role has turned over two, three and even four times within one CEO’s tenure.

A better decision for the CEO to make would be investing the money and time otherwise spent on a search and dedicate it to helping the incumbent CFO implement enhanced systems and create an environment that enables success. This alternative increases shareholder value creation and promotes more effective use of corporate assets for the long term. Scapegoating the CFO fails to address a poorly conceived finance function, and shooting the messenger whenever the numbers disappoint investors does not resolve the issue of an operating environment that may lack financial discipline.

2. The Board and Audit Committee

Recent ethical scandals have focused Board member attention on the liability associated with their role, and they in turn insist on a better understanding of the company’s finances and control systems. Personal reputations are often riding on how well the finance function performs in today’s environment.

While Audit Committee members should have a strong sense of the regulatory and compliance challenges faced by their CFO, not all do. They may be even less aware of the operational, strategic, management and internal political pressures. In addition, numerous changes in today’s regulatory environment drive more frequent Board and committee meetings to review previously unheard of levels of detail on operations, SEC filings and internal controls. Many audit committee members lack training not only on these issues, but also on their very role. A CFO is then called upon not simply to present, but also to provide research, perform training and educate his/her Board.

A recent survey of audit committee members sought to clarify this apparent disconnect between audit committees and their CFOs. When asked what makes a successful CFO, respondents agreed that follow-through on decisions, communication and foresight of consequences were the most critical factors. They also agreed that skills such as handling criticism and time management were the least important. Surprisingly, CFOs rate their performance in most areas much higher than audit committee members do. The main exception is time management; audit committee members see CFOs as managing their time much more effectively than the CFOs themselves.

And the most often cited barrier to success? Most agree that personality issues are holding
CFOs back. Overall, CFOs seem to understand what is important, but they do not seem to be “connecting” as well as they think. If this is the case, how effective can they be in meeting the new functional imperative?

It is critical that both Audit Committee members and CEOs be attuned to and educated on the current environment and pressures of the CFO. Audit tends to “listen” to the CEO. It is important for Audit Committee members to have an on-going dialogue and relationship with the CFO as well. Indeed, a qualified Audit Committee chair should be, as one aspect of a multi-faceted role, a support and advocacy champion for resources that enable and enhance the CFO and in turn support the CEO. After all, few issues can erode shareholder value faster than a restatement or a liquidity crisis.

As an elected fiduciary of shareholder interests, the Audit Committee should look upon effective CFO support as effective risk management and stewardship of company assets. Likewise Audit Committee members should proactively exercise increased diligence, discernment and involvement in a company’s finance function well before any discussion of CFO termination is introduced, otherwise they are not effectively doing their job.

[The] thankless role has the diciest risk/reward ratio of any job short of Navy Seal. Pay has stayed flat while workload and responsibility have soared. Work hours allocated to audit committees alone have tripled during the last four years. Forbes: “Surviving America’s Worst Job”

3. Peer Executives

Executives throughout the company rely on accurate and timely reports from the finance department to lead their functional teams. When this flow of pertinent information is disrupted, less optimal business decisions are often the result. This fuels resentment and a perception that the finance department is at best incompetent, and at worst, sabotaging certain departments.

Since the new millennium and the dot-com boom and subsequent bust, the days of ‘gut-feel’ or intuitive decision-making are over. No longer do CEOs accept business plans that are built on hope— they want to see detailed analysis, a real business plan and accompanying sensitivity analyses. Of course, business units are oftentimes not equipped themselves to perform these feats, so they come to finance for help.

However, finance is often forced to prioritize requests for peer support behind regulatory compliance, Board requests and CEO priorities. Often, trying to avoid conflict and disappointment, they commit to these with the best of intentions but do not get the work done, at least not in a timely manner. Enhanced ability to negotiate upfront or a simple conversation to explain delays at a minimum could make a huge difference to all parties involved. Unfortunately, all too often those steps are not taken, leaving many disappointed.

4. The Finance Department

Neglecting day-today  operations is an obvious recipe for disaster, but a distracted, overworked and unavailable CFO is unable to provide necessary supervision and counsel to department staff.

With less time and energy from the CFO to serve as a mentor, many in the finance department grow tired of constant fire drills and crave leadership from above. The CFO, stretched too thin, misses more meetings and is less focused on day-to-day operations and staff support. At the same time the CFO has delegated the routine aspects of the job to subordinates often without providing adequate instruction. Concurrently, these same staffs are besieged by calls from recruiters due to increased demand for mid-level finance professionals.

A discouraged and overworked staff leads to higher turnover, which sets in motion a downward spiral: higher turnover means more of a CFO’s time is spent on personnel issues and training of new staff. But none of this addresses the institutional problems that precipitated the turnover in the first place. In addition, the roles and requirements of the middle-level financial manager are in opposition to desired work/life balance of the Gen X work pool, leaving fewer staff members interested in doing “what it takes.”

Doing What it Takes to Succeed

So how are finance executives navigating this environment of high demand and scarce resources? The 2008 survey of CFOs sought to uncover the right combination of non-technical business management and leadership skills that finance executives need to carry out this expanded business mandate. Breaking down this equation, consider first the many roles CFOs must play and the multilevel technical requirements they are expected to meet:

Clearly, an ongoing struggle exists for CFOs who strive to allocate time among multiple responsibilities. The majority of their time (over 60%) is generally devoted to core financial functions, such as controllership issues, compliance, audit committee demands and general day to day management. CFOs spend 20% of their time meeting business support needs, such as financial planning and analysis and investor relations. Less time is then left for CFOs to address issues at the partnership level — strategic issues such as capitalization, transactions and governance.

To effectively deal with a myriad of demands placed on a CFO, what then are the qualities and characteristics of the ideal financial leader? That is what we set out to study in our second research project. We surveyed, with CFO Research Services, a group of 400 CFOs of various size and profile companies to obtain insight into qualities essential for success. As mentioned previously, we also asked them to rate themselves on those very traits.

Survey results revealed that the most successful leaders tend to exhibit clarity of thought and action. Being an effective change agent requires one to lead, rather than simply doing, and advocating rather than merely complying. They also bring a level of adaptability and judgment to their work that is often the result of experience. An overlooked attribute we have observed however is effective communication skills, as CFOs often assume that their various constituents are always on the same page. Greater collaboration, both perceived and practiced, is also important for the CFO to avoid being branded a “lone ranger.”

An overwhelming majority of survey respondents recognize the increasing importance of soft skills. While technical knowledge is still important, effective CFOs must be able to promote ideas and get them implemented, which requires knowledge, vision and significant people skills.

While top-notch technical skills are indisputably important for finance leadership, companies often
train intensively on these skills at the expense of broad management training that would help CFO’s manage and support the business. Career development at senior levels is always a challenge, but most finance executives are eager for training on industry and competitive dynamics, business management and so-called “soft skills,” such as collaboration, negotiation and communication.

CFO Survey Results of Critical Success Factors

Clearly, CFOs are less comfortable with complex, potentially emotionally charged interactions that arise in the course of carrying out their duties. This does not come as a total surprise as some of a CFO’s natural tendencies, as previously noted, are to remain risk averse, unemotional, compliant and task oriented.

However, that is not what we found. Consistently, the CFOs in the survey rated themselves as “adequate to excellent” on every measure with only one exception: the ability to manage their personal time, where they clearly indicated a level of struggle.

Given our surprise with how easily they graded themselves, we decided to solicit additional input from Audit Committee Members. Interestingly, Audit Committee members and CFOs described the critical characteristics almost identically: both the top three and the bottom three rankings were the same. However, Audit Committee members surveyed rated their CFOs differently than the typical profile of self-assessment by CFOs themselves. Audit Committee members cited "understanding of internal politics” as the only category rated excellent. They also felt CFOs managed their time much better than CFOs rated themselves. They simply did not see any level of struggle that CFOs report, further supporting the characteristic that CFOs are typically stoic. The main barrier to success cited by Audit Committee members as holding CFOs back? “Personality issues” — ouch!

What can be concluded from these divergent views? CFOs understand what is important but are doing a worse job of connecting than they think. If they are, in fact, perceived to be managing their time well, too political, poor communicators, less effective at managing projects and unable to clearly see the future consequences of current actions how effective can they be at meeting the functional imperative of finance required today? And, doesn’t this begin to explain the striking prevalence of CFO terminations (especially the ones that insist they just didn’t see it coming)?

The Solution

CFOs in increasingly untenable situations need relief, and their key stakeholders inside and outside the organization need results. The role of Chief Financial Officer needs to be redefined, requiring a fundamental paradigm shift by the CFO in the management of the entire financial function.

Last year we said: This “evolution of the CFO” requires five steps:

1. Continually Reassessing the Organizational Life Stage

The stage of a company’s lifecycle determines its needs. A company preparing for a merger and subsequent integration has very different financial leadership needs from a business looking for turnaround management or bankruptcy specialization. Different challenges require different skill sets and an evolution of the company’s financial organization and structure. It is up to the CFO to lead this charge, to diagnose what stage the company is in and to anticipate the next two stages.

Because forward thinking is an absolute must in today’s environment, the CFO function needs to lead the way with strategic plans and vision for the finance function itself, as well as more broadly organizationally. A CFO’s credibility is closely tied to a strong focus on strategy, and correctly diagnosing the stage of the lifecycle guides decisions on what investments to make and programs to advocate. This becomes a perfect platform, then, for CFOs to re-establish themselves as strategic leadership, while simultaneously preparing the way for organizational requests and changes to better position the finance department (and the company) for success.

2. Realizing That Success Means Strong Management Skills

Managing a function, not just a job, requires a more sophisticated understanding, deployment and leadership of limited resources and initiatives. In order for a CFO to be effective they must adjust quickly, transitioning from skeptical to open-minded, from compliant to independent and from risk-averse to risk-manager. The CFO’s platform has expanded, and a CFO’s success will largely be tied to strong communications and the ability to work well with others. A CFO can no longer put his or her head down and plow through a rough stretch; getting others involved is necessary for a long-term solution. The more people a CFO can get on board with any given initiative, the greater the company’s chances of success will be.

3. Becoming an Advocate for the Financial Health of the Company

CFOs, often champions of cost-cutting measures, must embrace a parochial mandate for investment to support their function. Going to the CEO and Board and insisting on additional funding goes against the cost-cutting tendencies ingrained in many CFOs. Ensuring a company’s financial health will not happen without CEO and Board support. First, it is up to CFOs to sell them on this point. Partnering with the Audit Committee Chair is an absolute must to be successful as CFO today. Advocacy must encompass the entire spectrum of demands, from IT systems and infrastructure, to added external and internal resources, to additional training and support. All are important and interrelated in engineering an “effective finance function.”

An overwhelming majority of the finance executives surveyed recognized that timely and accurate visibility into operation metrics is central to managing the company’s health. Some 70 percent of respondents identified financial reporting, planning and analysis as one of three areas their companies are most likely to improve in the next 12 months. Meanwhile a staggering 45 percent say their companies are likely to seek improvements in corporate performance management and related executive dashboard capabilities. The study infers that this may be “a daunting task for finance executives, however, since they say they face a shortage of senior technical talent.” An intermediate solution could be effective use of project initiatives to shore up a floundering finance function.

4. Creating Your Own Chief Financial Office (“CFO”) Suite Featuring External Operational Leadership

   

Outsourcing should be geared to senior-level executives with specific expertise who leverage their intellectual capital to implement solutions targeted to the organization’s needs. The Office of the CFO will morph toward (although not fully achieve) the model of the General Counsel’s office—where the use of high-powered outside legal resources are chosen over building a large internal department. Long-term annuity contracts will disappear, because once the work is completed, the external source disappears.

Enhanced systems and processes—intelligently designed information flow—can ease regulatory reporting, audit committee concerns and peer requirements. “Band-Aid” solutions abound in this high-pressure business world, and it shouldn’t be a surprise when a company learns they are disposable and short-term. Long-term solutions require IT investment, but making a strong commitment on the front end will save time, money and heartache in the long run. These solutions include ensuring data integrity, developing automated processes and cross-functional linkages to peer and day-to-day support of operations. Effective CFOs have liberated themselves from “Excel hell” by defining appropriate metrics required to manage the business and designing management dashboards that automatically capture meaningful data at the source. Having one’s "finger on the pulse” is absolutely critical in today’s fast-paced environment.

Again, CFOs need to ignore their innate tendency to minimize costs and instead lobby for support and funding. In the CFO Research Services survey, this area drew particular notice from finance executives. Several respondents noted the impact of sophisticated IT systems, not only for their positive effects, but also for the otherwise required amount of time, attention and resources absorbed in the implementation and related initiatives. Many pointed to a lack of IT resources and skill sets in their own organization as the root cause of problems, leading many to believe outsourced operational leadership of the IT initiatives is the ideal solution.

5. Supplementing Internal Skillsets with Flexible Staff Augmentation

The CFO Research Services survey confirms that Finance has a pressing human capital problem. Only 29 percent of respondents say they are spending more time on human capital functions like hiring, training and developing finance staff. CFOs are staking their organization’s future, as well as placing themselves at risk, by attempting to personally guarantee the company’s financial health without adequate resources to address fast changing needs.

Fortunately, an entire industry has developed around staff augmentation. The benefits are obvious: lower permanent SG&A load, reduced benefit and training costs and the ability to match the number of people in the department to the current work demands. These are not the high level experts referred to in step one, these are lower and middle-level temporary employees who are sourced at a lower cost and leave when appropriate.

CFOs have perhaps the most experience with this element of the solution. Consider when Sarbanes- Oxley was enacted and virtually no CFO had the internal resources to meet the sudden and overwhelming need. With no time to build internal resources, most looked to outside resources, suddenly provided by a cadre of “internal audit” boutique firms. These firms provided the necessary resources for flow-charting and testing internal controls. While CFOs may not have gravitated this way under normal circumstances, (which these certainly were not), they quickly became comfortable with the model and continue to use it today, at least for SOX testing.

The “Next” Level of Solution

So, while an outsourcing prescription is still very much recommended, the lack of progress against CFO termination statistics in the past year would indicate that embracing this new “vision” has been anemic. Our research study further indicates that the lack of ability to advocate, communicate and essentially SELL this solution to the CEO and Board appears to be the stumbling block. CFOs simply do not seem to realize that their performance is perceived to be weaker than they think, and therefore CFOs have not fully internalized the need to change and evolve their management style.

With this in mind—advocating for the Office of the CFO, now with a heightened sense of urgency since the financial crisis of autumn 2008, and understanding that CFOs MUST do something to stem this tide, we added a middle layer to our proposed Office of the CFO model. The middle layer is more tactically oriented; it is the “how to” directive as opposed to the “what.” The “how
to” includes the creation of a fully functioning technical financial practice, supplemented by tools and products that are increasingly being developed to augment velocity in attaining results. But MOST importantly, this HOW TO requires the development of the emotional quotient element — the ability to advocate, communicate, sell and lead the implementation of the solution.

The winners in today’s increasingly fluid environment are those who adapt to the ebb and flow of business lifecycles with a flexible approach to not only their finance and accounting teams, but the leadership of those teams. Bringing the right skills to the table in the right increments for the company is the only way to maintain successful operations in today’s exceptionally demanding markets. This, too, is the only way to eliminate the risk of termination.

The Future

CFOs today fight an uphill battle to achieve success. Newspaper headlines each week detail the latest turmoil and announce the casualties. It is becoming obvious that no one person can go it alone, as the CFO role has truly become more than a one-person job regardless of company size. With market conditions and business cycles changing so rapidly, even executives who think they are sailing smoothly now may soon find themselves struggling to stay afloat in the future. And those who are already under fire need to quickly get help before it is too late. The modern day CFO has made precious little headway in absorbing this truth and internalizing the need for behavioral changes. Our research has identified many inherent reasons for this deficiency. A primary reason is the inability of CFOs to effectively communicate and advocate for the higher levels of investment in systems and resources, both financial and human.

Challenges faced by CFOs today are not insurmountable. There is a growing list of resourceful leaders who have made their companies stronger in these challenging times. The key to victory is creating an environment that enables success through an educated and effective system that functionalizes the job, advocates for changes and embraces external resources.

About the Author

Cynthia Jamison is a Senior Partner with Tatum, a Randstad Company. As an expert in the field of financial management and crisis restructuring she has been quoted in numerous publications including the Wall Street Journal, Forbes, Newsweek, and CFO Magazine. She is a frequent key note speaker for various organizations around the topic of today’s crisis in the CFO Suite.

Ms. Jamison has served as CFO of seven companies across a variety of industries, a publicly traded telecommunications company (successful turnaround) and as CFO of a software company in the CRM/ERM space, which was subsequently sold (start-up with several rounds of successful fundraising). She then served as CFO with a privately-held insurance brokerage facing unique crisis conditions (ultimately dismantled), followed by a one-year stint heading both finance and operations for an Internet payroll company. Ms. Jamison was CFO for a joint venture software/ BPO company owned by KKR and McDonalds. Most recently, she was CFO for a public restaurant company, successfully completing a turnaround, an equity offering and a complete re-start. Ms. Jamison sits on the Board of two publicly-traded companies: Tractor Supply Company (NASDAQ: TSCO) and B&G Foods (NYSE BGS), serving as Audit Committee Chairman for each. Ms. Jamison holds a B.A. in Economics and Political Science from Duke University, an M.B.A. in finance from the University of Chicago, and is a Certified Public Accountant in the State of Illinois.

 

About Tatum

Tatum is a leading management and advisory services firm offering hands-on strategic, financial and technology solutions that measurably improve business performance. Tatum’s executive leaders and consultants help companies navigate critical points in the business life cycle and execute their strategic initiatives. Our deep management and operational expertise, keen strategic consultancy and a focus on follow-through enable our teams to deliver solutions that drive sustainable impact. With a national footprint of offices in key markets, our firm is ready to mobilize locally anywhere in the country. Tatum is an operating company of Randstad.

 

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