IS the role of the chief financial officer (CFO) evolving from bean counter and custodian to change agent and strategist?
In collaboration with the Finex Research & Development Foundation Inc. (Finex Foundation), the Ateneo Graduate School of Business conducted a study on the perceived role of the CFO. As a framework for the study, the DeLoitte model—the Four Faces of the CFO—was adopted. It states that the CFO is expected to play four diverse and challenging roles: Steward (preserving the assets of the organization), Operator (running a tight finance operation), Strategist (helping to shape overall strategy and direction) and Catalyst (instilling a mind set to help other parts of the organization perform better).
Surveys in various countries were used as references to discover the current thinking on the CFO’s role.
DeLoitte’s survey found that CFOs preferred the Strategist and Catalyst roles. The Institute of Chartered Accountants of Ontario (Icao) survey shows that CFOs consider Steward and Strategist as the two most important roles, followed by Catalyst and Operator roles. In the Singapore survey (Singapore CFO Institute and Singapore Management University), over 90 percent of the CFO respondents identified Stewardship as their key responsibility.
The Ernst & Young survey showed that the Steward role is a priority. In the KPMG survey, 62 percent of senior executives project a larger role for finance over the next five years.
The survey conducted by Ateneo and Finex used the same DeLoitte framework. The sample is composed of 33 respondents who come from 19 different industries. The survey results showed that the Strategist role was ranked the highest, with 29.2 percent of the respondents in agreement. This is closely followed by the Catalyst role at 27.1 percent and the Steward role at 25 percent. The Operator role, meanwhile, trailed behind at 18.8 percent. All four roles are rated at least “important” for the CFO. The Operator is the least important role for the CFO and is also where the least amount of time is spent on. Meanwhile, from the CEO’s point of view, all four roles are rated at least “moderately important.” Strategist is the role most important to him, followed by Catalyst, Steward, and Operator roles, in that order. Comparing the results with the Icao study, the trends are similarly close all throughout the four roles. Male CFOs consider Strategist as most important, closely followed by Catalyst, and trailed behind by Steward and Operator roles. However, the Steward role was ranked highest among female CFOs, followed by Strategist, Operator and Catalyst. Strategist is the most important role among 35 to 44-year-old CFOs. Forty-five to 54-year-old CFOs, meanwhile, equally view Strategist and Catalyst as most important. CFOs aged 55 and above consider Operator as most important. CFOs with accounting background consider Strategist as most important, while CFOs with MBA degree ranked Catalyst the highest. Respondents with other academic background view Steward as the most important role. CFOs with four to seven and seven plus years experience with finance-related functions consider Strategist as most important, while CFOs with one to three years in finance-related functions ranked Catalyst the highest. CFOs in finance industry ranked Steward the highest, while those in the service sector consider Catalyst as most important. CFOs in manufacturing and other industries view Strategist as most important. CFOs of companies with foreign equity regard Steward as foremost, while CFOs of companies with local equity equally ranked Catalyst and Strategist as the most important. Strategist was considered the most important role by CFOs of companies with combined foreign and local equity. Operator was the role viewed as least important across-the-board.
Based on the surveys, there appears to be an emerging role for the CFO to be a Strategist and Catalyst while retaining the traditional and foundational roles of Operator and Steward. Because of the shifting role of the CFO, the chief executive officer must recognize that the CFO is an important partner in realizing the vision and purpose of the company in a complex setting.
The study on the emerging role of the CFO may serve to guide Finex and International Association of Financial Executives Institute in the course of their mission to promote and enhance the professional development of its membership.
With a thorough understanding of the CFO’s roles and required competencies, it can contribute to better governance and more effective performance in organizations.
Eliseo A. Aurellado, MBA, PhD, is a CPA who is the former head of Finance Faculty at the Ateneo Graduate School of Business. He is a retired banker and has experienced being in the CFO role during his more than 40 years in private industry. He is the vice chairman of the Board and COO of Metro Stonerich Corp., a Triple A, ISO-certified construction company. He can be reached through his e-mail address:taxmanely@yahoo.com.