By Jack Perkins, founder at CFO Hub, which provides on-demand CFO, controller, accounting and HR services.
The traditional role of a chief financial officer (CFO) has been to focus on operational efficiency, financial reporting and compliance. CFOs have essentially been astute accountants, myopically focusing on the company’s past and present financial data. They would rarely consider the bigger picture or strategically plan for the future.
The traditional CFO could be considered more of a manager than a leader. They would follow a more reactive and risk-averse approach to the company’s data while largely isolating themselves from other departments. While sound financial fundamentals are still a prerequisite, there is much more to being a strategic CFO in modern times.
The Rise Of The Strategic CFO
Technology continues to drastically change business practices and competition. New technologies and business structures disrupt established markets, and international newcomers create unique business challenges in all sectors.
This shift has led to the rise of the strategic CFO. They take a more holistic view of the company’s finances, considering data in the context of rapidly changing markets. They’re also less insulated and risk-averse, proactively looking at changes as opportunities rather than threats. They take responsibility for engaging with other departments to develop long-term financial strategies that benefit every aspect of the business.
Three Qualities To Look For In Your Strategic CFO
These are the three qualities that you need to demand when hiring your strategic CFO:
1. Financial And Analytic Prowess
A strategic CFO still needs financial acumen to ensure the company’s financial health, just like a traditional CFO. The difference is that a strategic CFO should harness new technologies and algorithms to develop financial models that help them plan for the future.
Being financially forward-thinking is a defining characteristic of a strategic CFO. They should take a more holistic view of the financial environment, monitoring the company’s internal financial performance and making predictions and forecasts for the market as a whole. Strategic CFOs may be relied upon more for raising funding than a traditional CFO, so a complete understanding of how the company fits into the changing competitive landscape is essential.
Strategic CFOs tend to welcome more risk than their more conservative counterparts. They’re also more proactive, so analyzing financial trends to look for potential opportunities for the company to grow and succeed becomes part of the remit of the modern strategic CFO.
2. A Cross-Disciplinary Strategic Mind
For a modern CFO to strategically impact their company’s direction, they have to go beyond just the numbers. They need an intrinsic understanding of each department within the organization. This entails speaking with other department heads, not only to understand their budgeting needs but also to understand how they feel their departments can influence the business’s future success.
Cross-collaboration encourages creativity and new perspectives on problem-solving. Opening up conversations with and listening to the needs and ideas of other C-level colleagues will enable critical thinking and, therefore, better decision-making. Considering that strategic CFOs tend to take on more risk, they must have as much information as possible from all parts of the business.
3. Excellent Communication And Leadership Skills
A strategic CFO should be more of a leader than a manager. This means they must make strong decisions, stick by them and clearly articulate why people should be excited about new ideas.
Being a clear communicator makes building the necessary internal relationships easier. It also helps build confidence with other stakeholders. It makes the CFO more effective when pitching for investments, dealing with current shareholders or explaining to a bank why it should extend its line of credit.
During a crisis, a respected leader and clear communicator must inspire confidence within their team. Trust and motivation can be the difference between surviving a downturn and ceasing to exist. This responsibility has traditionally been placed solely on the company’s chief executive officer (CEO). While the CEO is still the driving force behind this leadership today, a strategic CFO should also be able to step up to the plate when needed.
Why Your Company Should Look For A Strategic CFO
The modern strategic CFO isn’t entirely an aberration from the traditional CFO. They’re the next step in the evolution of the role. Your company should look for a strategic CFO who is forward-thinking and can adapt to today’s changing market while still taking care of your company’s financial health.
We don’t know what the next iteration of the CFO will be, but if you’re not ready for a strategic CFO now, how will you be ready for whatever you might need in the future?
Read the full article here