There has been a sea change in the role of the CFO over the last few years. The CFO is a business partner to the entire C-suite and a co-leader of the company, leading enterprise-level change initiatives that touch on every aspect of the business. Think of systems implementations, use of AI, pricing, change of business models, etc. The CFO of today understands the vision of the founder/CEO and helps crystalize that vision into a culture and a workplace that make it a reality. The result is an enterprise that is in a stronger position to empower and enable the company to achieve its goals. As we face increasingly choppy economic waters and higher cost of capital, these are important changes that will affect both hiring and retention of CFOs.
Direct quotes from the last three Tech CEOs who engaged us to find them a new CFO: From a manufacturing company: “We need an operationally oriented CFO.” From a tech-enabled service company: “The CFO will run all the traditional finance and accounting functions, but we will also have them running our business operations unit where the majority of our headcount resides.” From a robotics company: “I need the CFO to run all the finance functions as well as Investor Relations, but just as important in need them to drive sales ops and sales support.”
Enterprise risk management under fire
CFOs are taking a leadership role in several areas not traditionally associated with finance and accounting including risk management, I/T and sales operations. One of these areas undergoing significant change is enterprise risk management. Risk is generally something that a CFO has had exclusively under their domain. However, as the definition of risk has changed, as within cyber security for example, the CFO must now take an active role with the CIO to mitigate this type of risk – and report to the Board about what actions are being taken to keep the company safe from data breaches, maintain customer information security, protect intellectual property and avoid ransomware threats.
Supply chain entanglements
In the recent past, the whole area of supply chain was an afterthought and humdrum, but not anymore. A purchasing manager would likely bring issues to the CFO’s office in very rare cases. However, the supply chain issues that hit very hard year two of COVID definitively affected the role of the CFO. They are now actively dealing with suppliers and securing supply certainty. When key components cannot be acquired, or when work from home negates the ability to produce goods, the CFO is going to be front and center. This may be just a blip in time, but the importance of securing supply chains has become a more prominent bullet item on the CFO’s checklist.
A recent real-life example of this shift shared with me by a CFO client: Pre-Covid, a chip the enterprise uses in their telecom equipment was generally less than a dollar. During the height of the chip shortage, the only place they could purchase these components was on a spot market for $1500 apiece. No purchasing manager is going to make that decision! The CFO and CEO purchased the parts. Certainly, the chip market has returned to some sense of normal, but the lesson has been learned.
Accounting becoming its own beast
Another change in the CFO’s organization is the constantly demanding and shifting world of accounting and compliance. We are seeing companies hire Chief Accounting Officers much earlier in their growth cycle than ever before. Why? Because the role of the CFO is becoming more operational; Boards and CEOs do not want their CFO getting bogged down in accounting minutia. This is coupled with the growing body of compliance issues (ESG for example). The CFO now needs a really strong accounting/compliance team earlier than ever. Rule of thumb used to be a company at $1B revenue would hire a CAO; now we are seeing these roles hired in pre-public ~$100MM companies.
Employee issues exacerbated
Another expansion in the CFO role is within Human Resources. Employee issues have been exacerbated by work at home, hybrid work environments and current tech layoffs. The efforts to keep employees content, engaged and motivated to fulfill the mission of the company can no longer fall to HR alone; these efforts need to start at the top with the CEO and CFO. The CFOs I work with are constantly on the front lines of employee retention, recruitment and overall job satisfaction as well as being a standard bearer for company culture.
These are a few examples of the expansion of the influence and responsibilities CFOs are taking on. All on top of the regular finance, accounting, treasury and tax roles traditionally under the CFO’s domain, which makes for recruiting and retaining these special professionals a veritable challenge in today’s highly unpredictable marketplace. Recruiting becomes more difficult because the list of must haves just keeps growing. Retaining these folks becomes a matter of balancing a strong team to support the newly added responsibilities as to not burn out a hard to replace executive.
As always, if you have comments about this, I welcome your input. Please comment on LinkedIn or register on my website. Cheers, Dave
About Arnold Partners, LLC
Arnold Partners is a retained executive search firm specializing in the placement of CFOs and Audit Chairs. Arnold Partners serves the technology industry on a national basis, both Venture Capital-backed and publicly traded companies. With 100% success rate in completing our CFO search assignments. In addition, our placed CFOs have well beyond the average tenure in their new roles. More information can be found at: arnoldpartners.com.