In organisations across the world, CFOs are stepping out of the shadows to take a seat at the table of discussions on business strategy. As Edward Parsons, CFO of APCO Worldwide, explains to Jim Banks, CEOs need a trusted adviser at the head of finance who understands not only the numbers, but also the business and its people.
One of the most important appointments a CEO of any large organisation makes is that of the head of finance, mainly because the CFO is, in many companies, the CEO's right-hand man.
This change has come about, not only because a sharper focus on bottom-line performance has made the finance function a more visible and influential part of any big company, but also because the role of CFO has changed over the years to become about more than number-crunching.
Today's CFOs are communicators, working with business decision-makers to deliver on strategy, and with external stakeholders to provide a clear picture of how a business is performing.
In fact, today's CFO not only monitors the performance against the company's strategic goals, but also helps to decide what those goals are.
"A well-rounded CFO needs to be someone who engenders a lot of trust and is inquisitive," says Edward Parsons, CFO of APCO Worldwide. "By this I mean that the CFO should be happy to talk to people about what they perceive as the problems they face and someone who can come up with solutions.
"The role is something like a consigliere - a partner you can trust; for example, I spend a lot of time talking to our international president about my views on key business decisions. A good CFO is a partner with whom the CEO can have confidential conversations and discuss 'what if' scenarios, where the business is at today and what can be improved."
APCO is an independent communications consultancy that has embraced business partnering, embedding members of its finance outfit in its regional teams to act as a flexible resource wherever they are needed. They are on hand to provide insight into the company's local businesses and help to match its financial resources to its operational goals.
The trend towards business partnering is changing the role of the CFO, which has become about not just delivering the numbers, but also bringing them alive for the CEO and other senior executives.
"I am there to support decision-making and I am often asked if I can offer my view on what the impact of a particular decision will be," says Parsons. "The financial aspects are only one element of change, so the CFO now has to think more holistically about people and processes.
"The biggest change in how the CFO role is perceived is evident from the fact that I am involved in most decisions about our business. The CFO has to understand the business model."
The demands of the role mean that financial skills must be taken as read, and accompanied by the right package of people skills.
"The job of CFO is about who you are, as well as what you have learnt," explains Parsons. "One of the best personal development books I have ever read was about how to 'be yourself with more skill'. It looks at how to stay true to yourself, and authenticity in this job is very important. That is what I have worked hard at for the last ten years. I won't be the CFO of a FTSE 100 company, but neither am I working in a small, local business. You have to know your limitations and know what skills you have that you can improve on."
"With that in mind, one of the most important characteristics of a good CFO is to be receptive to feedback. That is essential in what I do."
Out of the shadows
Today, a CEO should look for CFOs to be much more than the bean counters they were once perceived to be.
"I think a CFO also has to be comfortable with ambiguity and uncertainty, especially if they are working in a small or medium-sized organisation, where they are very involved in the detail of the business," says Parsons. "Emotional intelligence is another important characteristic. You have to be empathetic, which is very important in a fast-paced environment. You need to understand the impact of business on the people in the company."
"The number of stakeholders CFOs interact with has grown, so they need the ability to approach each stakeholder with the right style of communication, whether it is staff, managers, investors, venture capitalists, analysts or anyone else. That is essential, and it is a real challenge."
In many successful organisations, the relationship between CEO and CFO is the principal axis of decision-making. Increasingly, the CFO can be trusted to be the connective tissue between business strategy and the investment that delivers it.
"There has been a subtle change in how finance works - partnering with professionals in the business is a real challenge," explains Parsons. "One way of looking at it is to say that we employ a lot of master craftsmen who are superb at what they do, but they are not business people. So, we have invested in support for them to set ourselves up for success and run each project in the right way to make an acceptable level of profit.
"Finance is more than processes like invoicing; it is about partnering with the business so that people understand what is important about finance. It is about tying people and resources together."
Form and function
Over the years, Parsons has seen a change in how the relationship between CEO and CFO works. Unlike some, however, he does not feel that this change has come about because the head of finance has necessarily become the unspoken number two in any large organisation. Instead, he believes that finance has found its voice at the table when key strategic decisions are taken.
Finance is there to provide a service to the rest of the business, and to do so effectively it must understand the other functions within the company, as well as the dynamics of the industry in which it operates. By connecting to and partnering with the operational sides of a business, the finance function is revealing its true value.
"The dynamics between the CEO and the CFO have changed," Parsons explains. "Some people see the CFO as the de facto second-in-command in a large organisation, but I would not say that is true at APCO, though it may be for other companies. Other roles are equally important, particularly HR.
"In a pharmaceutical company, for example, the chief scientific officer might be more important than the CFO. But the role of consigliere, which is what the CFO has increasingly become, is more important. Because business these days is very focused on bottom-line success, the CFO comes to the fore because there is a spotlight on how to maximise profitability and growth."