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Innovating Finance: The CFO isn't just your best accountant

Posted by Devin Cole  November 2, 2011 05:00 PM

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The role of the CFO is changing. Not too long ago, he or she was simply the best accountant in the company, the person who knew the numbers best. Today, the CFO (chief financial officer) is truly a difference maker and innovator who is responsible for many aspects of the business such as growing revenue and leading global expansion. To survive in the office today, a CFO must be more strategic and focused on operations than ever before.

Jack McCullough is the Co-Founder and Co-Chair of the MIT Sloan CFO Summit, an annual one-day event (on November 17th this year) that brings together financial executives from around the world to discuss the changing role of the CFO and “Where Finance Meets Innovation.” It will explore how businesses are looking to expand revenue and market share in today’s environment, and how the CFO's responsibility are at the forefront of this innovation.

Nine years ago Jack and his Co-Chair Jeremy Seidman hosted the first summit to address what they identified as a need for education specific to CFOs. Jack can be reached at jack@thecforoundtable.com]. He shares his thoughts with Manya Chylinski about the CFO summit, the nature of innovation in finance, and what he sees in the future for CFOs.

What are the objectives for this year’s summit?

This year the theme of the conference is “where finance meets innovation.” It’s a reflection of how the role of the CFO is changing. This is not your father’s CFO anymore. The role has become a lot more strategic, a lot more operational, and we are trying to reflect that in the conference.

“Where finance meets innovation” is a pretty good metaphor for the entire MIT Sloan experience. MIT is certainly one of the top five schools in the world for innovation and it’s also in top five for finance. I’m a Sloan 1997 graduate and my experience really was an intersection of those two disciplines.

What kinds of innovation are actually taking place in the role of the CFO?

The CFO has become a true change agent, a strategist. You hear a lot about the CFO as a business partner to the CEO, and to the board and the rest of the executive team. The days where the CFO simply reported the numbers are a thing of a bygone era. The CFO actively influences the numbers, not just reports them.

On the technical side there is an ever-increasing quest for more information. It is no longer just how profitable is your European division. Now there is a push to know how profitable each particular product or customer is, and how can we measure the effectiveness of the sales and marketing organization. CFOs are under increasing pressure to be strategic, yet at the same time they are under increasing pressure to provide more information, which may or may not be GAAP (Generally Accepted Accounting Principles; standards which govern what information a company must report).

One other trend I have observed, and I sort of saw it coming when we started doing this conference, is that the CFO job as it existed 10 years ago has almost split into three roles. A lot of large public companies have a CFO, a Chief Accounting Officer, and a Chief Compliance Officer. All that used to be done by one person, but the job has just grown to be too big. It’s the remaining CFO that has the strategic role.

Because of improved technology, now the pressure to make decision cycle times on complex transactions continue to shrink. In fact, the ability to make a decision quickly and to make the right decision quickly is really a competitive advantage for a lot of companies. So the need for real-time data is paramount for CFOs.

How are CFOs adapting to these changes?

I think they are adapting to these changes quickly. The people who are getting the CFO roles today are sort of prescreened for it; they have that natural tendency to be strategic. Not to slam professionals who report the numbers, but these individuals are embracing strategy and want to get the executive position to make an impact on the business rather than just reporting the numbers.

Undoubtedly there are a lot of CFOs who continue to be just strong numbers people and do that extraordinarily well. But if the CFO today can’t be a real business partner and a real grower of the company, he or she is not likely to become a rock-star CFO. The job now is strategic first, you have to be competent on the numbers but that might be the second biggest piece and you count on your comptroller and chief accounting officer to provide the numbers most accurately.

What kinds of challenges or pressures from outside the world of finance are impacting people inside the CFO’s office these days?

Over regulation has been a bit of a problem for CFOs to deal with because their bosses and allies on the executive team expect them to be strategic but when a regulation comes along they have to deal with it. And the regulation is not always positive from the CFO’s perspective. For example there are privacy laws, which make a lot of sense and protect us as consumers but they do take real effort from the CFO and his or her team.

Does social media play any part in the CFO’s role?

Have you ever heard of the CFO Coach—Cindy Kraft? She is the one and only person that I ever followed on Twitter and I’ve met in real life. She calls CFOs the last people to have not really embraced social media. I know as many CFOs as anyone in Boston, and they don’t tweet for the most part, they’re on Facebook but they don’t use it, and their LinkedIn profiles aren’t everything they should be. I think there’s an opportunity for that to improve, but people just haven’t fully embraced it.

Maybe it’s because as CFOs we are taught to keep things confidential. Finance, accounting, and human resources are the three groups that want to do that more than others and are trained to do so. So the idea of going out and tweeting information about your company is counterintuitive to most CFOs. They are just afraid of what they might share.

Tell us three things you see in the future for CFOs.

Since we’ve been doing the conference, the pendulum tends to swing. During the Internet boom, the CFO’s main job was to raise money, raise a lot of it and raise it quickly. And that was the most important skill a CFO had. Then the bubble burst and we saw a return to the old school CFO—who focused on financial reporting and compliance.

What it’s been for a while and will continue to be, is that the CFO is truly the global thinker and strategic, but with high expertise in the old school skills. Globalization in particular and expertise in emerging markets are important, but perhaps not as important as continuing to serve a business partner to the CEO.

The other thing that is important to think about is that the regulatory environment just continues to get more and more complex and the CFO has to be prepared to deal with that. This is one of the reasons we developed the "Innovative Solutions to Risk Reduction" track for this year’s Summit. I just think the job is a lot harder than when I was in it. I was admitted to Sloan in 1995. I had good credentials and nice work experience; I was a certified public accountant, a comptroller for a public company. When I look at what people have accomplished at a pretty young age…there is a lot more expected of people these days.

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