The Chief Financial Officer

1. The CFO's dramatic evolution from bookkeeper to strategic leader.

Variations on this theme crop up time and again throughout the history of the modern financial executive.

From back office. The role of the chief financial officer has undergone perpetual reinvention over the past century, moving far beyond its origins as a simple bookkeeper or controller. Early finance managers, like those at DuPont in the early 1900s, began developing sophisticated analytical methods, such as return on investment, which started to influence company strategy.

Strategic importance grows. The rise of large, complex conglomerates in the mid-20th century further elevated the finance function, as financial metrics became the primary way to measure performance across diverse business units. This period saw a significant increase in the number of company presidents with finance backgrounds, demonstrating the growing recognition of financial expertise at the highest levels.

Adapting to change. Economic shifts, market pressures, and regulatory changes have consistently expanded the CFO's remit. From navigating the stagnation of the 1970s by focusing on internal cash flow to managing the debt boom of the 1980s and the shareholder value focus of the 1990s, the CFO's skill set has proved uniquely adaptable to the prevailing economic climate, solidifying their position as a key executive.

2. Balancing the dual role of financial steward and business partner.

Good finance people find reasons to say “yes”, but make sure that it’s done in the right way.

More than just finance. While heading the finance department is fundamental, the modern CFO spends ideally no more than half their time on purely financial matters. The rest is dedicated to acting as a "business partner," actively contributing to broad strategic goals rather than just recording past performance. This involves bringing financial knowledge to bear on every element of business decision-making.

Supporter and leader. CFOs see themselves as either supportive "developers" or proactive "leaders" within the executive team. While they play a crucial role in validating strategic proposals, they increasingly influence the formulation of these plans. This requires striking a balance between serving as an independent adviser and actively leading the company in a particular direction, often acting as a calm, logical counterweight to more bullish colleagues.

Finding reasons to say yes. Rejecting proposals outright is less common than finding ways to make them work, albeit with necessary alterations or alternative approaches. This "navigation partner" role involves helping shape the company's vision, setting clear milestones, monitoring progress, and correcting course. It's about enabling business growth while ensuring strong financial control and discipline.

3. The CFO as the CEO's essential co-pilot and independent voice.

Successful executive teams are often marked by a healthy tension between a bullish, hard-charging CEO and a cautious, independent-minded CFO.

Crucial partnership. The relationship between the CFO and CEO is arguably the most important within a company. Often characterized by complementary skillsets – the CEO providing vision and passion, the CFO offering pragmatism and analysis – this partnership works best when there is mutual respect and the CFO can maintain independence.

Speaking truth to power. Given their fiduciary duties, CFOs must be able to challenge the CEO, even saying "no" when necessary, without blind allegiance. Research suggests that CFOs involved in accounting manipulations often succumb to pressure from CEOs rather than seeking personal gain, highlighting the importance of this independent stance.

Complementary strengths. Psychometric studies show CEOs tend to be more optimistic than CFOs, making the finance chief's analytical and pragmatic approach a vital balance, especially in capital allocation decisions. While disagreements happen, they are ideally resolved privately, presenting a united front publicly. The growing power of CFOs gives them more leverage in these crucial internal debates.

4. Mastering core internal responsibilities from accounting to risk.

Although accounting matters are typically delegated to the senior controller, if something goes wrong it is the CFO who gets it in the neck.

Foundation of the role. Despite the expanded strategic remit, core responsibilities remain paramount. The fundamental duty of compiling accurate accounts is unusually fraught, with potential for significant penalties if controls fail or results need restatement. While discretion exists in accounting interpretations, the pressure to meet targets can lead to "earnings management," a constant challenge.

Beyond the numbers. The CFO oversees critical functions like financial planning and analysis (FP&A), treasury, investment analysis, M&A, and risk management. FP&A moves beyond statutory reporting to provide timely, forward-looking insights, requiring commercially savvy staff. Treasury manages funding sources, working capital, and external financing, a role highlighted during the 2008 crisis.

Guardian against threats. Risk management is increasingly owned by finance, involving identifying, measuring, and mitigating threats across economic, financial, and operational domains. While planning for "known unknowns" is standard, the most damaging risks are often the "unknown unknowns," requiring foresight and imaginative scenario planning. The CFO's role is to protect the company while enabling calculated risk-taking for growth.

5. Developing finance talent and structuring the modern department.

The perfect finance person has mastered the technical, they’re strong on the interpersonal, they have worked in different countries and done operational roles and seen finance from the other side of the fence.

People are key. With demands on finance chiefs increasing, the quality of their teams is paramount. Attracting, retaining, and developing talent is a core responsibility, requiring CFOs to act as leaders and mentors, even as they spend more time outside the function. The goal is often to become a "net exporter of talent" to other parts of the business.

Modern structure. The traditional finance hierarchy has evolved into a more complex structure with:

• Transactional services centralized or outsourced.
• Specialist functions (treasury, tax) at headquarters.
• FP&A teams embedded in business units.

Building future leaders. Companies known for producing top finance talent, like GE and PepsiCo, emphasize varied functional and geographic rotations. This provides broad experience, including exposure to operational roles, which is increasingly seen as essential for senior finance positions and future leadership roles outside finance. Identifying and nurturing this talent pipeline is a critical, ongoing task for the CFO.

6. Navigating crucial relationships with investors and external partners.

Investors look to CFOs in order to feel confidence in the firm’s stewardship.

Voice to the market. For listed companies, managing relationships with investors is a significant part of the CFO's job, often consuming a day a week. Investors rely on the CFO for an unvarnished, clear-eyed view of performance and prospects, often spending more time with the finance chief than the CEO. Honesty and reliability are key, even when delivering bad news.

External ecosystem. The CFO also manages relationships with banks, auditors, and other vendors. The 2008 crisis strained bank relationships, pushing companies towards capital markets and diversifying lenders. Auditor relationships, while long-standing, are under increasing scrutiny regarding independence and cost. Vendors face heavy scrutiny, with reliability and value often prioritized over initial price.

Balancing interests. These external relationships require balancing competing interests:

• Investors seeking short-term returns vs. long-term company health.
• Banks offering financing vs. potential risks and costs.
• Auditors ensuring compliance vs. potential disruption.
• Vendors providing services vs. cost and reliability.
  The CFO must navigate these complex dynamics while protecting the company's financial integrity and strategic direction.

7. The CFO as a prime candidate for the CEO role and other leadership positions.

They go into their career thinking of it as a destination, but what happens is that there are more opportunities post that destination than there once were.

Beyond the pinnacle. While CFO was once seen as the apex of a finance career, it is increasingly a stepping stone to other senior roles. A significant percentage of CFOs aspire to positions outside finance, with CEO being the most popular destination, particularly among younger finance chiefs.

Path to CEO. Direct promotions from CFO to CEO are becoming more common, especially in mature or heavily regulated industries, or during periods of significant restructuring. However, a frequent path involves a rotation through a regional or divisional general manager role to gain operational experience before taking the top job.

New horizons. The versatility of the CFO skillset is opening up a wide spectrum of options beyond traditional corporate roles. Former CFOs are sought after for:

• Non-executive directorships (often chairing audit committees).
• Leadership roles in state-owned companies and sovereign wealth funds.
• Positions in the non-profit sector.
• Roles in private equity, either vetting deals or leading portfolio companies.
• Interim finance placements and project-based consulting.

8. Embracing new challenges like big data and sustainability.

As the finance director, I can see the financial implications of that.

Leveraging data. Advances in technology and the explosion of "big data" are creating new opportunities and challenges. CFOs, as conduits of corporate information, are keen to harness vast data pools to improve reporting, anticipate risks, and produce better forecasts. However, this requires careful management to avoid data overload and ensure data integrity and security.

Sustainability's financial case. Environmental, social, and governance (ESG) issues, often grouped under "sustainability," are increasingly falling under the CFO's purview. While driven by public awareness and customer demand, the biggest driver is often cost reduction through efficiency and reduced waste.

Integrating ESG. CFOs are involved in:

• Developing robust metrics for sustainability performance.
• Integrating these metrics into regular reporting and executive scorecards.
• Communicating the financial benefits of sustainability initiatives to stakeholders.
  By demonstrating the financial implications of sustainability, CFOs can champion these initiatives and integrate them into core business strategy.

9. The expanding influence and versatility of the modern finance chief.

In a relatively short time, historically speaking, the role of the CFO has grown from a discretionary clerical post to a vital strategic position whose influence is matched only by the chief executive.

Central to the corporation. The rise of the CFO is a defining characteristic of the modern corporation. Their influence stems from privileged access to information across the firm, making them trusted advisers and crucial links to external stakeholders. This central position, combined with increasing demands for financial savvy across all departments, is reshaping how companies operate.

Omniscient and omnipresent. As the volume of data grows, the CFO's role in interpreting it gives them an air of omniscience. Their involvement in diverse areas, from operational efficiency to investor relations and risk management, makes them seem almost omnipresent. This broad exposure and influence make the CFO role a powerful platform.

A stepping stone. For many, the CFO role is no longer the final career destination but a crucial step. The experience gained prepares them for CEO roles, board positions, and leadership in other sectors. The increasing number of former finance chiefs in top positions across the corporate landscape suggests that the methodical, data-driven approach championed by CFOs is becoming the dominant management philosophy.

Last updated: July 6, 2025