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Challenges facing the 21st century CFO
23 September 2008:
At a time when modern best practice suggests that CFOs should be focused on more strategic issues, the report — Future Perfect: The CFO of Tomorrow — shows that 62 percent of respondents are still spending more than a quarter of their time on traditional finance tasks. Twenty-six percent spend more than half of their time on such tasks.
Consequently, almost half of the survey’s respondents spend less than a quarter of their time on decision support and business strategy.
Edge Zarrella of KPMG Advisory, Partner in charge of Risk Advisory Services in Asia Pacific, believes that this highlights how companies need to support and encourage the continued evolution of the CFO role — and quickly. He explained: “It has become accepted as best practice in leading companies that the CFO’s role is about more than extracting financial data and providing historical analysis. Instead, he or she has been elevated to the role of the CEO’s trusted strategic advisor and partner, assisting on strategic decision-making. This cannot happen when that person is still mired by the traditional tasks associated with the CFO of yesteryear. The message to firms across the region is clear — help them develop the skills required of the 21st century CFO and remove some of the responsibilities which are cluttering up their agendas. In short, free the CFO.”
Zarrella is not alone in voicing these sentiments about the future development of the CFO. As one CEO who was interviewed put it: “We want them to spend less time on transactional activities and more on strategic issues — the CFO should be a sounding board for the CEO.” In addition, the respondents themselves know full well what they should be aiming for. When asked how they expect to be allocating their time in two to three years from now, a swing became evident — away from traditional duties (63 percent expect to be spending less than a quarter of their time on this) and towards more value-added operations (48 percent expect to spend between 25 and 50 percent of their time on decision support).
Zarrella continued: “Looking even further into the future, I would go as far as saying that a CFO in the year 2020 will spend 95 percent of his time providing insight — and just five percent on extracting financial data. I’d suggest that the current split — in AsPac — sees 85 percent of time spent on data and just 15 percent on providing insight. So the question all companies should be asking themselves is whether or not they can facilitate their CFO’s progression from the 2008 ratio to the 2020 ratio.”
“As the saying goes though, no man is an island. Behind every good CFO is an equally good finance team. If companies expect their CFO to develop along the lines already outlined, then the supporting finance function will need to match the pace of that development. Otherwise, the evolving CFO will find himself marooned without the support he needs to do his job properly. Unfortunately, our research shows that not everyone is confident in the ability of those teams to do this.”
In fact, only 21 percent of respondents felt that their finance teams had sufficient depth of talent and experience to undertake non-traditional, more strategic finance operations — i.e. to fill the gap which the CFO hopes to create by moving further up the evolutionary ladder. Forty-five percent felt that teams lacked strategic and broader management skills. Perhaps most damningly though, 34 percent felt that they also needed to improve on technical accounting and transactional skills.
More encouragingly, when asked to assess CFOs against a number of personal attributes seen as key to their role, it becomes clear that respondents are generally content with their CFO’s personal performance. The number of respondents claiming there was ‘room for improvement’ rarely rose above 20 percent, suggesting that CFOs have the abilities needed to take the evolutionary step up required of them. Interestingly though, the largest negatives were registered against CFOs’ ability to persuade others to follow a course of action. Despite a widespread acceptance of the importance of this characteristic, only 18 percent of CFOs rated themselves as 'excellent' at this while a further 60 percent believed themselves to be no more than adequate.
Zarrella concluded: “A key question right now should be — how do we develop the CFO of tomorrow? I think that companies will need to look to a variety of ways to get the best out of their people, including formal professional development, on-the-job training and observation, mentoring and coaching. CFOs themselves must also be proactive in lobbying their companies for support and should work to extend professional development and overall talent management to the rest of the finance team. Succession planning should be a critical part of this process.”
Download the report 
Source: KPMG
