Final Paper

Today's CFO Gregory Hilgendorf BUS 7800 Wendy Achilles 11/07/2012

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Abstract

The role of the CFO has developed into a new breed that is emerging as more than CPA and MBAs who fill these top ranks positions. With the diverse and dynamic global economies this position relies on individuals to balance compliance and business growth. As markets increase in their values rely on the skills of those to posses the know how and one who looks at ways to minimize cost. This paper will explore how this position has evolved over the years and how it plays a role in today's organization.

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Chief Financial Officer Transformation from Bean Counter to Company Strategist

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Today's Chief Financial Officers have an array of responsibilities that depending on the size and complexity of the organization. This position has been transforming over the years from a high paid accountant regulating the finances and financial statement reporter. This position takes on fiscal duties, but have a strategic partnership with CEO with the daily functions of the organization. This position has any array of responsibilities that provide the fiscal backbone for the organization, and has becoming a position to require the partnership to develop among other departments in order to add value to the organization and help reduce the company's bottom line. The position of CFO have been evolving from the early part of this century the position was known as a bean counter, who was focused on reporting numbers, looking preparing detailed reports as why to measuring performance with integrity and accuracy, and managing the companys checks-and-balances processes (MacDonald, 2011). This position requires a person with financial and accounting with the possession of strong quantitative skills. They often had a narrow view and where confined to their own department. Furthermore, they were countrycentric, even with their firms having a globalizing perspective due to the notion that regulatory differences made global finance and policy too complicated (MacDonald, 2011). However, there have been regional differences that loom larger than ever, and multinational no longer having the luxury of maintaining finance issues within boundaries. That the company's financial have become more complex, that require becomes to develop teams of department heads to team up with the CFO, who have developed into a strategic position (MacDonald, 2011). This position now involves helping the CEO and other top management develop new business opportunities and assets their strategic and financial merits risks. Risk management has become more involved and has gotten the attention of corporations ever since the scare of Y2K, aftermath of 9/11, and other business scandals, as CFO had to took the role of being departmental focused to

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the role of partnership with CEO by making ambitious but rational choices on an array of issues (MacDonald, 2011). With global threats that may damage a company, risk management has now become the focal point for upper management. That CFO along with other upper management positions require a broader background for risk management. It is critical that CFO have the experience with capital markets, mergers, and information technologies. In addition, they are sometimes asked to play an active role in managing external stakeholders and in investor communications in particular (MacDonald, 2011). They also are expected to have the experience in the operations and other departments, and have the ability to encourage their employees to pursue crossfunctional paths in order to have a team that have various skills and strengthen the team with diversity (MacDonald, 2011). Innovations is another focal point that CFO must strive to do on a regular basis. The rational is that in a competitive market, that companies are facing minimal to little growth, and rely on key position to develop new ways to do business. CFO, who are required to follow rules and regulations and know being required to become creative thinkers (O'Sullivan, 2011). Those who have developed industry changing products and services, possess natural innovation abilities, that people can learn to become more innovative. Leaders who have innovative skills set have five common which are questioning, observing, networking, experimenting, and associating, and connecting key ideas (O'Sullivan, 2011). That by taking away from some of these common elements it allows for new ways on how leaders even CFO are able to resolve problems. That this can be done by changing the way people look at resolving a problem or delivering a message.

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Chief Financial Officer have the tendency to be known for delivery-oriented, with skills that are heavily focused on organizing, planning, attention to detail, and execution. These skills are critical, yet they must be able to come up with new skills if they want to improve their organization. For example this can be done by not only find ways to reduce cost, but spending time questioning various products, visiting stores to observe customers buying and looking at the products, and meeting with contacts outside the company to discuss the products (O'Sullivan, 2011). In addition, they can review the finding, and analyze the data and make the recommendations to rest of the management team. This would be a slightly different approach if they just stayed in their office, analyze the data gathered by their staff, and present their findings to the rest of the team. (O'Sullivan, 2011). Another, way that Chief Financial Officers are able to bring in innovation would be how they are able construct reports, what data they analyze , how they build and manage their teams, and pursue financing for a given project (O'Sullivan, 2011). This requires the Chief Financial Officers to have both short and long term planning and determining what impacts there decision will have on the organization. They also must have the ability to work with the visionary leaders and take their ideas and have the ability to translate those ideas into actions that are sustainable (O'Sullivan, 2011).

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In addition the Chief Financial Officers requires individuals to have the ability to work in multiple time zones, and work regularly with non-financial areas of their business with the focus on growth and expansion. This will also require them to have the possessed the mid set of commercial sensibility and global mind set, requiring the CFO to develop and implement systems and budgets for budgeting and performance metric which has been the cornerstone of what they do. However, they must be able to provide that they will also need to look at ways of gather real time information as they present that to the management team, and develop cost saving measures. The Chief Financial Officers have a series of responsibilities and obligations that they must up hold for their peers and the company's shareholders. These responsibilities center around all financial and accounting matters by developing a series of company wide objectives, policies, procedures, processes, and practices as a way to have continuous sound financial accounting structure (Anderson, 2009). One of the tasks that the CFO must do is find ways of controlling the cash flow of the firm, and understand the sources and usages of funds. They also must have the ability to maintain the integrity of those funds, securities, and other valuable documents. They are able to do this by establishing accounting policies and procedures for credit and collections, purchasing, payment of bills, and other financial obligations. That if they fail to keep current on this can risk the longevity of the company (Anderson, 2009). Another key component would be to have an understanding of the company's liabilities They also must determine any hidden contingencies, leases, insurance summaries that are tied into legal contracts and obligations that company has with their business channels, partners and customers (Anderson, 2009). They also need to meet the expectations of the board of directors and company CEO. This also lead into anther key role which is performance, that the CFO

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would need to understand the company's business model for developing revenue and how customers value the company and translate that information into operational metrics that are used to measure performance (Anderson, 2009). They must use an assortment of tools such as balanced scorecards, dashboards, and financial statement ratio analysis. With these tools they are able to generate information that they are able to communicate the companys expected and actual financial performance (Anderson, 2009). Another facet that they would possess is the ability to manage various departments departments that center around accounting and finance functions. They also need to make sure that they are able to maintain these departments by developing job descriptions, policies, procedures, and methods for document control. They will also need to look at ways of having limits in order to control cost. They are able to do this by overseeing budgeting processes with the collections of inputs, and evaluating actual performance with estimates (Anderson, 2009). That if they fail to do this than departments will be spending more than what value that they can add to generate revenue are add value to products and services that they provide their customers. They also must find ways of establishing and maintaining lines of communications with investors, and shareholders in conjunction with the company CEO (Anderson, 2009). The CFO would also need to administer banking arrangements and loan agreements and maintain adequate sources of capital for the companys current borrowings from commercial banks and other lending institutions (Anderson, 2009). In addition, they must be able invest the companys funds and administer incentive stock option plans. This is also done by developing and renegotiating the procurement of debt and equity capital and maintaining the required financial arrangements (Anderson, 2009). They also must be able coordinate the and develop a long-range plans for the company, and asses the financial requirements implicit in these plans,

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and develop alternative ways in which financial requirements can be satisfied (Anderson, 2009). This would also lead to being accountable for all financial aspects of the company. They also must be able to ensures the maintenance of appropriate financial records, prepares required financial reports, insures audits are completed in time and statutory book closing occur (Anderson, 2009). Furthermore, the CFO would need to follow the responsibility and ensure that company is in compliance with financial regulations and standards, like Sarbanes-Oxley, IRS Tax Code, and GAAP. (Anderson, 2009). Lastly the CFO must analyze company shareholder relations policies, procedures and the board of directors. They also must make any recommendations to the CEO regarding any revised policies, procedures, and programs if needed (Anderson, 2009).

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With key responsibilities the Chief Financial Officer must avoid certain things or they will greatly impact the firm and growth of the firm. First would be that the CFO lacks the ability to develop and follow measurement and performance objectives that add value to the performance of strategic relationships and lack of measurements and performance objectives to assess the value and performance of strategic relationships. The ability to manage these relationships requires that the CFO, with the assistance of the CEO and the executive, that must be able to establish measurable performance objectives that are able to contribute that add value to the organization (Unknown, 2012). The accountability for each measure is assigned by the CEO to the management time with objectives and deadlines that they must meet. This requires that the CEO providing information needed to assess performance are made available to the accountable executives in a timely fashion (Unknown, 2012). However, if the CFO fails to develop plan with the CEO to ensure strategic relationships that are being monitored or measured will run into the risk of have dealing with uncertainty as the result of disconnecting with stakeholders (Unknown, 2012).

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Failures can cause delays in accounts receivable, material shortage, and missed opportunities. Furthermore, without automated processes supported by business solutions and reporting, these relationship becoming daunting task that lose value (Unknown, 2012). Another issue that would have an impact would be the Chief Financial Officer ability to attract and retain key talent. Human capital is a key resource that firms employee individuals that will contribute over long term. The firm finds ways of developing their skills and provide opportunities to retain their employees. The CFO, plays a key role in integrating the needs for human capital with the strategic and operational plans by looking at short and long term financial impacts of human resources with the assessment of critical human resources that add value to the organization. (Unknown, 2012). That if the CFO fails to drive home to the management team the value of the human capital and how this can be integrated info the operating plan, that this impact would lead into employee disconnect that will result in high turnover, low employee morale, and decrease in production (Unknown, 2012). That this could greatly impact the operations of the business and limit the firm to be competitive in the markets that they operate. Corporate policies and processes which prevent investment in key areas which affect the company's brand. The brand of the firm is impacted with ever interaction that the company is involved in. The CFO must have the buy in from the management team by developing key measurements that demonstrate the financial impact of brand-destroying activities(Unknown, 2012). These actions are often associated with independent measures over which each operational area has accountability and integrated view of all functions of the organization that adds value to improving their brand, including views of cost and benefits of optimizing overall to improve brand awareness and recognition (Unknown, 2012). That if the CFO fails to work within the other executive members to ensure that they

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share a common vision, that they can cause unsuitability and could be costly with the organization's brand image and dissolve brand loyalty with their consumers. The Chief Financial Officer also must find ways to improving their operations by making sure they have the buy in from the executive team otherwise any processes or policies that they have in place would fail. In addition, they would also need to find ways of improving the individuals that work within their organization. This requires the CFO and HR department to resolve the issues dealing with managing human capital, and making sure that they have people in positions that they are the right fit for. A survey conducted on behalf of Chartered Institute of Management Accountants and the American Institute of Certified Public Accountants surveyed 300 CEO and CFO found reasons why companies are missing performance targets and growth opportunities (Sammer, 2012). The reasons that they found were that they did not have the people in place examine growth opportunities, develop innovative ideals, and develop obtainable and measurable goals (Sammer, 2012). Furthermore, there was a lack of information used to support decision making, strategy development, and investment evaluation, according to the survey results (Sammer, 2012). Most of these issues also fall under the shoulders of the finance and accounting departments and uncovered certain findings. First, that they are inadequacies in talent management, that based on the respondents felt that they are not confident with the quality and usefulness of their organizations' data on their human capital and how they analyze the data (Sammer, 2012). Because of this they are unable to make effective decisions relating to human capital management. In addition, with the utilization of the fiance, accounting, operational departments are able to develop processes and policies regarding with the collection and analyzing data (Sammer, 2012). By doing this it ensures that they are able to determine what they can do to develop training and find ways to retain their

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employees. Second, would be that management is not in agreement about the level and type of training. Even though the CFO and the CEO are in agreement when to comes to talent management, that HR executives have a slightly different view (Sammer, 2012). That a majority of Chief Executive Officers felt that they cut spending on training, and workforce development, and a small number Chief Financial Officer and HR executives hold the same view. To resolve this management must be able to be in agreement with how they will train and develop their employees (Sammer, 2012). Third, individuals felt that there is poor succession plan. That over half of the respondents felt that their companies do not have a formal succession process for critical roles such as CEO, CFO, and COO. A small number of respondents who were HR directors are confident with the succession plan, and have the enough talent to step in those roles, however a smaller number of Chief Executive Officers and Chief Financial Officers have the same view (Sammer, 2012). Fourth, that there is a lack of clarity on managing issues with people, causing employees to question effectiveness of various talent management tools (Sammer, 2012). With the collection of data and improved metrics, this will allows companies to be more more confident when it comes to determining what resources and tools will be the most effective in any situation (Sammer, 2012). This also requires for management to determine those who are going to be is responsible for measuring talent management effectiveness. Chief Executive Officers and others that feel that this task of mandating the effectiveness of talent management falls under the role of CFO, however, this will fall under the realm of HR. In order to determine how the talent management will be handled and implemented effectively requires a partnership between Chief Financial Officers and HR. The rational because Chief Financial Officers have analytical and strategic capabilities used to in assisting HR department with the collecting data

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that is used to by the HR department to come up with policies and processes that impact the organizations human capital (Sammer, 2012). The Chief Financial Officer has evolved over time and has become a critical key for the organization. That this position requires a person to have a skill set that requires them to have an attention to detail, but must have the innovation that requires them to develop a short and longterm strategy which adds value to company. This is done through a partnership that Chief Financial Office must have with other departments by working with department managers, so that they are able to come up with new ideas to resolve issues that arise. In addition , the Chief Financial Officer, is a position that they have to avoid they can run the risk of doing things that are not fundamental sound that have an impact the overall success of their organization. There is misconceptions that members have with the role of the Chief Financial Officer, and there are other departments that are able to help retain employees and find ways of improving the human capital.

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References Anderson, C. (2009, November 9). What Are The Top Ten Responsibilities of a New CFO?. Retrieved from http://www.bizmanualz.com/blog/what-are-the-top-ten-responsibilitiesof-a-new-cfo.html MacDonald, Bryan, B. M. (2011, March 1). The new path to the c-suite. Harvard Business Review, Retrieved from http://hbr.org/2011/03/the-new-path-to-the-c-suite/ar/1 O'Sullivan, K. (2011, August 12). How To Be An Innovative CFO. Retrieved from http://www3.cfo.com/article/2011/8/leadership_cfos-improve-yourleadership-skills Sammer, J. (2012, October 12). How Can CFO Help Fix Talent Management? Retrieved from http://businessfinancemag.com/article/how-can-cfos-help-fix-talentmanagement-1018 Unknown. (2012). CFO Problems and Business Impact. Retrieved from http://www.justbusinessresults.com/JBR/?q=cfo-problems-and-businessimpact