The role of the CFO is constantly being redefined. This is, in part at least, because it is still a relatively new role. In 1978, less than 10% of major companies in the US had CFOs, compared to 80% or more each year after 2000.
Their responsibilities have largely been dependent on economic change and trends in the general business environment. The rise of leveraged buyouts and conglomerate-driven acquisitions in the 1980s, for example, saw CFOs become more of a business partner, while in recent years, automation and other technological advances have seen them take even greater responsibility for strategic planning at their organizations. This might be good news for CFOs, but where does it leave the CSO?
CFOs are arguably best placed to make strategic decisions, as their position combines a high-level strategic overview alongside the CEO with a direct line of sight into everyday execution. Two-thirds of all executives agree that the best way for CFOs to ensure their company’s success would be to spend more time on strategy. Executives that believe CFOs should be spending more time on strategy cite the hard data and empirical mind-set that they can bring, particularly in forecasting trends, building strategic capabilities, or managing government and regulatory relationships. CFOs are able to cut through sometimes airy grand ideas with data, offering a degree of pragmatism that CSOs, for all their fine qualities, often lack simply because they have less knowledge of the financial consequences. Indeed, research shows that despite over 60% of growth coming from riding on favorable market tailwinds, less than 15% of executives consider these macroeconomic trends in their strategic decision-making, and under 25% even look at their own financial projections and portfolio performance.
While the benefits are clear, in a study done by Ventana Research, just 19% of CFOs that responded said they would describe their organizational influence as ‘strategic,’ with 68% saying they provide operational level support and 13% only provide information with no transactional or strategic function at all.
One of the key reasons behind this failure of CFOs to become as involved as they could in strategy, is resistance from other C-suite executives such as the CSO. However, while it may initially appear that such a move into the CSO’s traditional remit is an intrusion of sorts, it is not the case that one needs to leave to make room for the other. Both executives should be working together and collaborating to achieve the best results for the business. Good strategy requires that strategy, budgeting, and capital allocation be fully integrated - and this can only happen if finance and strategy executives collaborate.
Both the CSO and the CFO bring with them different insights, skillets, and experience from which they can build a better link between resource allocation and strategy in the corporate-strategy-development process. Building a strong partnership between the two usually requires the CFO to become more directly and deeply involved in strategy development, but it also needs CSOs to have a better view of the firm’s financial position. To move away from counterproductive tension and turf wars, there are a number of things a firms needs to encourage. Most important though is simply regular communication, and gaining a strong understanding and respect for what each department has to offer each other.