The chief financial officer’s responsibility has become more complex. He no longer just crunches number but also leads the company on various fronts.
Excellence in number crunching, innovativeness and effectiveness in tax planning are the first thoughts which come to mind when you think of a skilled chief financial officer or CFO. This was a true description till the early 1990s, but post-liberalization there has been a complete redefining of the finance function and the role that a CFO plays in an organization.
There are several success stories that illustrate the opportunities for leadership available to CFOs. Take, for instance, Keki Dadiseth who managed various finance roles in India and overseas before taking over as the managing director and chairman of Hindustan Unilever. He went on to become Unilever’s global director for home and personal care business. Likewise, another CFO went on to be the CEO from a finance role at Ambuja Cements.
Even Uday Khanna led the finance function across various Unilever subsidiaries before taking over as the country head, India, for Lafarge. Praveen Kadle represents another success story — he rose up the finance function within the Tata Group and today leads the group’s financial services business as the managing director and CEO of Tata Capital.
In today’s dynamic environment, to be a successful CFO, it is absolutely essential to have a sharp business mindset and be proactive in enhancing knowledge about all aspects of the corporation such as manufacturing, product development, marketing and sales, in addition to the core area of expertise. A higher level of inquisitiveness to gain information about the overall scope of business and the ability to gauge its impact on the organization and the industry enables the CFO to understand the nuances of how to build a strategic partnership with the senior management of the organization.
The critical competence for effectively managing a CFO’s role is to keep a balance between number orientation and strategic mindset.
It is important to have the intellect to identify short- to long-term business opportunities and potential roadblocks in a venture. In today’s technology-driven environment, managing the routine accounting work and preparing MIS (management information systems) is not at all a time-consuming task, and therefore the intellectual stimulus for a high-caliber CFO will come from his interaction with other functions and participation in business-related matters.
Today, a CFO with a big-picture mindset and the ability to contribute beyond the functional area is the most sought after talent by organizations across industry segments. The reality however is that while demand continues to grow, professionals with such well-rounded capabilities are in short supply. It is therefore important for finance professionals to take the initiative to develop interest in business matters and get a first-hand feel of business at the ground level.
The transition in the CFO’s role from a back-office support function to that of a strategic partner to the CEO has also resulted in restructuring of their compensation packages. In the past, the CFO’s compensation would predominantly be a fixed amount, similar to that of other functional heads and with no amount linked to the performance of the organization. With CFOs now playing a critical leadership role in a company’s strategy and business operations, it has become a norm that about 25-35 per cent of the CFO’s compensation is linked to the performance of the organization. Further, the total compensation package of the CFO would be amongst the top two to three highly-paid professionals in the organization.
In addition to functional competence and commercial acumen, equally important are softer skills for a CFO to be respected as a thought partner by various stakeholders in an organization. It is necessary to develop skills such as collaboration, influencing, negotiation, team work, people management and inspirational leadership to command respect both in the internal and external environments.–