Author Brian Alleman, Partner at SeatonHill Partners
It seems that the role of CFO is evolving into far more than the traditional management of accounting and financials. While some increase in demands would be expected given the economic challenges of the past few years, the role of CFO has expanded to often include Cybersecurity, Customer Service Management, Customer Satisfaction, Human Resources and more. This scope/job creep has been a major source of stress, especially given that the primary functions related to earnings reports and storytelling of the business haven’t abated in the least.
According to a recent study, this “kitchen sink syndrome” has left some CFOs feeling like they are now doing the bulk of the heavy lifting in the C-suite, with no end in sight. This is happening, in part, because the CFOs role is quite unique. The CFO has a very broad overview of the company, a perspective that allows for more comprehensive decision making versus others in the C-suite whose roles are much more specific.
Over the past twenty years, the role of the CFO has shifted from an accountability/compliance style CFO when the Sarbanes Oxley Act came about around 2002. Around 2010, the focus shifted to growth and CFOs took on a deal making role. In recent years, there has been a turn towards operational aspects, covering everything from talent acquisition and sales to technology and more. While driven by business demands, the drawbacks that come along with the multi-discipline focus are resources and priorities getting spread far too thin. With CFOs now becoming jacks-of-all-trades, disproportionate workloads can lead to strained relationships with other members in the C-suite. According to an April DataRails survey, 81% of CFOs believe that they have the most intensive day to day workload compared to any other role in the C-suite. The survey was of 200 CFOs at businesses of up to 500 employees.
The CFOs increasing responsibilities has no end in sight. A survey of 150 finance chiefs at mid-market size companies conducted by HighRadius in April found that in the next year, 44% of CFOs plan to be more involved in talent acquisition and retention, 40% will be more involved in finance technologies and 36% will lead their organization’s finance automation agendas.
“The chief financial officer’s (CFOs) role continues to evolve as the business and the market environment remain dynamic. From being the go-to person for annual reports, revenues, and profit numbers, and cutting costs, the modern CFO is a strategic leader who weighs in on different decisions ranging from talent management to IT security.”
As the CFOs job continues to creep into other departments, other C-suite counterparts primarily remain focused on the same traditional tasks. For example, Chief Technology Officers are focused on hardware/software systems, and Chief Human Resource Officers are focused on a limited range of legal issues such as compliance, diversity, equity, and inclusion. In fact, the function of employee acquisition and retention, typically under the CHRO, is now becoming more of a critical issue for CFOs due to the tight labor market and rising wages.
To alleviate the financial effects of employee related issues, CFOs are having to take a more people-focused approach. Last month, 40% of CFOs pointed to talent shortages as a top business risk, according to the 2022 U.S. Bank CFO Insights Report released November 1. According to data from the Workhuman and Gallup Employee Wellbeing Report, released in October, quiet-quitting is almost a half a trillion dollar problem in the U.S. alone, contributing to CFOs concerns with the mounting costs associated with talent.
With all the increased responsibilities, there are also retention issues developing for CFOs. With a surge in CFO retirements over the past couple of years, the CFO retirement rate has increased for the first time in several years, hinting that there might be an increase in CFO turnover in the next year. As CFOs continue being spread thin, their primary role of managing the numbers of the business becomes even more difficult. CFOs are expected to understand cyber events and privacy, intellectual property, and talent, as well as remaining accountable for accurate numbers and all the other finance functions. With increased retirements and retention issues, the need for alternatives and new perspectives is becoming more urgent.
Interim and fractional CFOs that support companies through financial challenges, growth, M&A transactions, and reorganization, are gaining tremendous momentum; offering invaluable solutions for employers and new career paths for those looking to make a change. Both sides, employer and consultant, benefit from this unique relationship. Companies receive the expertise, guidance, and wisdom of a seasoned CFO, with incredible results that can change their trajectory of success.
Consultants enjoy the variety and flexibility that interim and fractional consulting offers. Fractional CFOs experience a variety of interests, companies, and industries to get their job done; bringing an outside perspective into their day-to-day, as they’re not focused solely on one organization. Flexibility and the ability to build something are vital components of the role, differing from a full-time job that solely focuses on one industry/company.
Avoiding burnout and piling on of responsibilities over time are also attractive qualities for the interim and fractional CFO job. As more and more companies are realizing the value of this type of arrangement, and more CFOs are wanting a more balanced career path, the interim and fractional CFO is rapidly becoming more and more commonplace; perhaps solving not only a company’s financial issues, but employment ones as well.