The Bar Has Been Raised For CFOs
Bank Chief Financial Officers are becoming increasingly valuable commodities following the subprime meltdown. But finance chiefs must go beyond merely crunching numbers. Now more than ever, CFOs are also under intense pressure to keep pace with a rapidly changing global market, according to the McKinsey Quarterly. And as banks continue to grapple with complex loans and credit swaps, CFOs who structured some of those complicated instruments will likely find even more demand for their services, according to Financial Week.
Executive search firm, A.E. Feldman, says the bar has been raised substantially for the CFO. The recruiter reports that professionals seeking CFO jobs must be able to transition from director of value preservation to partner in value creation. CFO candidates that have some experience with complex financial instruments and who can focus on strategic decision-making as well as value creation are in growing demand.
Adding Value
CFOs and the finance functions they head must go beyond measuring performance to also create value. According to a panel of experts at McKinsey’s 2007 CFO forum in London, there are a number of areas where a CFO and the finance organization play a critical role in creating value. Some obvious ways this is achieved is by ensuring that the company has a highly effective capital structure, meeting expectations for investors, and setting stretch goals for revenue and profitability that meet the company’s long-term goals. Other less obvious ways CFOs can add value, the panel concludes, is to orchestrate the relationship between the board and executive management and to set an effective rhythm to the business for how things get done on a monthly and quarterly basis.
Increased Scrutiny
Companies must attract and retain the best finance professionals they can which, in turn, perpetuates an environment where the finance organization can create more value and do higher-quality work, according to experts attending the McKinsey CFO forum. The panel concludes that the starting point for recruiting and retaining good people is the reputation of the CFO. The finance chief is an intensely scrutinized role - from the board to industry regulators. According to McKinsey, if a firm has respected leadership, good things happen to the talent pool of the entire organization.
Raising the Bar
Firms should expect more of the CFO and the people in their finance groups in terms of financial management and business support, say experts attending the McKinsey CFO forum. Experts say integrity and strong compliance, anticipating issues before they arise, forecasting accuracy, as well as productivity and value creation, are areas where the bar has been raised significantly.
