Am I alone in wondering if the many references and articles concerning the CFO’s emerging role as a “trusted advisor” is more hype than reality?

Increasingly, I read articles and research studies alleging this emerging CFO role to be actually happening. In an article written by Gianni Giacomelli, senior vice-president at Genpact, titled “Can a CFO Innovate?” he states:

“Modern financial executives are moving toward a more central and expanded role as stewards of the company's longevity, using the finance function to enable growth, especially in new markets and in response to market changes. For those who are ready for change, the new finance is an exciting and rewarding way to help shape a more intelligent enterprise that is better connected to the market and its customers.”

Really? Just to be a devil’s advocate for a moment, what proof do we have that Gianni’s observation is true? When we cut to the chase, what are CFOs more concerned about – regulatory compliance using external financial accounting or with internal managerial accounting for organizational performance improvement leveraging better decision making? Certainly many CFOs monitor and report on performance using scorecards and dashboards. But do they actively participate in assisting line managers to move those dials. As examples:

  • Do they assist sales and marketing managers with identifying which types of customers are attractive to retain, grow, win back, and acquire?
  • For the attractive existing and prospective customers do they help determine how much to optimally spend with those actions including deals, offers, price discounts, or coupons for each type of customer segment?
  • Do they assist operations managers to determine which productivity actions and projects will realize gains in efficiency, effectiveness, quality, and cost reduction?
  • Or do they simply serve as gatekeepers and keep score?

Bean counter or bean grower?

In an article by Myles Corson, a consultant with the Financial Accounting Advisory Services of Ernst & Young LLP, titled “The Evolving Role of Today’s CFO”, he writes:

“In addition to overseeing the company's financial health, CFOs are increasingly involved in setting operational and commercial strategy, navigating their companies safely through tighter credit markets, more complex regulation and unstable trading conditions. … As organizations continue to adjust to market volatility and economic uncertainty, CFOs must increasingly provide expert advice to support boardroom decisions. In fact, many CFOs feel that they are in an exceptional position to offer this level of strategic counsel because of their ability to gather information from disparate parts of the company.”

But is this evolving role one of just better external financial accounting reporting for regulatory agencies and the investment community or a role for creating a greater impact on analysis and decisions?

In a survey conducted by Mary Driscoll of the America Productivity and Quality Center, titled, “A New CFO Priority,” she writes:

“Surprisingly, only five percent of survey respondents believe that finance is currently delivering game-changing value to their enterprises. Is this cause for concern? … Finance organizations that are seen as a partner to the business generate thoughtful, clear, and authoritative analyses. However, the biggest barrier preventing business partnership is the lack of time to perform this same work.”

My intent is not to be a naysayer and deny there is truly an evolving and expanding role of the CFO. In fact, my intent is just the opposite. I am a believer that, particularly given the opportunity provided by the connections of technological forces ( advanced analytics, cloud, in-memory computing, mobile and social computing) the CFO’s finance and accounting function is uniquely positioned at this moment in time to accelerate the adoption rate of enterprise and corporate performance management (EPM/CPM) methods along with emerging business analytics to gain crucial insights that were previously inaccessible and truly facilitate business innovation in new and novel ways. Finance and accounting professionals were born with a quantitative aptitude – which technology will only further fuel.

Delusion or reality?

But do we know or just think we know? Which is it - delusion or reality? I bemoan the slow progress by the CFO’s function with performance improvement methods such as the adoption of activity-based costing (ABC) principles. If ABC is done at all it is typically only taken as far as product and service-line gross product profit margin line reporting and does not look beneath that line to report and analyze channel and costs-to-serve for arguably more critical customer profitability reporting and analysis.

And what about marginal / incremental expense analysis for that matter? This involves classifying available / used resources as sunk, fixed, step-fixed, semi-variable, or variable. This involves an understanding managerial economics, not just managerial accounting.

How many finance organizations have built core competencies with these functions? My suspicion is that many finance organizations are for the most part dealing with more fundamental problems, such as simply closing the books. Few have yet to build core competencies in many of the practices espoused by analysts, consultants and business pundits.

For now though, my opinion is the CFO function is about to enter a golden age of business analytics and managerial accounting. But we need more evidence. Are CFOs taxiing on the runway, or have they begun lift-off?

(About the author: Gary Cokins is the founder of Analytics-Based Performance Management LLC, an advisory firm. He is an internationally recognized expert, speaker and author in advanced cost management and performance improvement systems; previously a principal consultant with SAS. You can contact him at gcokins@garycokins.com. For more of Cokins' unique look at the world, visit his website at www.garycokins.com).

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