What’s driving the trajectory of the CFO role?

By Andy Burrows

Let’s talk about how and why the role of the CFO has changed over the last 30 years, and why that puts Finance in a critical position within the business.

You know, ever since I qualified as an accountant in 1995, I’ve noticed magazine articles, courses, seminars, books, all talking about the changing role of the CFO (or Finance Director as we used to call it).

And I’ve always been a bit cynical. I didn’t really know what it was all about until I sat and thought about it recently.

You see, I think there’s a misunderstanding in the media, even in the financial press, about what is driving any changes in role, if there are any.

The media portrays the CFO’s role changing because of Finance technology. In the past it was all about EPM (Enterprise Performance Management), BI (Business Insight) and ERP. Nowadays it’s all about RPA (Robotic Process Automation), AI (Artificial Intelligence) and Blockchain, apparently – you can’t get through a Finance publication without meeting those terms.

But think about this:

RPA is new, automation isn’t

Is automation a new thing? No, of course not. I was using formulas, linking spreadsheets, using macros, building databases, 20 years ago. That’s all automation.

I heard about robotic process automation (RPA) about 2 years ago. I didn’t know anything about it other than there was a lot of hype around it. Apparently, the robots are coming to take our jobs! So, I went to an evening seminar to learn a bit about it.

And I found out that RPA is just a glorified macro. That’s all really. The difference is that it can do anything you do on your computer, without being limited to one application (like Excel).

And, since then have we seen RPA sweeping through Finance and automating huge parts of it? No. I mean, what do you picture when you hear the hype? The robots are coming to take our jobs! Do you picture Finance functions cutting their numbers by 30%? 50%?

There are actually very few true pure RPA case studies in Finance (if any). The most aggressive RPA project I’ve seen addressed only 10% of the Finance headcount in the organisation – the cheapest 10%.

RPA isn’t as revolutionary as people are saying. It’s great. Don’t get me wrong. It’s cheap and powerful. It’s a useful new automation tool.

But RPA is not changing the CFO’s role.

Artificial Intelligence and Blockchain isn’t changing the CFO

What about artificial intelligence?

I haven’t come across a single use of AI in Finance. For all the talk about it, it’s still at the outer markers of the radar. Now, you may hear applications for machine learning. The software industry would like to rebadge that as AI. But I’m not being fooled. Having optical character recognition for invoices which then has the ability to learn where the key data is on the invoices, depending on which supplier it comes from – that’s not new. It’s pretty much mainstream by now.

And don’t even worry yourself about blockchain. Blockchain is still being debated. And can we really see big traction for a technology that no one understands even when it’s explained in really simple terms?

AI and Blockchain in Finance is not changing the CFO’s role.

But technology is key to understanding the changes

And yet the CFO’s role has changed over the last 30 years.  And technology has been a key driver. But it’s not Finance technology that has driven the evolution (much as that may be the case for the other roles within the Finance function).

On the other hand, with some irony, it is technological revolution that has driven changes in the CFO role. Just not quite in the way it’s normally presented. Let’s just think about some examples.

Online retailing – Amazon. If I know what I want (for many types of things), Amazon is the first place I go. I just think it’s great that I can go from realising I need something to getting it the next day, or even a couple of hours later, without having to plan a shopping trip!

So, there’s impact on logistics – the internet has shifted postal services from letters to packages. GPS has enabled logistics planning to happen instantaneously.

There’s an impact on high street retailing – complex niche-specific impacts, and changing all the time.

The media has been revolutionised. Audio and video can be recorded, edited and distributed for free. Books can now be self-published and distributed anywhere in the world on demand with no upfront investment – I know because I’ve done it!

Daily newspapers are practically almost a thing of the past.

Communications are possible globally and immediately. If something happens in Milan, people in Melbourne and Minnesota can hear about it less than a minute later. And not just hear about it. See it and hear it directly with high definition sound and video.

The barriers to entry, even just in terms of capital requirements, in some sectors have been practically knocked down. That means more competition.

Access to global markets means growth can be very fast. And global advertising is dirt cheap.

Business has changed in every aspect and sector

Business has changed. Being in business is not the same as it was 30 years ago.

30 years ago, there was no such thing as a Chief Information Officer. 30 years ago, IT departments were all about buying hardware, configuring servers and installing desktop software. Now cyber security is one of the biggest economic threats a business faces.

Low barriers to entry means lots of start-ups, more entrepreneurs, and therefore more exit plans, IPOs, acquisitions. More individual entrepreneur success means more private equity investment. Businesses are bought, sold, restructured, broken up, rebranded, with greater frequency. It’s much easier nowadays to be a global player, with communications being so cheap, so expansion into new markets is a realistic possibility.

Global communications have advanced to allow businesses to contract operations out to the other side of the world in offshore service centres. That has changed business, in some ways making it more complex. It’s also changed global economic dynamics.

Globalisation has increased the importance of learning English as the language of commerce.

The CFO helps the business stay on top

The point I’m coming to is this:

With all those things, the business needs a numbers person that is commercially astute right at the heart of the planning and decision making.

Who else is going to understand the trends? Who can do the analysis to identify the drivers? Who sees the risks?

Who else can work out a business valuation? Who else can give a business credibility to raise funds for growth?

The CFO is the natural fit, and therefore CFOs have naturally had to become more commercially astute to keep up.

The CFO role has not mainly changed because of Finance technology, although lots of roles within the Finance function have changed because of Finance technology such as ERP and EPM. I’m explicitly making a distinction between the CFO role and the roles within the CFO’s team.

The CFO role has changed because of the impact of technology on business, economics and management.

In other articles I’ve considered what this all means for today’s CFO and the Finance team. Have a look at the related posts below. The first on the list is probably the most relevant. It highlights what I believe is the most important area for the CFO to develop in response to today’s new challenges – leadership.

And this is the reason why I think it’s so important to understand correctly the drivers for change in the CFO role. If we believe that it’s Finance technology, then the CFO must become a master of technology.

If we believe (as I’ve laid out above) that it’s the technological revolution in business, economics and management, that is driving changes in the CFO role, then the CFO must become a master of business.

Related posts

The Future CFO – 4 ingredients for CFO success in the modern age

Why CFOs should spend less time business partnering, not more!

Next Generation Finance Skills – a business and personal challenge

Please can we stop saying that the future of Finance is RPA and AI! It’s Not!

Thinking Strategically About Finance Transformation

It’s Time to Take an Amazonian Approach to Technology in Finance

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