A Look at the Shifting Roles of Today’s CFO

March 19, 2024 – CFOs are responsible for managing risks and planning for the what if moments. They are the architects of business resilience and growth. They have taken on new responsibilities in environmental, social, and governance matters; mergers and acquisitions; and corporate strategy, to name a few, according to a recent report from Egon Zehnder. And they are doing more than ever. The firm’s global survey of nearly 600 CFOs found that 82 percent say their role has significantly grown in the past five years. The good news? “These added responsibilities haven’t drained CFOs,” the study said. “They continue to be energized by the role, and most of them report their work-life balance is good.”

The bad news? These additional responsibilities don’t necessarily make CFOs “must-see” candidates for future CEO positions—an aspiration 60 percent of survey respondents share. However, CFOs say limited networking and visibility are their biggest hurdles to the CEO role. Egon Zehnder takes a closer look at how CFOs are shaping the future, sourcing talent, and navigating career aspirations, and what it means for your organization.

The Egon Zehnder report found that the CFO role is bigger than ever before, with 82 percent noting that they have taken on additional responsibilities, including environmental, social, and governance (ESG); mergers and acquisitions (M&A); and corporate development duties in the past two years.

Around half have taken on ESG or M&A and corporate development roles in the last two years. The study found that there are some variances by industry:

• CFOs in the industrial sector were the most likely to have added ESG responsibilities to their remit (62 percent).

• Cybersecurity is more likely to be a recent addition to the remit of a healthcare and pharmaceuticals CFO’s responsibilities than other industries.

Interestingly, Latin America is the only region where CFOs say the role hasn’t significantly grown (45 percent). In contrast, in the Middle East, zero CFOs believe the role hasn’t notably expanded, as well as in North America, where only five percent say the role hasn’t significantly grown.

Undertaking Risk Management

CFOs have also undertaken risk management duties and co-leadership of the enterprise with the CEO, among other mandates, making the role truly multifunctional. Looking to the future, the trend of increased responsibilities will only continue. When Egon Zehnder asked about the competencies that will matter most over the next five years for the role, CFOs ranked driving change, shaping strategy, and developing talent as the top ones. In particular, female CFOs were adamant about driving change—57 percent named this the key competency compared to 40 percent of male CFOs.

CFOs were also clear about areas they would like to see come off their remit. A majority of CFOs in the services sector (57 percent) would like to exclude HR/talent from their responsibilities, while IT is what many CFOs in financial services (57 percent) would opt out of.

There were also some different answers from a gender perspective on HR/ talent and ESG: 43 percent of male CFOs would like to exclude HR/talent from their scope compared with 17 percent of female CFOs.

Similarly, in terms of ESG, Egon Zehnder found that 12 percent of male CFOs would choose to exclude it versus six percent of female CFOs. To help shoulder some of the workload, CFOs don’t act alone. They rely on their head of financial planning & analysis (57 percent) and their controller or chief accounting officer (49 percent) the most. These two roles are particularly important as the path CFOs take to the role has shifted. Many CFOs most recently held divisional or regional CFO posts, making those with corporate finance spikes an important part of the team.

Related: How the CFO Position Continues to Evolve

There are some industry and regional differences. Financial services CFOs were less likely than other industries to rely on their controller/CAO. At the regional level, the controller/CAO was highly relied upon in North America (67 percent), compared to lower levels globally.

Reflecting on the actual and desired time they are able to allocate to core financial aspects of their role, CFOs told Egon Zehnder there is a gap: strategy, developing finance talent, partnering with other business leaders, and capital allocation were the top areas they would like to spend more time on. In addition, CFOs believe that AI and machine learning will have the greatest impact on the future performance of the function, underscoring the need for finance leaders to be able to experiment in these developing areas.

Harder to Attract Top Finance Talent

Two-fifths of CFOs told Egon Zehnder it’s harder to attract top financial talent today than it was two years ago. Layoffs, tough labor markets, increase in demands of roles, and skills gaps are some of the major reasons behind this struggle for talent, according to CFOs.

The Evolving Role of the CFO
Given the speed at which market conditions, business strategies, and operational structures have changed in recent years, businesses are more aware than ever of the crucial role the chief financial officer plays in shaping and driving a company’s strategic direction. A just-released report by BoardEx of ‘The Role of the CFO 2022’ examines more than 1,400 CFOs who lead major publicly traded companies across 16 countries around the world. Let’s take a closer look.

But the challenge to attract financial talent varies by region. In the Middle East, 56 percent of CFOs believe it has become harder to attract top financial talent. In Latin America, CFOs are split. While there has been no difference in the past two years for 42 percent of them, 44 percent of CFOs report it has become harder. There are also some variances by industry. Half of industrial companies and 46 percent of consumer companies note it’s harder to source financial talent today, while 34 percent of services and 31 percent of financial services CFOs say it’s easier.

But not all companies are facing a finance talent shortage. CFO respondents shared some intentional strategies they use to attract top employees:

• Raising the profile/reputation of their organization.

• Establishing a track record of strong financial performance.

• Embracing remote hiring.

• Being at the forefront of the sustainability transition.

A strong finance team is also a good selling point for potential recruits. “Talent attracts talent—younger people want to work for top-tier managers,” a CFO noted. “To build that bench of talent, CFOs shared that open and honest feedback was the most essential strategy, followed by rotating top employees into other parts of the finance department and ensuring employees have access to targeted development programs,” the Egon Zehnder report said.

Aspiring CFOs

For finance professionals aspiring to the CFO seat, there are a few areas they can focus on for growth. In their first CFO roles, survey respondents noted that board interaction, external credibility with investors, and co-leadership of the organization with the CEO were the areas they had to develop the most. External credibility and co-leadership are also believed to be the key skills for future CFOs. Board interaction dropped a bit in importance, potentially because that can be honed while in the role.

Related: As CFOs Gain in Stature, Succession Plans to Replace Them Falter

CFOs who reported being approached for new roles more often are being sought after every few months (47 percent), monthly (28 percent), and even weekly (eight percent). The Egon Zehnder report found that financial services was the only industry where CFOs report being approached less often than every few months for new CFO opportunities.

Looking at gender, women report being approached a lot more often (17 percent) when compared to men (12 percent), suggesting that companies have been taking steps to attract gender-diverse CFOs. With growing competition for CFO talent, what sets a company apart, according to 60 percent of respondents, is a high-quality executive team as well as growth prospects (for 45 percent of respondents). The focus on who they’ll work with over company size and revenue signals that companies that are more intentional about executive development are better positioned to attract top talent than those that aren’t, according to the study.

Egon Zehnder survey found that 60 percent of CFOs want to be CEOs, and seven in 10 say they are ready to become CEO now. CFOs who also serve as non-executive directors on boards (80 percent) were more likely to believe they are ready to be CEO now, compared to 67 percent of non-NEDs, and multi-time CFOs (77 percent) were more likely to say they are ready now than first-time CFOs (67 percent). Some industries also have CFOs who feel more ready for the role than others. A little over half of technology and communications CFOs (55 percent) say they are ready to be CEO now compared to 82 percent of healthcare and pharmaceutical CFOs, who are ready to take the reins immediately.

The study also found that the level of readiness also varies depending on ownership structure: 74 percent of public company CFOs feel ready now (the number is even higher for companies in the $6-10 billion revenue range), compared to only 56 percent of CFOs of family-owned companies. But there are some hurdles to the top post. Nearly half (46 percent) of CFOs surveyed say networking and visibility is the biggest barrier to them becoming CEO, followed by customer and market knowledge and operational expertise.

This Looks Like a Job for the CFO

CFOs are not just meeting but embracing new demands beyond their core functions, with 8 in 10 experiencing significant growth in their roles over the past five years. “They are going beyond their technical expertise,” the Egon Zehnder report said. “For some CFOs, it may be stagnancy. CFOs are clear about their goals—for many, the move to CEO is imminent, with only a few steps remaining until they reach their next career destination. For other CFOs, it may be that continually adding new responsibilities will eventually become too much to bear alone. In these instances, companies must continue to build and develop a strong finance team and find others in the C-suite who can help to shoulder the load.”

“As the responsibilities have broadened, often it should be the CFO who best understands the risks and should be the most front-footed. That requires others around the table to adapt their role,” the CFO of a real estate company explained to Egon Zehnder.

Whether they continue to be CFOs or have their sights set on the CEO or a board role, CFOs are a critical piece of safeguarding organizations’ futures. “CFO fundamentals are often not talked about—fiduciary duties, legal exposure, hardcore controls, fraud prevention, transparency, facts versus stories,” a CFO of a healthcare/pharmaceuticals company told Egon Zehnder. “These create the largest challenges inside organizations, and a CFO is not there to make friends, but to report and protect honestly.

Related: Financial Services is Booming, CFO Role Continues to Evolve

Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Executive Editor; Lily Fauver, Senior Editor – Hunt Scanlon Media