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THE CFO OF THE FUTURE

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THE CFO OF THE FUTURE : VIEWS OF JSE TOP 40 COMPANY CFO’s

Over the past 50 years, the role of the Chief Financial Officer (CFO) has evolved to that of a strategic business partner who focuses on the creation of shareholder wealth. Recently SAICA embarked on a research project, targeting 40 CFOs of the largest companies listed on the JSE Ltd to gain insight into this evolving role. The research project focussed on six areas:

  • Area 1 The key focus areas on which CFOs are currently spending their time
  • Area 2 The key focus areas on which CFOs will spend their time in the future
  • Area 3 The skills currently required by CFOs
  • Area 4 The skills required by CFOs in the future
  • Area 5 The tools and strategies currently used by CFOs
  • Area 6 The tools and strategies that CFOs are likely to use in the future to cope with challenges

Results revealed that CFOs at the top of the corporate ladder in South Africa are certainly aware of the change in the role they play. No less than 94% of respondents feel that their role and responsibilities have changed over the past three years, while the same number believes that their role and responsibilities will change further over the next five years.

With regard to the effect some of the change drivers have had on CFOs, 72% of respondents believe that the increased emphasis on compliance with laws and regulations and listing requirements has had an adverse effect on their ability to add value in their organisations. Furthermore, 47% are of the opinion that the increased emphasis on corporate governance has also adversely affected their ability to add value in their organisations, while 56% of respondents believe that the implementation of International Financial Reporting Standards (IFRS) has had an adverse effect on this ability.

In order to conduct research into the key focus areas and responsibilities of CFOs at the top of the corporate ladder a model for the key focus areas of CFOs was used which is presented in figure 1.

 

Figure 1 – Key focus areas for CFOs

 

Planner and strategist

 

Compliance and
transaction officer

 

Growth and innovation catalyst

 

Corporate governance, citizenship and people’s manager

 

 Based on this model and a range of responsibilities classified under each role, a number of research questions were posed. When asked to select the one role most important to them, more than two thirds of respondents selected that of planner and strategist as the most important present and future role. CFOs also ranked the four roles with regard to their relative importance (table 1).

Table 1 – Ranking of importance of roles

New

 

In five years time

 

  1. Planner and strategist

 

  1. Planner and strategist

 

  1. Compliance and transaction officer

 

  1. Growth and innovation catalyst

 

  1. Corporate governance, citizenship and people’s manager

 

  1. Compliance and transaction officer

 

  1. Growth and innovation catalyst

 

  1. Corporate governance, citizenship and people’s manager

 

 Current time utilisation revealed that CFOs spend most of their time on strategic planning, advice and management and a great deal of time on attracting and retaining skills, on coaching and mentoring staff, on investor, stakeholder and market liaison and communication, and on merger and acquisition activities. On the other hand, few respondents spend significant amounts of time on information management and information technology maintenance and management, or on sustainable development, sustainability reporting and the triple bottom line.

Regarding CFOs expected time utilisation in five years time, respondents believe they will spend even more time on strategic planning, advice and management and on risk identification, assessment and management, as well as on performance management and benchmarking – all aspects related to their role as planners and strategists.

The soft skill CFOs use now and expect to use in five years time that is most important to them is that of leadership, with communication skills a distant second, both now and five years into the future. CFOs felt that the two most important hard skills for them now and in five years time are general business knowledge and trend analysis; and strategic planning skills.

Some of the tools and strategies that CFOs frequently employ at present to cope with the challenges they face are Enterprise Resource Planning (ERP) systems, hiring and developing the right talent, performance management as well as strong internal audit capabilities. Looking forward five years, the tools and strategies that CFOs expect to use most broadens in range to include Virtual (Fast) Close, ERP systems, benchmarking, robust standardised processes within the organisation, rolling budgets and forecasting, trending or predictive modelling, scenario analysis or what ifs, hiring and developing the right talent, performance management and strong internal audit capabilities.

As these CFOs find themselves at the top of the corporate ladder, their views will also inform the educational framework for chartered accountants who may be the CFOs of the future. The most important trends from comments respondents made on areas or skills that they had not been taught during their formal education and that they are currently using or may use in the future include –

  • business acumen and general business skills,
  • IT and its impact on the organisation,
  • leadership skills,
  • people management and interpersonal skills,
  • problem solving techniques, and
  • strategic planning and strategy formulation.

The full report will be made available to members.

Prof Dr Thea Voogt CA(SA).