THE BLOG

From Chief Bean Counter to Rock Star - The History of the CFO

02/04/2015 11:58 BST | Updated 01/06/2015 10:59 BST

When Patrick Pichette, CFO of Google, posted a message announcing he was quitting his post to go travelling, the story became national news. In doing so, it illustrated the way CFOs have evolved from back-room figures to rock stars of the corporate world.

In the middle of the last century, the role of the CFO (or financial director, the title preferred by many UK companies then) was often straightforward, and sometimes anonymous. Finance departments were "a back-office function performed by treasurers or controllers, whose duties were confined to tasks like bookkeeping and preparing tax statements," according to one Princeton University paper.

Fast-forward half a century and the world has changed. CFOs are now making headlines, for better or for worse- sometimes both. Take Andrew S. Fastow, whose work as head of Enron's finance department won him both a "Professional Excellence" award from CFO magazine, and a six-year prison sentence for wire and securities fraud.

Neither is their role simple. CFOs are concerned with numbers, and thanks to big data, numbers are not in short supply: in 2013 Norwegian consulting firm SINTEF claimed that 90 per cent of the world's data had been generated over the preceding two years. There are now more numbers than anyone could hope to deal with.

So what does today's CFO do? To find answers we got four leading board members in a room and picked their brains. They were Sir Charlie Mayfield, executive chairman of the John Lewis Partnership; Jean-Marc Huët, CFO of Unilever; Keith Luck, finance and commercial director, strategic partnerships at Serco and CIMA President, and Charles Tilley, CIMA CEO and vice-chairman of Great Ormond Street Hospital.

At the end of the conversation, the respondents had broken the role of the CFO into four key tasks, and four key relationships. If you are wondering what your company's CFO does from day to day (or if you are a CFO yourself), the following should be useful:

Four key tasks

1) Financial security. The CFO's main job is the obvious one - ensure the numbers stack up. This is especially important as even profitable companies can go bankrupt if they do not collect the money in time to pay the bills.

2) Compliance and control. The CFO is ultimately responsible for ensuring a company follows the rules. This is a far more crucial task than it can sometimes sound: as part of last year's forex scandal, for example, the Financial Conduct Authority fined five banks a total of £1.1bn. Ignore compliance at your peril.

3) Strategic direction. Rather than just attending to the accounts, a good money man (or money woman) needs to be able to help steer an organisation. For instance, thanks to advances in computer modelling, the finance department can increasingly predict the financial effect of business decisions. It's a simple step from this to helping guide the decisions yourself.

4) Building capability. As well as looking after the organisation, the CFO needs to look after his or her own department, which means ensuring that staff and competencies are fit for purpose - both now and in the future.

Four key relationships

1) Above all, the CFO is a manager - as Jean-Marc Huët, put it, people are my primary responsibility." However, the CFO's managerial responsibilities are uniquely important because tone is set at the top of organisations. As the person in charge of compliance and reporting, it is vital that the CFO sets a good example through his or her own communications and management style.

2) The CEO/CFO relationship. CEOs tend to be confident people -Merrill Lynch head John Thain spent $1.2m redesigning his personal office during the 2008 meltdown, for instance - and CFOs need to be able to influence them. Skills required include persuasiveness, diplomacy - and knowing which battles to pick.

3) Management team member. The CFO should work with peers - particularly other senior figures such as CTOs, the head of marketing, and so on - to help run the company. Part of this role is to act as a filter, and determine what issues are serious enough to require being escalated up to the CEO.

4) Executive director of the company. Finally, the CFO is a board member, and has governance responsibilities. The CFO must ensure the right information goes to the board - but also bears part of the collective responsibility for ensuring the board functions well.

CFOs have come a long way from the relatively predictable role they played in the middle of the last century. But if they concentrate on these four tasks and relationships, they stand a chance of leaving on a high like Patrick Pichette, rather than a low like Andrew S. Fastow.

For more details, see CIMA's report on the subject.