Dr. P.V. Viswanath
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Finance Chiefs Expand Roles
WSJ, Jan. 31, 2011, By DANA MATTIOLI
In the wake of the recession, more chief financial officers are expanding their role beyond finance.
Long seen as the overseer of a company's books, finance chiefs have been getting more deeply involved in business strategy, deciding where to invest capital and even looking at a company's product mix. They're also taking on new responsibilities: overseeing divisions like information technology, production, customer service and human resources.
The change comes as companies put more emphasis on controlling costs, seeking input from finance chiefs as the companies try to manage revenue growth more closely during a tentative economic recovery.
Nancy Cooper, finance chief of software developer CA Technologies, based in Islandia, N.Y., now finds herself at marketing meetings. "I'm working pretty closely with marketing people trying to determine where we'll spend money and what's the payback on it," she says.
Ms. Cooper says she sometimes has to pare what a marketing employee wants to spend on certain projects, which has generated more than a few eye rolls. But, she says, once she explains the limits on spending, employees usually understand.
While companies longed have groomed finance chiefs for bigger leadership roles by expanding their responsibilities, the recent trend is more about navigating through a shaky recovery.
For years, companies managed finance during long periods of upward growth. Now, in a time of slower growth, finance chiefs must think more creatively about how to create shareholder value, says Jeff Kotzen, a senior partner at Boston Consulting Group in New York. This requires a sharper focus on driving profitable growth through cost reduction, pricing and managing capital structure, among other things, he says.
"The attention being paid to financial health and strength of the business is greater than I've seen in 20 years," he says. "These are uncertain times."
The traditional financial role of the chief financial officer has intensified, too. Ms. Cooper says her forecasting is now centered more around scenario planning so the company can react to the increasing amount of fluctuations in currencies, market conditions and sales. The company's annual strategy is revisited more often, too, she says. "In light of things changing more frequently, you ask yourself what's the best outcome, and if things change, how would I manage through that," she says.
Typically, finance chiefs spent the bulk of their time on accounting, investor relations, financial planning and analysis. Now a different skill set is in demand, says Jeremy Hanson, a partner at recruiter Heidrick & Struggles International Inc. "There's a distinct need today for strategic CFOs because of the uncertainty of the economy," he says. Increasingly, Mr. Hanson conducts searches for chief financial officers who have run business units and had broader roles outside of finance.
During the recession, Earl Fry, finance chief of Informatica Corp., began supervising the data-integration company's customer-service and tech-support divisions, which together account for one-third of the company's revenue. That meant Mr. Fry went to having 450 employees under him instead of 250. Mr. Fry says the new divisions now account for between 10% and 15% of his time and likely are permanent changes.
Mr. Fry says he recently was involved in pricing newer versions of the company's products, working closely with development staff and the sales force to determine customer needs and price points.
Dave Evans, chief financial officer of Scotts Miracle-Gro Co., has taken on oversight of corporate strategy and business development, which was decentralized after the recession. "Strategy is all about how to deploy scarce resources," he says.
In 2009, hotel chain Marriott Resorts International Inc. appointed four regional finance chiefs for the Americas, Europe, Asia and the Middle East and Africa, to report to corporate Chief Financial Officer Carl Berquist. The changes highlight the need for companies to be more flexible in their financial planning, Mr. Berquist says. "The world is changing and operationally we need to be nimble."
Seventy-nine percent of respondents to a recently released Accenture survey of 1,054 senior finance executives, including about 600 finance chiefs, said they need more flexibility in their operations to more readily respond to ongoing market changes. "When we find ourselves in challenging business climates, the role of the CFO and the CFO's influence expands," says Paul Boulanger, global managing director of Accenture's finance consultancy.
Terry Lillis, chief financial officer at Principal Financial Group Inc. says there's more back and forth with different departments when making decisions.
"Before, it might be an email asking about salary increases and I'd say, 'Go ahead and do it,' " says Mr. Lillis, who has more departments reporting to him since the downturn. Now, he says, more of these meetings are face-to-face and options get heavier scrutiny.
Ms. Cooper, of CA, says she has meetings with department leaders in sales and development and other areas more frequently to hear their plans and how parts of their business are changing. "You listen to them and think of what it means for your financial model," she says.
For instance, CA is developing software for emerging markets like India, China and Eastern Europe. Ms. Cooper met with the group leader about these efforts and determined that the company would need to allocate more capital to development and new markets.