Chief financial officers hone in on profitability

A recent study by Robert Half Management Resources shows that in recent years, many finance executives have shifted their focus from corporate governance issues to profitability.

Of CFOs surveyed, 25 percent indicated that the biggest change in their role in the last five years has been a greater focus on increasing profitability, according to results released in July.

Shifting attention away from corporate governance doesn’t mean any less scrutiny; rather, it indicates that governance is now established and systemized within companies.

“It’s still of high concern and it’s still very important, it’s just that we’re far enough down the road that it’s more in maintenance mode,” said Andy Bell, division director with Robert Half Management Resources in Creve Couer.

The survey also showed that 20 percent of CFOs are interacting with colleagues in other departments more frequently. Intensified communication with the CFO is driven by governance issues as well as the CFO’s growing role in operations, Bell added.

Meanwhile, an Aug. 1 article on www.cfo.com reported that chief operating officers are fading from the executive suite, and their duties are being picked up by CFOs, saddling them with more responsibility, liability and plain old blame if things go wrong.

Greater CFO involvement in operations isn’t a bad thing as long as the CFO “understands the core business and not just the financials,” said James Philpot, an assistant professor of finance and general business at Missouri State University.

His caveat is based on the example from the 1980s.

“Just because you understand finance and accounting and all that doesn’t necessarily make you a generic business expert capable of running anything,” he said.

“We saw that 20 years ago when we saw the end of all this go-go merger activity where companies had managements who thought they could manage anything and add value to anything. Some did, but it turned out a lot of them did not. More value was created later when they busted up,” Philpot added.

Growing responsibilities

Traditionally, the CFO job was pretty straightforward, Philpot said.

“I’m not going to say it was an easy job, but the tasks were pretty well-defined,” he said.

Duties included finding the least expensive, most effective ways to finance company operations, monitoring those operations to see that capital was used efficiently, making investment and product line decisions, and seeing that investors and owners received a fair rate of return.

“That’s all still there,” Philpot added, but in public companies particularly, “with increased emphasis on governance issues, increased emphasis on transparency and fairness to financial markets, (the CFO job) really has gotten to be more responsibility.”

For example, the Sarbanes-Oxley Act of 2002 essentially made financial executives personally liable for their companies’ financial reporting.

“If you want to be a chief financial officer now, you’d better have a lot of insurance, indemnification, bonding, that sort of thing to protect you personally in case someone that works for you makes a mistake,” said Walt Nelson, an associate professor of finance and general business at MSU.

Today’s CFOs also must be tech-savvy and have a close working relationship with the company’s chief information officer to meet regulators’ demands for data. At the same time, CFOs have to watch what they say about their companies, and to whom.

For example, “We have new regulations on disclosure. It used to be a CEO or CFO could talk to an analyst on the telephone, or to someone working for the Wall Street Journal or BusinessWeek; even a brokerage company could possibly get access and ask questions,” Philpot said. “Now, you have to be extremely careful because certain information can only be disclosed publicly, so they would actually have to call a press conference or something like that from a fairness perspective in the market.”

An emerging trend affecting c-level executives is that public companies are relying less on finance or investment committees and looking more to the executive committee, including the CFO, for decision making.

“You probably are seeing CFOs getting more decision responsibility than they used to have,” Philpot said.

The few, the proud

Not surprisingly, the CFO role isn’t for everyone.

Philpot said when he talks to students who are pursuing a financial management track, they tell him that “being a CFO is not a sexy job. It’s not like being an investment banker or a broker in a booming market,” he said.

But for those with the know-how and the nerve, “it’s still a great job,” Philpot said.

And the demand is out there. In recent years, the burdens associated with the CFO role have resulted in burnout and a high rate of CFO churn at public companies.

The U.K.’s Accountancy Age reported July 30 that one in six Fortune 1000 companies has no CFO, and of U.S. CFOs who left their positions, 30 percent retired, more than half left finance altogether and 20 percent moved within their current companies.

Changing duties

A recent Robert Half Management Resources survey asked CFOs which of the following areas their roles have changed most significantly in the last five years.

They said:

Greater focus on increasing profitability – 25 percent

Increased interaction with other departments – 20 percent

Expanded leadership of management role – 17 percent

More strategic planning – 15 percent

Increased focus on corporate governance initiatives – 12 percent

None/don’t know – 10 percent

Other/refused – 1 percent

Source: Robert Half Management Resources

Workloads weigh down finance, accounting pros

As top finance executives take on more operational responsibilities, workloads in general are a concern for finance and accounting professionals, according to a study by Accountemps, a temporary staffing service targeted to accounting, finance and bookkeeping.

Chief financial officers were asked, “Which one of the following do you think is the greatest source of work-related concerns for finance and accounting professionals?”

The results:

Heavy workloads – 35 percent

Job security – 19 percent

Corporate governance mandates/compliance issues – 17 percent

Personnel issues (such as co-worker conflicts, office politics) – 14 percent

Work/life balance issues – 11 percent

None of these – 2 percent

Other/don’t know – 2 percent

Source: Accountemps[[In-content Ad]]