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06 December 2023

Understanding the role of CFO

By James Babb

What is in a title you ask? When it comes to a CFO, the answer is more than most organisations probably realise. As the abbreviation for chief financial officer, CFO is the title most closely associated with the finance leader of an organisation. Yet often it is overly used and incorrectly applied to other positions in the finance function such as financial Controller, Finance Manager, or Chief Accountant. That's not a problem, you may be thinking. However, on the contrary, it's a potentially huge problem, as you are about to find out if you read on.

As we are all acutely aware, the business environment around us, both regionally and globally, is undergoing rapid changes.

The terms and conditions for attracting and accessing local and international capital markets are being rewritten. Governance rules the day. In this reset world, the constituents of an organisation (bankers, financiers, market analysts, shareholders, board of directors, family members, governments, and regulatory bodies) need to know who is leading the organisation financially, what their responsibilities are and what their authority is to act thereon. When there is a lack of transparency with this regard, the organisation's financial situation could very soon be compromised.

With this in mind, any organisation should undertake a thorough review of the title held by its financial leader to ensure that it accurately reflects. Equating the title CFO with other positions results in an unclear (and misleading) description of that person's place in the organisation. Even more compelling is the fact that this indicates that an organisation's governance standards need improvement.

The four faces of the CFO framework: When an executive carries the title CFO it communicates that this person exercises financial leadership in the organisation through four key dimensions or "faces": Strategist, Operator, Steward, Catalyst.

When a CFO is active and eminent in their organisation in all four dimensions, they can be considered "the Real Deal". They are a trusted strategic advisor to the CEO and are recognised and authorised by the board of directors as the organisation's leader for corporate governance. They extract value from the finance function in terms of services and scale and are active stakeholders in any new major initiatives within the organisation. Other functional leaders actively seek out guidance from this person rather than avoiding them. They are skilled at conflict resolution as well as focusing alignment and driving value from the various functional elements of the organisation.

However, when a CFO is missing one or more of these four dimensions from their role, then they are more likely executing in the capacity of a finance manager or possibly even a chief accountant.

The following represents a number of possible such CFO profiles where there is a need for reconsideration:

The Ready and Willing – This type of CFO is qualified and capable of being impactful in all four dimensions but because "politics" is tolerated in the organisation, they are relegated to being active in only a couple of dimensions.

The Smooth Operator – This CFO is blessed with a silver tongue and manages to keep everyone satisfied through their gift of the gab and "yes man" persona.

The Historian – Like a tenured professorship, this CFO has "earned" the title through years of service as a book-keeper and administrator.

The Dictator – This CFO is all about "my way or the highway". Typically they are strong technically and in controlling activities but have zero emotional intelligence and alienate everyone around them in the process. 

- The author is CFO Programme Leader for Deloitte Middle East. This the first in a five part series of articles examining the current state of the CFO in the Middle East business environment. The views expressed are his own


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