Business Management zone

CFO an over-worked but endangered species

Finance directors are struggling to keep up with the increasing demands of their job and accept they do not have enough understanding of some of the wider issues their companies face, says a new survey of business leaders.

The survey , 'What's next for the CFO?', draws on the views of 251 of the world's most powerful business people. Although 97% of respondents acknowledge that the role of the chief financial officer has broadened, 43% cite regulatory and compliance issues as the main cause for their increasing workload.

Richard Sandwell, lead partner, finance and performance management at report sponsors, Ernst & Young, said the survey is the first to offer insight into the impact of new legislation and the regulatory framework.

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"What it shows is they're being forced to spend time on the control and governance agenda rather than what is wanted - being a business partner," he said.

The survey, respondents to which were equally divided between between Europe, North America and Asia, also showed an important difference between the geographies: European firms found board and audit committee created more pressure than regulatory and compliance. In part this has been the Euro-specific legislation like MiFID.

To an extent, the report shows a revolution of the wheel. According to Sandwell, in the mid-nineties the CFO was pushed into the role of business partner to the chief executive officer. As the scandals involving Enron, Worldcom and Parmalat rocked confidence, regulation increased and CFOs were sent back to watch compliance and keep a tighter rein on the figures.

Companies have been increasingly looking to finance directors to fulfil a strategic role and 35% believe they should be the business partner. The survey also discovered that 25% believed acting as custodian, managing financial and business risks, was next most important. Following that acting as commentator and providing board and audit reporting and forecasts gained 23% of the vote. Coming up last was acting as score-keeper, monitoring reports, results and tax gained 17% of the vote.

When the role was broken down, 65% opted for strategic partner as the most important focus for the CFO. At the same time, over a third of respondents agreed that the finance director does not have enough understanding of the wider strategic issues that businesses face, while in North America this rises to 50%.

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"The problem is that the CFOs acting as business partners find their strategic role better when expressed in financial terms, but seem to be disconnected when there is no mathematical extrapolation," observes Sandwell.

The research looked at how effective the collaboration was between the finance function and various business functions in the company. Naturally with treasury and tax issues they felt most happy, while IT and procurement also scored high. However, when CFOs had to interact with R&D, human resources or marketing, they felt relatively ineffective.

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The reasons behind this are manifold. Over the last 15 years according to Sandwell the cost of finance and the department has steadily dropped as a percentage of company turnover. "I'd say it's time to stop the cost reduction policy in the finance role and take some of that cash that has gone to implantation of SOX, for example, and spend it on the technology and people you've got," says Sandwell.

Anecdotally he can see improvements in one area but not all. He believes there are fewer disparate computer systems providing a consequent reporting mish-mash and more of an effort to glean business insight from better information systems but it was not there yet.

"The other thing is training and skills: many of the finance people feel there is little in the way of training plans and training in people skills rather than just technical qualifications is important," points out Sandwell.

However the survey raised other concerns as the accounting function of the CFO has reached a crossroads.

"I think the finance professional should be worried as there's increasing pressure to be pushed into a compliance box and the role of business partner will be taken by chief information officers or chief operating officers," warns Sandwell.