The Changing Role Of The CFO

THE CHANGING ROLE OF THE CFO:BECOMING A STRATEGIC BUSINESS PARTNERCFO Alliance- BostonBreakfast Roundtable July 7, 2009
LAWRENCE P. CARR, Ph.D. PROFESSOR OF MANAGEMENT ACCOUNTING BABSON COLLEGE

Full Size Half
Workers
Blue Collar/white collar Worker focus Knowledge worker
Longevity & seniority Rewards Performance
Functional hierarchy Structure Networked
Large Scale Flexible
Organization
Mergers & acquisitions Economic relationships Strategic alliances
Paper Communications Electronic
Formal plans Plans Visioning
Tangibles Value Intangibles
Mass Distribution Targeted
Management
Control Management Coordination
Multinational Competitive calibration Global
Support Information technology Enabling
1960 1975 1980 1995 2010
Today's Managerial Challenges
Production Orientation Customer
satisfaction
Industrial economy Transitional economy Information/service economy
Period of “creative destruction”

CHANGING VECTORS OF COMPETITION: Do the old tools still apply?
NOW

LOW LABOR CONTENT
COMPLEX
MOSTLY INDIRECT COSTS
SYSTEMATIZED
STRATEGIC MANAGEMENT
CONTINGENT-FLEXIBILITY
INTENSE GLOBAL COMPETITION

BEFORE

LARGE LABOR CONTENT
SIMPLE
MOSTLY DIRECT COST
COMPARTMENTALIZED
SCIENTIFIC MANAGEMENT
OPTIMIZATION
MARKET DOMINATION

THE CHANGING ROLE OF THE CFO
"MANY TASKS ARE DONE TO SIMPLY SATISFY THE INTERNAL DEMANDS OF THE COMPANY'S OWN ORGANIZATION. THEY HAVE NOTHING TO DO WITH ADDING VALUE - PRODUCT QUALITY - SUPPLYING THE PRODUCT AT A FAIR PRICE OR PROVIDING EXCELLENT CUSTOMER SERVICE.“
The CEO wants the CFO to be “a Strategic Business Partner”
MICHAEL HAMMER & JAMES CHAMPY

THE CHANGING ROLE OF THE CFO:What is your opinion? Circle your choice
FUNCTION Traditional----1-------2-------3-------4-------5-----Emerging
Overall Role Watchdog Analyst
Information Base General Ledger Integrated Database
Methods Full Cost Incremental, Direct Attributable Cost
Output Inventory Valuation Decision Support
Financial Reporting
Frame of
Reference Historical Strategic
Style Autocratic Consultative
Orientation Functional Integrative
Skills Accounting Interdisciplinary
Organization Staff Team member,
Liaison

THE CHANGING ROLE OF THE CFO:
Where are you on the spectrum?
Traditional Emerging
A staff specialized in a hierarchy A team player, a partner
A data gatherer, score-keeper analyst A data gatherer, score-keeper, and analyst
(more real time, more diverse data)
An interpreter of the past Concerned with the future
A commentator Focused more on recommending actions
A policeman Empowering & helping others
The bearer of bad news Accountable for team results
A preserver of the accounting system’s Customer oriented to serve both external &
accuracy and completeness internal customers