The Changing Role Of The CFO

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WITHIN THE NEXT FIVE YEARS, FINANCE WILL OPERATE DIFFERENTLY
Member of the Team that gives DIRECTION, comes up with strategy and evaluates the structural content of the organization.
NEW TOOLS:
JIT, CAD/CAM, ABC. ABMS, TQM, FMS, CI, TC
NEW MEDIUM:
Computers - PC- Networks - “The Virtual Close” - AA Instant Info
FLT ANALOGY SHOWS IN TROUBLE BUT NOT WHY; NO CAUSALITY

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  • CFOs are now sitting alongside CEOs in an advisory and strategic capacity. They are expected to possess extensive knowledge about how the business works and farsightedness to visualize its future and navigate it towards success. Besides the acumen to perform traditional number-crunching with ease, they are also expected to create corporate strategies and detailed working plans.
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The Changing Role Of The CFO

  1. 1. THE CHANGING ROLE OF THE CFO:BECOMING A STRATEGIC BUSINESS PARTNERCFO Alliance- BostonBreakfast Roundtable July 7, 2009<br />LAWRENCE P. CARR, Ph.D. PROFESSOR OF MANAGEMENT ACCOUNTING BABSON COLLEGE<br />
  2. 2. Full Size Half<br />Workers<br />Blue Collar/white collar Worker focus Knowledge worker<br />Longevity & seniority Rewards Performance<br />Functional hierarchy Structure Networked<br /> Large Scale Flexible<br />Organization<br /> Mergers & acquisitions Economic relationships Strategic alliances<br />Paper Communications Electronic<br />Formal plans Plans Visioning<br />Tangibles Value Intangibles<br />Mass Distribution Targeted<br />Management<br />Control Management Coordination<br />Multinational Competitive calibration Global<br />Support Information technology Enabling<br />1960 1975 1980 1995 2010<br />Today&apos;s Managerial Challenges <br /> Production Orientation Customer <br /> satisfaction<br />Industrial economy Transitional economy Information/service economy<br /> Period of “creative destruction”<br />
  3. 3. CHANGING VECTORS OF COMPETITION: Do the old tools still apply?<br />NOW<br /><ul><li>LOW LABOR CONTENT
  4. 4. COMPLEX
  5. 5. MOSTLY INDIRECT COSTS
  6. 6. SYSTEMATIZED
  7. 7. STRATEGIC MANAGEMENT
  8. 8. CONTINGENT-FLEXIBILITY
  9. 9. INTENSE GLOBAL COMPETITION</li></ul>BEFORE<br /><ul><li>LARGE LABOR CONTENT
  10. 10. SIMPLE
  11. 11. MOSTLY DIRECT COST
  12. 12. COMPARTMENTALIZED
  13. 13. SCIENTIFIC MANAGEMENT
  14. 14. OPTIMIZATION
  15. 15. MARKET DOMINATION</li></li></ul><li>THE CHANGING ROLE OF THE CFO<br />&quot;MANY TASKS ARE DONE TO SIMPLY SATISFY THE INTERNAL DEMANDS OF THE COMPANY&apos;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.“<br />The CEO wants the CFO to be “a Strategic Business Partner”<br />MICHAEL HAMMER & JAMES CHAMPY<br />
  16. 16. THE CHANGING ROLE OF THE CFO:What is your opinion? Circle your choice<br />FUNCTION Traditional----1-------2-------3-------4-------5-----Emerging<br />Overall Role Watchdog Analyst<br />Information Base General Ledger Integrated Database<br />Methods Full Cost Incremental, Direct Attributable Cost<br />Output Inventory Valuation Decision Support<br /> Financial Reporting<br />Frame of <br />Reference Historical Strategic<br />Style Autocratic Consultative<br />Orientation Functional Integrative<br />Skills Accounting Interdisciplinary<br />Organization Staff Team member, <br /> Liaison <br />
  17. 17. THE CHANGING ROLE OF THE CFO:<br />Where are you on the spectrum?<br />Traditional Emerging <br />A staff specialized in a hierarchy A team player, a partner<br />A data gatherer, score-keeper analyst A data gatherer, score-keeper, and analyst<br /> (more real time, more diverse data)<br />An interpreter of the past Concerned with the future<br />A commentator Focused more on recommending actions<br />A policeman Empowering & helping others<br />The bearer of bad news Accountable for team results<br />A preserver of the accounting system’s Customer oriented to serve both external &<br />accuracy and completeness internal customers<br />

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