5 Critical Ways the CFO Role Is Evolving

by Kurt Shintaffer

Today’s CFO must not be just a consumer of technology and enterprise applications but rather have a deep understanding of how digital products and services are driving competitive advantage and user engagement.

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In a recent conversation with one of our sales leaders, she told me about a meeting with the finance chief at a large customer who had changed his title to “Digital CFO.” She wondered what I thought of that. My response: it makes sense. While I don’t feel the need to put “digital” in front of my title, I understand why this leader wants to do so – to emphasize the shift in their way of thinking, understanding, and engaging with the organization. Digital transformation not only changed the role of the CIO, CMO and other leaders, it fundamentally impacted the role of finance.  

As I’m sure many of my peers reading this agree, the role of the CFO is not just about finance. In fact, depending on the organization, CFOs are responsible for technology, human resources, facilities, legal, enterprise planning and other broad organizational functions and strategies. Today’s CFO must not just be a consumer of technology and enterprise applications but rather have a deep understanding of how digital products and services are driving competitive advantage and user engagement.   

Specifically, the CFO must bridge from:  

  1. Financial Excellence to Operational Excellence  
  2. Financial Value to Business Value 
  3. Blocker to Enabler 
  4. Order Processor to Sales Champion 
  5. Technology ROI to Digital Expertise 

From Financial Excellence to Operational Excellence 

Traditionally, the CFO is responsible for managing the organization’s financial operations and bringing a strong level of financial discipline to all aspects of the business. This has not changed. Great CFOs bring a level of financial structure and support that allows the CEO and the entire company to successfully execute their strategic priorities.  

In addition, however, the CFO must go beyond excellence in the financial function to drive overall operational excellence across the company. For me, this starts with influencing and leading our overall enterprise strategic plan for the fiscal year. I believe CFOs have a distinct ability to bring prioritization, focus, and metrics to these plans, and then allocating capital across the business in a way that aligned to the strategic objectives.  

The CFO needs to force a discussion on business outcomes and Key Performance Indicators for every business objective. This not only ensures you are measuring your business against clear targets every month and quarter, but also drives greater accountability among your leaders. All leaders should be held accountable for organizational revenue and profitability metrics, in my opinion, as all functions have an impact on our ability to achieve financial targets.  

As the CFO drives operational excellence across the business, there is still a need to measure how the operational results translate to financial outcomes (you’re the CFO, after all). In the technology industry, many of us use the Rule of 40 as a guidepost for measuring financial outcomes. The Rule of 40, in simple terms, is when the sum of a company’s year-over-year revenue growth rate and its preferred profitability margin (e.g., free cash flow, operating income, EBITDA, etc.) is 40%. If the primary business objective is growth and you can do it efficiently, then this framework allows you to evaluate the trade-offs between investing in growth and driving profitability. As many CFOs find their business in a lower growth cycle, there is a need to drive operational efficiencies across the organization if the objective is to attain a certain “Rule of” metric.  

From Financial Value to Business Value 

While it’s critical that CFOs and their teams rigorously track and analyze financial metrics, we need to go beyond pure financial results to measure business value. Ironically, this translation from financial metric to business value or business outcomes is exactly why we founded Apptio 15 years ago. However, we were working with CIOs and technology leaders who needed to prove to the CFO and lines of business how technology investments helped achieve better business outcomes or save money. That is still needed, and today, this is a known model called Technology Business Management (TBM) along with its cloud financial management cousin, FinOps.  

CFOs are no longer passive bystanders of critical technology decisions but instead, they are front and center in these TBM/FinOps conversations and frameworks. This is because CFOs need to move beyond discussing costs to communicate the value of investments made in the business. As I noted above, these value drivers are not just top-line and bottom-line values, but values extending to the customer experience, human value such as sustainability and diversity, and values around resiliency and compliance.  

Our colleagues across the business will pay more attention to our near-term financial objectives if we also align them to business outcomes and the value drivers they perceive as most important to compete and win.   

From Blocker to Enabler 

If I had a dollar for every time I’ve heard, “The CFO blocked the purchase . . ." or “It’s tied up in Finance review.” In my experience, this happens when it’s not clear how a significant investment is aligned with the priorities of the business. Overcoming this dynamic is a shared responsibility between the CFO and their business partners.  

If the CFO leads a financial planning process that is tightly aligned with the company’s strategic priorities, the financial plan will capture OpEx and CapEx investments that support those priorities. The CFO then will know that unless the strategic priorities change, the budgeted items have been properly vetted. In that case, their role is to rapidly greenlight the spend that will allow the business to proceed with the value-creating initiative.  

But I recognize that there is no such thing as a perfect financial plan that runs unchanged throughout the year. The unexpected happens, curveballs come our way, and priorities must change. Then, for the business to move quickly, there needs to be a great partnership between the CFO and their peers in the lines of business. Both parties need to quickly reset priorities, agree on the trade-offs, establish a new plan, and return to running the business. CFOs have many qualities, but one of them is not a mind-reader, so collaboration with their peers is critical.  

From Order Processor to Sales Champion 

There was a time in my career when my biggest contribution to our selling efforts was billing the customers and collecting the cash. If that’s the only way you engage with Sales today, you’re missing an opportunity to add tremendous value to your organization. Today, my team and I are involved early and often. From sales pipeline analysis and forecasting at the early stage of the sales funnel, to deal structuring and negotiation at later stages, we seek to add value in a way that is unique to someone with a finance skillset.  

The CFO should embrace the role of product evangelist by deeply understanding your products’ value proposition and being able to articulate it credibly to many different audiences. I have noticed that because CFOs are generally viewed as objective and clear communicators, we have a unique opportunity to influence prospects or customers because we offer a contrast to the “salesy” nature of the sales rep. But you will only have the opportunity to make an impact with customers if you make it clear to your sales leaders that you want to contribute. Don’t’ stay is some imaginary “CFO lane” – you’ll add more business value by finding new “lanes” to operate in.  

From Technology ROI to Digital Expertise 

Back to my conversation with our sales leader about the Digital CFO. To be worthy of this new title, we must develop the knowledge to be a key contributor to the technology strategy of the business. Just as I need to understand our products to be a sales champion, so must I understand the overall technology market and the digital services we need to leverage to remain a market leader. With CIOs now often reporting to the CFO, finance leaders need to speak DevOps, governance, security and compliance, and multi-cloud infrastructure, etc.  

The digital CFO is now a consumer of Gartner or other industry analyst reports on technology trends, new innovations, and vendor rankings. Our reading list needs to include both the WSJ and the FinOps newsletter.  

The CFO Journey is Different for everyone 

Perhaps these five evolutions are just scratching the surface, but I think they capture the essence of how CFOs must transform themselves to remain impactful in a rapidly changing business environment. Every CFO is evolving in these areas at a different pace based on their organization’s scale, its industry, and in accordance with their own experience and abilities. That is okay. The key is understanding that our role has changed and it’s not going back. For me, that’s exciting. This is why I keep doing this job, because I’m constantly being pushed to transform and grow . . . even if my title stays the same.  

Kurt is the co-founder and CFO at Apptio.