Editor’s note: Sergio Monsalve is a partner at Norwest Venture Partners.
The CFO has always served as a sounding board for CEOs — a person behind the curtain helping to make strategic financial decisions to drive the growth of the business. But today, the modern CFO has publicly emerged as not only a financial leader, but also a business leader. She is not just a number cruncher, but also a power player in the C-suite. No longer taking a back seat in business discussions, the modern CFO acts as a key driver for evaluating strategic opportunities for a business.
Uber, for example, is a company that hasn’t starved for attention, but has hit some serious hurdles for growth with competitors and legislation blocking the way. In just two short years, its former CFO Brent Callinicos helped to expand its global operations to more than 50 countries and oversaw more than $5 billion in funding.
Another example is Google snapping up former finance chief of Morgan Stanley, Ruth Porat. Porat has been known as a power player in finance for many years, and was recently considered for Deputy Secretary of the U.S. Treasury by President Barack Obama. This new hire for Google, which included a multiyear pay package valued at more than $70 million, highlights the fact that the intersection between business strategy and finance is becoming more central to the CFO position.
Callinicos and Porat aren’t the only ones fitting into this new role; according to a CFO Indicator survey from cloud corporate performance management company Adaptive Insights, more than half of the CFO respondents are expanding the role of their teams from number crunching to also include strategic business analysis (54 percent). This is an even higher priority for CFOs at $1 billion-plus revenue companies (70 percent).
The survey of more than 250 CFOs also showed that the majority of CFOs (76 percent) see themselves as a “navigator,” well equipped to guide their teams through fluctuating economic conditions.
All about the data
There’s been a lot of buzz about companies hiring a chief data officer, but now, many of those responsibilities are being handled by the CFO. Analyzing data has become more pertinent for the modern CFO as they guide their companies through market expansion, IPO process and overall growth. Access to real-time data has aided CFOs in becoming business navigators because they aren’t only focused on their prior experiences, but are able to forecast different scenarios in the road ahead.
For example, Zendesk, which provides integrated customer support portals, used cloud data analytics and forecasting to better manage and plan for growth leading up to and after its IPO process, which helped save the company time and kept all levels updated on its growth trajectory. BlackLine, a leader in enhanced finance controls and automation software, uses continuous, data analytics to help the company understand business performance, share insights with the global team and inform important decisions.
High-growth company, high-value CFO
The opportunity for CFOs to act as business leaders at high-growth companies is particularly strong. These organizations are aggressively tackling business issues, ranging from market adoption and product development to hiring and fundraising and are looking to financial leaders to act as business leaders in each area. Many CFOs are also expecting the high-growth market to expand. According to the CFO Indicator, more than 30 percent predict a record-breaking number of IPOs in the remainder of 2015.
For CFOs at high-growth companies, responsibilities go far beyond setting and managing financial fundamentals. These CFOs must fully understand the size and scope of the market and the potential growth opportunities. As a result, they are adopting business analytics, forecasting and sophisticated modeling to provide projections for the future.
One example of where this plays out is how CFOs can influence a company’s business model. For many technology sector companies, subscription-pricing models deliver the kind of predictable, recurring revenue that the market loves. By leveraging the power of data insights and analytics, CFOs can quickly adjust their business models by modeling certain scenarios and responding to different growth stages. For example, an emerging startup may experiment with a freemium model and transition to a paid subscription model as it gains more adoption.
Another area where the modern CFO is providing tremendous value is the relationship between the company and its venture capital firm(s). In the past three years, I’ve noticed the CFO taking a more prominent role in key areas of both the funding pitch process and quarterly board meetings. For a VC, this is a strong selling point and especially important for young companies that have raised a lot of capital quickly. These promising, fast-growth companies need a dynamic CFO early on to work with the board and executive team to determine how to strategically allocate capital across the business.
It’s clear that for the modern CFO, the job description now includes business strategist. These company power players are expanding their traditional responsibilities and tapping the power of data analytics to forecast and make strategic decisions to fuel business success. By providing company stakeholders with a holistic view of the entire organization, the CFO takes center stage and enables the executive team and board of directors to embark on a rapid growth trajectory.