Is the New CFO Really a COO in Disguise?
I went to two CFO events last fall: a panel for hyper-growth companies in Silicon Valley and a breakfast in Dallas for Fortune 500 CFOs. Each event had a different theme but the conversation at both ended up being the same: How the role of CFO is changing with the proliferation of technology and big data. In fact, the conversation was so much the same that I found my mind wandering halfway through the second event. That’s when it hit me: Most companies no longer need a CFO in their org chart. I know it sounds crazy, but hear me out.
When I came out of school, the main role of the CFO was to make sure the company had internal controls, that there was no fraud and that the financials were correct. The only forward-looking aspect of the job was helping set the budget and making sure people didn’t go over it.
That’s table stakes for what a CFO has to do now. CFOs today are being asked to use technology and data to grow the business, to give department heads better information to help them make smarter decisions and to help the company decide where best to invest incremental dollars or dial back spending. When I look at my job now, I spend a lot of my time doing that in three key areas.
Three Operations; Dozens of Questions
The first is “quote to cash”, which encompasses everything the company does to generate leads and make a sale. Automated systems are spitting out metrics all along the way, such as how much it costs to generate a lead and which lead generation programs are resulting in sales.
I’m called on to study the data and answer questions such as: Do we have enough sales reps? Do we need an office in Mexico? What does the pipeline in Salesforce.com look like? How is that going to translate into future revenue?
Then there’s the new product introduction process. Sales people in the field are coming back to product management with product and enhancement requests. Product management hands that off to engineering to build. Then they work with product marketing to create the materials that they’ll need to hand off to sales to take to market. That process is also driven by data: How many customers need a particular product or feature? Which ones will drive the most future revenue?
The third is what I would call post-sales support, which basically means customer support and/or professional services. Some of the questions that arise: Are we charging enough for the level of support that’s needed? Do we have enough of the right people? How efficiently is the group operating? How happy are customers? How many tickets are we averaging? Where are we falling down? It's metrics-driven, and information from that process feeds into the new product introduction loop.
COOs in Disguise
To do all that, obviously you have to speak the language of finance, but you also have to be deeply involved in operations. In fact, today’s CFO is more like a COO in disguise. As Sergio Monsalve, a partner at Norwest Venture Partners wrote last year in this publication, “Over the last decade, CFOs have been taking on more corporate responsibility and expanding their influence far beyond their original number crunching roles.”
That has certainly been my experience. Instead of closing the books and recording and reporting, I’m involved with these constant, circular loops of real-time information, all tied to money and investment. The most valuable thing the CFO can do today is look at these intertwined business processes, understand the metrics, give each business owner the right data and work with them as a partner to make the best decisions to drive long-term shareholder value.
The hardest thing to do as a CFO is this forward looking piece. You have to understand these three key operations and the data that's being generated from them in order to predict—and shape-- the future. That’s increasingly what the role is, and there’s so much overlap with what a COO does that it seems to me like having both is redundant.
The New Org Chart
So what does the CFO-less org chart look like? The record keeping and reporting function is still essential, and could be done by the controller, or chief accounting officer. Maybe you have a VP of operations, of applications, or a chief data officer. This person’s job is to pull all the systems together and manage the data flows. This is what the COO has historically done, but I think to fill the COO role today, you have to have the finance piece as well.
I see a lot of CFOs now who hold the COO title concurrently, and that makes some sense. But the COO title is the most accurate reflection of the role as it’s evolving, and it signals to everyone that this is the person that’s pulling it all together. The CFO title signals, “finance person”, because for a long time that’s what we were. But that’s not who we are now.
We’re rapidly leaving that behind for a role that's become much more complex and strategic. I think it’s only a matter of time before titles and org charts change to reflect that. In the future you may only see a COO and a CAO, and the CFO will have become a relic of the past.