New research from Monash University has revealed the role of the Chief Financial Officer is widely ambiguous, and has a range of conflicting expectations placed upon it, relating to digital transformation, leadership, coaching and mentoring capabilities.
While a considerable amount of knowledge has been developed about different roles in finance and accounting, the understanding of the CFO role, which is arguably also the ‘chief business partner role’ in the organisation, is limited. As leadership teams focus on strategic and operational issues in a volatile and uncertain world, the CFO is expected to play a value adding role, but research suggests that the CFO might be challenged in fulfilling these expectations.
Associate Professor Paul Thambar, from Monash Business School, conducted semi-structured Interviews with 12 CFOs from Australia and Sri Lanka across a range of industry settings in both the profit and not-for-profit sectors, including mining, education, healthcare, pharmaceutical and financial services and professional services, over an 18-month period to explore the role expectations, role conflicts and role ambiguities of the CFO.
One element of the study found the CFOs interviewed envisioned their role as a leader and trusted adviser to the CEO and the broader organisation, and believed the core focus of the role is the dual balancing of controller-type tasks, for example, monthly financial reporting, cost management and business partner related tasks.
However, the study also found CFOs face conflicting expectations from senior managers, in particular balancing the role of controllership versus business partner, reporting information and analysis, managing budget and cost expectations and building trust between their role and the wider organisation.
“Faced with these conflicting expectations, CFOs used different mechanisms to manage
them,” Associate Professor Thambar said.
“For example, faced with the conflicting expectations related to balancing controllership and business partnering, CFOs focused on improving the quality and timeliness of the controllership tasks to build trust and confidence with senior and operational managers.
“When faced with conflicting expectations on managing budgets and costs, CFOs focused on the implications of any budget or cost issues and positioned these implications as a way of managing any conflicting expectations.”
The study identified a range of factors lead to conflicting expectations on the CFO role, including a lack of appropriate balance between controllership and business partnering; lack of quality in reporting and budget; and the absence of trust between the CFO and the wider organisation.
“CFOs identified building trust with senior managers and the wider organisation as an important aspect of managing role expectations. CFOs suggested building trust can lead to an improved understanding of the role and reduced role expectation-related conflicts,” he said.
The study found the CFO role also has ambiguous role expectations relating to digital transformation, leadership and coaching and mentoring.
“CFOs experienced these ambiguous expectations because their interlocutors, senior and operational managers held an expectation that they would be able to balance their controllership and business partner roles and provide support in emerging areas such as digital transformation,” Associate Professor Thambar said.
“However, the ambiguous expectations appeared to be broadly welcomed by CFOs who have used these expectations to build relationships and trust and to embed their role as a trusted adviser to senior and operational managers.
“For example, as early adopters of digital technologies in their organisations and using digital technologies to improve their accounting processes and data, they are able to improve their core accounting practices and provide information in a reliable and timely manner to support decisions. Through this process they are able to enhance their role as business partners and construct their CFO role as influential and valuable.”
The study, funded by the American Institute of CPAs and The Chartered Institute of Management Accountants, concludes that through the development of the business partnering role, CFOs have come to be viewed as dynamic and adaptable leaders who can also help organisations understand and navigate major strategic challenges such as digital transformation.
To view the whitepaper, please visit: The Chief Financial Officer (CFO): A study of role expectations, conflicts and ambiguity
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