The changing role of the CFO: what tech adoption and a widening remit means for financial leaders

By: Martyn Draper, Head of Finance Practice at Totum Partners

With Covid-19 pushing businesses ever more rapidly into the digital era, the role of the CFO is shifting considerably. Not only are they required to oversee the traditional responsibilities and functions of the role, they are also juggling a broadening brief including a range of new responsibilities, from tech implementation to talent development.

Post-pandemic, there is also a growing need to look to the future of finance and how this will change alongside progressing technological capabilities, which have become more crucial to business success over lockdowns. So, as organisations navigate these changes, the role of financial leaders is increasingly under the spotlight.

A growing emphasis on technology

It is no surprise that the coronavirus pandemic has put digital technology at the top of the agenda for business transformation. In latest research by McKinsey, just 11% of respondents said that their current business model could remain economically viable without adopting digital technology. 21% reported that they needed to embed digital technology into their current business model, while a staggering 64% felt they needed to build new digital businesses entirely.[1]

Financial departments are no exception to this trend. To gain a deeper insight into their evolution and future planning, Totum Partners recently surveyed CFOs and Finance Directors from among UK headquartered legal firms with annual revenue of £20m or more.

The findings make for interesting reading. Some 91% of business leaders expected that technology would be key to future business planning. In fact, over half of respondents cited technology investment as a key priority for finance functions over the next two years, while a further 87% of those interviewed discussed plans to invest in technology over this period.[2]

The findings also point to investment in new technologies and expertise. In particular, nearly a third are looking at robotics and artificial intelligence (currently used by just 5%) and 57% plan to invest in pricing tools (currently used by only 31%).[3] Further, almost two thirds of CFOs/FDs headquartered in the UK want to recruit for new roles in finance business partnering, pricing and business analysis.[4]

However, that is not to say that the traditional functions of the role are being overlooked. Maintaining cash flow, reducing lock up days, improving working capital processes and educating fee earners in financial hygiene all remained top priorities for the financial leaders interviewed as part of Totum Partners’ report.[5]

A role with many facets

Across professional services – and particularly in the legal sector – the finance function has become increasingly significant both for its size and influence on the wider firm. This is something we have seen in our research, but also first-hand through our client relationships at Totum Partners.

As their role develops from its traditional finance remit to also encompass business strategy and execution, finance leaders are expected to possess a far more rounded skillset. Now, both FDs and CFOs are being asked to take a view on every area of the business.

The CFO is also a board-level decision maker who inputs into all aspects of a firm’s strategic direction – an aspect of the role that shapes any CFO’s relationship with their wider C-Suite team. Indeed, 68% of CEOs feel people highly value the strategic insights of Financial Directors, while the 2021 Survey in Financial Talent cited the need for CFOs to step up and act as a strategic partner to Chief Executives.[6]

Financial leaders are also facing new pressure points around hiring, with increased competition for top talent. In our research, a third of firms reported plans to increase their headcount in an existing finance function in the next two years, with 9% planning as much as a 16-20% increase in the next year alone.[7] However, at the same time as growing their own team, more than a quarter of those surveyed cited concerns about competitors poaching existing team members.[8]

Planning for the future

Across the economy, the coronavirus pandemic has created uncertainty for financial leaders. When asked in Totum’s report about the biggest impacts of the pandemic, many respondents drew attention to familiar issues – managing staff wellbeing, adjusting to remote working and maintaining staff motivation – alongside more specific stresses. Strikingly, our research found the top challenge faced by leaders within the function was increased pressure from clients to reduce fees (76%).[9]

However, the pandemic has also been a moment of opportunity. While 42% of respondents cited the economic impact of the pandemic as one of the greatest challenges they currently face, even more (44%) felt the pandemic has had a positive impact on billing.[10]

So, rather than remaining stagnant, many CFOs and FDs are planning for the future – continuing to balance the traditional remits of the finance function while also embracing new commercial responsibilities underpinned by growing technology adoption. As much as that may yield new challenges, it will only increase the importance of well-rounded financial leaders in driving long-term business success.

[1] https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/the-new-digital-edge-rethinking-strategy-for-the-postpandemic-era

[2] https://www.totumpartners.com/developments-in-the-finance-function-highlights-from-totums-2021-report/

[3] Ibid

[4] Ibid

[5] Ibid

[6] https://economictimes.indiatimes.com/news/company/corporate-trends/cfos-need-to-step-up-and-act-as-strategic-business-partners-to-ceos-survey/articleshow/84820561.cms

[7] https://www.totumpartners.com/developments-in-the-finance-function-highlights-from-totums-2021-report/

[8] Ibid

[9] Ibid

[10] Ibid