Scope of Responsibilities
Defining the scope of a CFO’s oversight is challenging because it’s still evolving. Besides the overarching responsibility of overseeing and reporting finances, the role now often includes strategic planning, technology and investor relations.
New areas of reporting, including corporate social responsibility and environmental performance, are also being added. And in some companies, the CFO is even charged with overseeing the push into global markets.
A COO and head of merchandising and marketing all are focused on day-to-day operations, according to Chris Donnelly, global managing director of Accenture Retail, Chicago. The CEO needs help with the big picture, and “more and more, it’s falling on the CFO to be more involved in strategic and transformational thinking,” Donnelly noted.
Strategy can encompass mergers and acquisitions (and resulting store closures), possible overseas expansion and the monitoring of data security. A CFO’s direct reports also may change, including the chief information officer.
“While IT might not actually report to the CFO, it does affect the business brand,” Donnelly said.
If the CEO and board wish, the CFO could be the spokesman, also.
“If you’re a public company, you’re driven by what Wall Street says about you,” said Ellen Williams, senior client partner in Korn Ferry’s financial officer practice, Stamford, Connecticut.
With the CFO taking on so many new responsibilities, there may come a time when a COO may not be needed. Some firms are already eliminating the position, assigning the responsibilities to other posts, notably CFOs.
McDonald’s Corp. has handed off the duties of its retiring COO to two senior executives, including its CFO, who will now also oversee the global supply chain, development and franchising functions.
“We’ve seen reduction in the number of COOs in the last 20 years,” advised Bob Comeau, a principal with Deloitte Consulting LLP, McLean, Virginia. “It’s morphed into the CFO role.”
Expanding Role of the CFO
Strategist, adviser, communicator, futurist: Retail chief financial officers have seen their role broaden so much in recent years that, in some cases, they have become virtual partners with the CEO. Once responsible primarily for financial stewardship, the CFO is embracing a growing number of additional roles encompassing strategic planning, technology and perhaps even a bit of crystal ball gazing. Some are even taking on COO functions.
One thing is certain: CFOs are not just number crunchers any more.
“The old chief financial officer was primarily the guy with the numbers,” said Al Ferrara, a partner and leader of the retail and consumer products practice of BDO, Melville, N.Y. “Today, CFOs are much more a part of senior management.”
Increasingly, CFOs are taking on two new additional roles: strategists and catalysts, according to Alison Paul, vice chairman and U.S. retail and distribution leader, Deloitte LLP.
“As strategists, they are shaping the overall direction of a retailer’s business, working directly with the CEO,” she explained. “They are vital in providing financial leadership and aligning business and finance strategy to grow the business. As catalysts, they are taking on an additional responsibility of instilling a financial approach and mind-set throughout the organization to help other parts of the business perform better.”
SHIFT: The shift has been driven by a number of factors, including the financial crisis, competition, globalization, technological innovation, sustainability awareness, growing regulations and compliance issues.
“The role [of CFOs] overall during and after the financial crisis has hit an inflection point,” explained Chris Donnelly, global managing director of Accenture Retail, Chicago. “It was such an extreme event that it forced them into the forefront. [CFOs] are taking on more responsibility beyond accounting and cash management functions. They are taking on more strategic discussions.”
But this evolution may have been even longer in the making, as the changes in retail over more than two decades has increased the need for creative thinking and someone dedicated to looking at a larger, more strategic picture.
“Now [the shopper] has so many options,” said Ellen Williams, senior client partner in Korn Ferry’s financial officer practice, Stamford, Connecticut. “Twenty-five years ago, department stores were king. Then came specialty stores, then e-commerce. Now, with omnichannel retailing, companies have to be very strategic.”
PARTNERS: The best CFOs now are partners with the CEO, sometimes literally the person charged with looking forward, and anticipating challenges and opportunities as the CEO and COO deal with daily operations. The result is that the CFO becomes something of a bench coach, a sounding board for the CEO.
“The CEO wants to push product,” explained Bob Comeau, a principal with Deloitte Consulting LLP, McLean, Virginia. “The CFO figures out how to do it. Today’s CFO has to look at a strategy and make it so it can be financed.”
But the CFO also should also have the freedom to challenge the CEO, to push back on ideas while allowing the CEO to talk through ideas, noted Les Berglass, chairman and CEO of executive search firm Berglass+Associates, New York City.
“The business has changed so much,” Berglass said. “Great CFOs used to be expected to know all the answers. Today’s great CFOs are the ones who know the right questions to ask.”
The growing scope of the job also means changing the skill set of the men and women who hold the post. Where once an accounting or finance degree was essential, it’s possible that a CFO won’t even be a CPA at all. Schooling still matters, but even more important is experience in multiple areas, or running a business or division, even if that’s in another company — or industry.
As the CFO role continues to evolve, it’s only natural that, for some, it is becoming a stepping stone to the number one position, either in house or at a different company.
According to executive search firm Crist|Kolder Associates’ “Volatility Report 2013,” report, CEO hires with CFO experience rose to 22% in 2013, up from 13% in 2012.
Mobile Drives Holiday Forecast
It may only be October, but here’s a prediction: It’s going to be a high-tech holiday, and I’m not talking about the gift-giving part of it. (Although in a refrain I think will play out in countless homes over the next couple of months, my 20-year-old godson has told his family the ONLY thing he wants for Christmas is a new Apple phone.)
But the big story this year is likely to be retailers’ increased use of emerging technologies that bring the digital and brick-and-mortar worlds together. The main impetus for these efforts is mobile technology, according to market research company eMarketer, which specializes in digital marketing, media and commerce.
Naysayers of mobile like to point out that very few sales actually take place on a mobile device. They’re right. (eMarketer put the figure at 1.2% of all retail sales, during its webinar, “Holiday Shopping 2014 — Online Trends and Forecast.”)
But don’t be fooled: The influence of mobile’s impact on retail is much more significant than actual sales. A majority of U.S. smartphone owners in all age groups shop in-store with their phones. And eMarketer estimates that in the upcoming holiday season, mobile shopping (i.e. research) before or during in-store trips will influence between a quarter and half of all U.S. retail sales.
With more and more shoppers using their phones as part of the physical shopping experience, retailers will expand programs that make phones even more powerful shopping tools, particularly beacons and visual search.
“More than half of the top 100 retailers are actively working with beacon technology now,” said Rob Murphy, VP marketing at beacon provider Swirl, during the webinar.
Murphy predicted that at least several retailers will announce very large-scale beacon retailers to support their holiday campaigns. In fact, at press time Macy’s revealed it was rolling out beacon technology in 4,000 stores nationwide, the largest beacon deployment in retail.
Retailers are also seeing opportunity in visual search, which was pioneered by Amazon’s Firefly. eMarketer sounded a cautious note about this tool during the webinar, saying that until visual search can readily identify objects in the wild, and from different angles, it will not be embraced by shoppers.
The webinar also addressed one of the most vexing challenges retailers faced during last year’s holiday season: fulfillment. The takeaway: Shipping will remain a challenge this year, at least in part because shoppers increasingly expect quick and faster delivery. But retailers are turning to distributed fulfillment (shipping from stores), in-store pick-up and better coordination with shippers to help mitigate problems.
And while the holiday sales projections are just starting to come in, eMarketer was one of the first out of the gate with its forecast. Here’s how the digital research giant sees things playing out:
Total U.S. retail sales will increase 5.0% in November and December in 2014, an improvement over last year’s growth of 3.4%
U.S. retail e-commerce sales will grow 16.6% this holiday season, up from last year’s 15.3% increase.