CFO Stressors: Scope Creep

Editor's Note:This article is the fourth in the "CFO Stressors" series, exploring how the pressure of a slowing economy challenges seasoned financial executives.

Today, the CFO's role has expanded beyond accounting ledgers and Excel spreadsheets into areas such as human resources, cybersecurity, and customer service management. This expansion of responsibilities, while reflecting to some extent the natural demands of a changing economic environment on executive roles, has led some CFOs to believe, according to recent research, that they bear a disproportionate share of core work in the C-suite.

This "responsibility creep" has become a major source of stress for CFOs, especially against the backdrop that their core tasks—financial reporting and business narrative—have not diminished.

Three Archetypes of CFOs

"The CFO role is unique because it's almost like a nervous system running through the entire body. The CFO can see across the whole organization to make holistic decisions, whereas many other C-suite executives have defined functions and limited scope," said Kirk McLaren, CEO of Foresight CFO and author of "The Growth CFO's Blank Slate." Foresight CFO is a financial services firm that helps finance teams achieve high growth, and in his book, McLaren details the role modern CFOs should play in the macroeconomic and technological environment.

When and how exactly did the CFO's responsibilities expand far beyond finance? Wes Bricker, Vice Chair and Co-Leader of PwC's US Trust Solutions, noted that this role evolution has been underway for at least two decades.

Bricker believes that current CFO styles actually stem from three archetypes: the "accountability CFO," prevalent in the early 2000s during the Sarbanes-Oxley Act era; the "transactional CFO," prioritizing growth at all costs, more common from the 2010s to around 2020; and the "operational CFO," which is the current phase. Bricker said in an interview: "This type of CFO needs to connect different functions, address the talent war, and communicate with customers to manage inflation, while also ensuring the company prices its products appropriately."

However, when focus, resources, and priorities are spread across multiple areas, drawbacks emerge: the CFO must become a "jack-of-all-trades." Experts point out that a disproportionate workload and strained relationships with C-suite colleagues are two major stressors when CFOs venture into different domains.

Differences in the C-suite

According to a DataRails survey in April, 81% of CFOs believe they bear the heaviest daily workload compared to any other C-suite role. The survey polled 200 CFOs of companies with up to 500 employees, and results showed that 48% of CFOs said manual processes reduced time with family and friends, while 47% felt such work diminished their ability to participate in strategic decision-making.

About 37% of CFOs are dissatisfied with their overall output as CFOs, and nearly one-third (31%) admit that frequent spreadsheet operations make them feel weary.

Yet CFOs are increasingly required to make tough decisions in areas like human resources, information technology, and marketing, which directly impact the overall health of the enterprise. In the current volatile macroeconomic environment, combined with their inherent duties—backward-looking accounting, forward-looking cash management, and future-orientedfinancial planning and analysis(FP&A)—CFOs are under immense pressure.

Wave of Departures

This year and last, many CFOs may have chosen to "vote with their feet," and a surge in retirements seems to be driving turnover. Recent CFO departures include FootLocker,SalesForceand WW International.

Data from executive search firm Russell Reynolds shows that the CFO retirement rate has risen for the first time in three years, indicating that CFO turnover may soon increase. Since 2021 alone, the CFO retirement rate has risen from 45% to 52%. Meanwhile, the departure rate has recently declined slightly. In the first three quarters of 2022, the CFO turnover rate for S&P 500 companiesslowed to 14%, compared to 16% in the same period last year.

"CEOs and boards are signaling that perhaps it's time for a different type of CFO to tackle the challenges of the next phase. We see that CEOs and boards may believe new skill sets are needed," said Keith Meyer, CEO and leader of the board practice at executive search firm Allegis Partners.

He said the scope and scale of the CFO role has never been so broad, complex, or stressful. "In some ways, these CFOs are carrying a significant portion of the CEO's burden. In many cases, especially in public companies, external relations and shareholder issues flow into the CFO organization, and you feel that pressure at all times."

The expansion of responsibilities shows no sign of abating. A HighRadius survey of 150 mid-market CFOs in April found that in the coming year, 44% of CFOs plan to be more involved in talent recruitment and retention, 40% will be more involved in financial technology, and 36% will lead their organization's finance automation agenda.

Meyer said the CFO's to-do list will never shrink. "The list only grows; nothing is taken away, only added."

Compared to the expansion of other C-suite roles in recent years, Bricker said it "pales in comparison" to the expansion of the CFO role.

C-suite Internal Relationships

Finding a stable collaborative rhythm between the CEO and CFO can be tricky, making the CFO's job even harder.

"I think the biggest stressor for CFOs right now is trying to get the CEO's attention in a collaborative rhythm and ensuring the CEO follows through on decisions they need to make," McLaren said. He added that CFOs often have to raise issues that CEOs are reluctant to address.

McLaren also noted that CFOs need to gain the attention of other executive colleagues, which may push them into areas beyond the digital domain.

"When CFOs go beyond traditional finance—ensuring accounting and compliance are correct—and engage in processes like winning new customers and building talent capabilities, it gets more CEO attention than 'hey, come look at these financial statements.' But when the CFO-CEO relationship works, it's like a pilot and navigator; they can really accomplish a lot together," he said.

As the CFO's work permeates other departments, their C-suite peers mostly remain focused on their original domains. McLaren cited examples: the CTO still focuses only on machines, and the CHRO still focuses on narrow issues like legal and micro-aggressions, such as diversity, equity, and inclusion.

Talent issues have traditionally fallen under the CHRO's purview but are increasingly becoming financial issues, especially against the backdrop of a strong labor market.

CFO concerns about talent continue to rise. According to the "2022 Bank of America CFO Insights Report" released on November 1, 40% of CFOs last month cited talent shortages as the top business risk.

According to the Workhuman and Gallup employee well-being report released in October,quiet quitting(i.e., employee disengagement) alone costs the U.S. nearly $500 billion.

To mitigate the financial burden of talent issues, CFOs have had to incorporate people-oriented approaches into their responsibilities.

Trade-offs

When CFOs are stretched thin across areas like HR and IT, their core role of managing the company's numbers has not become easier. "This is where CFOs feel real tension," Bricker said.

"These CFOs must collaborate across the business in new ways. They need to understand cyber events and privacy, intellectual property, and talent, but at the same time, their responsibility for trusted numbers (at investor-grade quality) has never been under higher expectations," he said. "So, what's the trade-off?"