07.12.2023 22.

18 The CFO role and responsibilities in today's world | McKinsey

What are the roles and responsibilities of a

CFO?
November 29, 2023

The CFO role was named for its original function of overseeing an
organization’s finances, but it’s now seen as a cross-cutting
common denominator linking every part of an organization.

C
FO may stand for chief financial officer—but long gone are the days when the
CFO’s purview was just finance.

Get to know and directly engage with senior McKinsey experts on the
role of the CFO.
Michael Birshan and Kapil Chandra are senior partners in McKinsey’s London office, Andy West is a senior
partner in the Boston office, and Kevin Carmody is a senior partner in the Chicago office.

For over a decade, McKinsey has conducted a biannual survey to take the global pulse
of people in the CFO role. According to the most recent survey, the role is rapidly
evolving. As their jobs expand, CFOs today have opportunities for leadership as never

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before—working together with C-suite peers, line managers, investors, and boards to
focus on performance and capabilities, rather than just numbers.

Read on to find out how CFOs can meet modern challenges, based on McKinsey
research and insights.

Learn more about McKinsey’s Strategy & Corporate Finance Practice .

What’s the core responsibility of a CFO?

For years, the simple answer was that the CFO leads a company’s finance function. But
the role has expanded tremendously. Today’s CFO is a key colleague across businesses
and functions, and is the CEO ’s strategic partner in maximizing value creation. The CFO
helps with shaping portfolio strategies, undertaking major investment and financing
decisions, and communicating with key stakeholders—all while leading a multitalented
and technologically savvy finance team. Communication is a key part of the role, both
with investors and boards. This goes beyond earnings calls: CFOs are responsible for
building credibility for the strategic direction of the company.

The CFO and finance team can also model good financial and team-building practices
for teams across the entire organization. This can include demonstrating to other teams
the linkages among individual, team, and organizational performance.

Another critical aspect of the CFO job is dealing with risk. Managing risks associated
with cash, capital, resource deployment, accounting compliance, and strategy remains
core to the role even as it expands into nonfinancial realms.

Congratulations, you’ve started a new job as

CFO. What are the first things you should

do?

No matter how long you’ve been working at an organization—or in finance—your first

day as a CFO is going to be a whole new ball game. McKinsey has developed seven key
mindsets and practices that new finance leaders might adopt to help ensure long-term
success.

Scope the challenge. CFOs should form an independent, fact-based view of the
resources, support structures, and activities that the organization has in place to create
value—as well as which ones actually do create value. Then they should make sure all C-
suite colleagues, business unit leaders, and the board of directors are aligned. This may

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be more difficult than it seems as leaders’ conclusions can be clouded by incomplete

information and biases .

Adopt a bias for action. A company can’t achieve or sustain a competitive advantage by
staying in place. The best CFOs are constantly looking for ways to create more value for
the competitive landscape of the future—not the present. They do this by committing to
innovation and allocating resources to digital transformation for all functions of the
company.

Make space in your portfolio for a few bold bets. This bias for action could yield some
big changes, even to core business functions. An effective CFO should make sure that
every aspect of the business is always on the negotiating table—and should always be
subject to a “grow or go” mentality. The best CFOs understand and communicate that it’s
a losing bet not to take any risks .

Teach and translate. The best CFOs focus on frank dialogue with the CEO, the board,
and the top team about the economics of the organization and clearly explain the
consequences of making various trade-offs. Communicating in a way that everyone can
understand means avoiding financial jargon. But avoiding oversimplification is equally
important.

Be proactive about risk. As we’ve seen, risk is necessary in business. But some risks
are outside the control of even the best-prepared executive. The effective CFO will help
their organization respond to crises and build up organizational resilience for the long
term. McKinsey research shows that the companies that fared best during the 2008
financial crisis were those that used a number of interventions to balance out
performance and position themselves for a strong recovery.

Think strategically about ESG. Environmental, social, and governance (ESG) concerns
should stem from an organization’s unique business model. At a minimum, companies
can use ESG to comprehensively consider ways to mitigate risk. Beyond that, the best
CFOs approach ESG as a growth play. McKinsey research shows that more than 80
percent of C-suite leaders and investment professionals expect ESG programs to
contribute more shareholder value in five years than they do today.

Pull together for talent. The best CFOs collaborate closely with their colleagues,
particularly the CEO and chief human resources officer ( CHRO ), to direct capital toward
attracting, teaching, and retaining talented employees.

Learn more about McKinsey’s Strategy & Corporate Finance Practice .

What role should CFOs today play in

innovation?

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Innovation is usually not an ideas problem. People at all levels of an organization have
plenty of ideas—they just lack the resources to see them to fruition. The challenge is
unleashing innovators by giving them the resources they need, including money, people,
time, leadership attention, and physical assets.

Innovation can also be a process problem. That means an innovation is only as good as
the process set up to accomplish it. CFOs are uniquely positioned to mobilize new
projects, because their success depends on their mastery of efficiency and productivity
— more so than other C-suite roles . Because the CFO signs off at each stage of a new
process, they are uniquely suited to help implement a stage-gate process toward
innovations.

That said, McKinsey’s CFO survey indicates that some employees perceive CFOs as a
barrier to innovation. A CFO can change these perceptions by recognizing and rewarding
a culture of innovation—not necessarily a culture of success. That means celebrating
people who take risks and demonstrate leadership, rather than celebrating only when
innovations succeed.

What role do CFOs today play in ESG

initiatives?

In the past, digital transformations were primarily about cost, so naturally, the CFO was
ultimately in charge. These days, however, digital transformations extend to ESG goals.
McKinsey’s latest CFO survey indicates that CFOs want to play a larger role in shaping
ESG programs and better align social and climate issues with the company’s overall
direction. And the data shows that when CFOs are engaged in ESG initiatives, they do
better: there is a 20- to 30-percentage-point higher alignment between ESG initiatives
and strategic goals when CFOs are actively engaged in ESG topics.

Learn more about McKinsey’s Strategy & Corporate Finance Practice .

How can CFOs go digital in the smartest

possible way?

You’ve heard that digitization is critical. But CFOs shouldn’t just go digital because
they’ve heard it’s the right thing to do. Instead, the most efficient CFOs take a sharp,
critical look at the costs and benefits of digital use cases. Instead of making decisions
based on what digital tools or systems are available, they should look specifically at what
their organization or function will need in the short and long term, and then examine the
costs and benefits of adopting digital technologies to serve those needs.

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For digitization to work, two key prerequisites should be in place: process

standardization for automation and a clear view on how automation benefits will be
captured. In many cases, automation also requires putting the proper data architecture
in place, which ensures consistency across all regions, functions, and key performance
indicators.

Why should CFOs be closely involved in

capability building?

Capabilities are the mindsets and behaviors an organization needs to reach and sustain
its full potential. Capability building—or developing the skills an organization needs to
succeed—are critical to overall performance. To thrive in today’s fast-paced
environment, leaders should treat capability building as a strategic weapon to create
competitive distance as well as to materially enhance employee well-being.

From a CFO’s point of view, low employee satisfaction can lead to low productivity, which
in turn can lead to low morale. That can quickly lead an organization into a spiral. To build
agility in the marketplace, organizations need to retain smart, strong people. To do that,
leaders should focus on building satisfaction.

To foster satisfaction, CFOs should serve as talent magnets and chief inspirers. They
should use data to identify skills gaps and allocate talent to fill them. Then they should
take a holistic mindset, teaching basic financial acumen beyond the finance function to
make the entire organization better attuned to what drives performance. Empowering
employees to do their jobs more effectively can increase satisfaction—and overall
performance.

According to a recent McKinsey survey, 64 percent of senior executives already support

employee capability building. But only 40 percent report that senior executives are
directly involved in providing opportunities for employees to apply new skills.

Learn more about McKinsey’s Strategy & Corporate Finance Practice , and check out
finance-related job opportunities if you’re interested in working at McKinsey.

Articles referenced:

“ Starting up as a new CFO ,” January 18, 2023, Ankur Agrawal , Michael Birshan ,
Christian Grube, and Andy West

“ In conversation: The CFO’s critical role in innovation ,” April 12, 2022, Matt Banholzer

“ In conversation: The CFO’s role in talent development ,” April 11, 2022, Kevin
Carmody and Meagan Hill

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“ In conversation: The new CFO mandate ,” April 8, 2022, Ankur Agrawal , Christian
Grube, and Meagan Hill

“ Going global: A conversation with Revolut’s CFO Mikko Salovaara ,” February 22,
2022, Vijay D’Silva

“ Mastering change: The new CFO mandate ,” October 7, 2021, Ankur Agrawal ,
Christian Grube, Meagan Hill, and Jacob Marcus

“ The CFO’s role in capability building ,” April 22, 2021, Rawi Abdelal, Kevin Carmody ,
Meagan Hill, and William J. Pearson

“ The one task the CFO should not delegate: Integrations ,” July 14, 2020, Ankur
Agrawal , Brian Dinneen, Edward Kim, and Robert Uhlaner

“ How the CFO enables the board’s success—during COVID-19 and beyond ,” May 20,
2022, Vivian Hunt

“ Reinventing the CFO for the digital age ,” October 25, 2019, Kapil Chandra and Matt
Stone

“ The evolution of the CFO ,” June 26, 2019, Ankur Agrawal and Priyanka Prakash

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