Getting the books right, making sure taxes are done properly, ensuring integrity and compliance, making sure effective controls are in place – those are givens for a chief financial officer (CFO). “And if you get it right, you get absolutely no credit,” Hugh Johnston, CFO of PepsiCo and a 1987 graduate of the University of Chicago Booth School of Business, said at Chicago Booth’s 59th Annual Management Conference May 20 at Gleacher Center.
But today’s CFOs do far more than the traditional “command and control” functions. Playing an elevated role in the C-suite, CFOs increasingly have duties that extend into corporate communications, government relations, and product development, as they increasingly partner with chief executive officers in guiding growth strategies.
During a panel discussion at the conference, four Booth alumni – all CFOs of leading corporations – shared their thoughts on the evolving role of today’s CFOs in a conversation moderated by Mark Zmijewski, deputy dean and Leon Carroll Marshall Professor of Accounting.
“You have to avoid falling into the stereotypical role of the CFO who always says no,” said Jay Rasulo, senior executive vice president and chief financial officer of The Walt Disney Company and a 1984 Booth graduate. “There are a lot of risks, but you have to resist the urge to see the glass as half empty.”
Rasulo told the audience that he “nearly never compromises decisions that create long-term value due to their implications on near-term earnings. And if the long-term value creation is going to affect the short term, it’s not my job to stop that. It’s my job to explain to the constituencies who care about short-term earnings why we made that decision, and the fact that it’s the long-term value creating solution.”
Rasulo emphasized the importance of communication skill in his work. “Roman Weil, the V. Duane Rath Professor Emeritus of Accounting at Chicago Booth, may say that ‘accounting is the language of business,’ but sometimes that language needs translation. And if you can’t translate the often-technical finance work, and make those leaps to actionable, understandable concepts to business leaders, you shouldn’t be the CFO.”
Judy Brown, executive vice president and chief financial officer of the Perrigo Company, highlighted the importance of adaptability in her role. Although her title hasn’t changed in five years at Perrigo, a leading maker of generic pharmaceuticals for retailers like WalMart, CVS and Walgreens, her responsibilities have changed dramatically, she said. In that time, Perrigo has tripled in size through organic growth and multiple acquisitions.
As Perrigo has expanded globally, Brown’s duties have evolved far beyond the traditional CFO functions to include operations, corporate communications, government relations, and partnering closely with the CEO to plot growth strategy. She likened the CFO’s role to the adaptability required in parenting. “You bring different sets of skills to different stages in a company’s development. You need to adapt to the needs of the moment, which can be very dynamic during a growth phase,” said Brown, who received her M.B.A. in 1998 from Chicago Booth’s Executive M.B.A. Program.
“A lot of what I do is assisting acquisitions, communicating were the company is headed, and ensuring clarity of direction at a time of rapid growth,” said David Anderson, senior vice president and chief financial officer at Honeywell International, Inc. and a 1977 Booth graduate.
Having served as Honeywell’s CFO during a period when revenues increased from $23 billion to approximately $37 billion, Anderson said communication skills and leadership ability are critical to his role, and building a pipeline of financial leadership is among the biggest challenges in a massively diverse organization. (Honeywell operates in four major business segments and does business in more than 100 countries.) “You have to be a visible leader across the full range of businesses and geographies,” Anderson said to the management conference audience. “You have to build the team, and the succession capability.”
Although the chief executive officer role has historically been more often filled with people from a top-level marketing and sales background, Rasulo from Disney said boards of directors are increasingly favoring leaders with CFO experience. In part, Rasulo said, this is a clear response to laws such as the Sarbanes-Oxley and Dodd-Frank Acts, which have created a need for financial leadership to comply with regulatory changes.
The CFO-to-CEO trend also may stem from the reality that value creation has become more data-driven, said Johnston from PepsiCo. “It’s not as simple as the brilliant executive who has a brilliant idea,” he said. “It’s more of a process.”
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