"In December, an earthquake hit Taiwan," says Corning's Flaws, "and we had to rush out a press release letting investors know that our manufacturing partners weren't affected." That experience speaks not only to the impact that globalization has had on business but also to the astounding rise in the importance of…
Technology
Corning's rush to issue a statement regarding the soundness of its Taiwanese supply base doesn't merely reflect increased globalization, Flaws continues, but also "the speed at which information flows. The Internet didn't exist 25 years ago. Today it's ubiquitous."
And that, he adds, has profound implications for CFOs, because while the Internet provides a technological infrastructure of astounding power, flexibility, and reach, its very nature means that executives have "less time to think and reflect, and less ability to control" responses to events. The Internet has ushered in a new set of rules that CFOs have no choice but to follow.
"In 1985, I actually took typing classes as a way to get comfortable with computer keyboards," Burchill recalls. "Lotus 1-2-3 was a revolutionary development and I couldn't afford to miss it."
While perhaps no technology has touched the inner finance soul in quite the same way as the spreadsheet (even today, articles about Excel regularly rank among the "most read" on CFO.com), technology has dramatically reshaped the CFO role. Not only have CFOs had to acquire personal proficiency (in part to work effectively with a younger generation of finance staffers who have been immersed in technology since childhood), they also have had to gauge the strategic impact of technology.
Indeed, the turn of this century marked a wave of corporate reengineering driven by ERP systems — a movement that united technology with an increasingly finance-based view of the organization. Today, CFOs find themselves either overseeing IT directly or playing a critical role as adviser and approver, often to vastly expensive technology initiatives that continually defy a satisfactory ROI analysis.
What Lies Ahead?
Asked what things haven't changed since 1985, CFOs are quick to point to three things: economic uncertainty and its attendant impact on forecasting and risk management, the (mostly negative) impact of regulation, and the continued primacy of cost-cutting and process efficiency.
Those challenges, Graham suggests, constitute much of the "art" of the CFO job, and for that reason he says that the hypothetically long-slumbering finance chief who awakened in 2010 would be able to cope with the essence of the job "even if the technical changes would be very challenging."
Flaws agrees in principal, but notes that while regulations have always posed a challenge, the task is now much more difficult. "Many of the changes have been stunning," he says. "Now with Sarbox the CFO has personal liability for the accuracy of the financial statements. You have to disclose far more about compensation practices. You have Reg FD limiting what you can say when, and to whom. In 1985, we had far more freedom. Maybe not all of it was appropriate, but it was a far less restrictive climate in which to operate."
Nonetheless, he says, the best CFOs have the skills needed to adapt to any business climate. And he credits the previous generation with having one skill that many current finance chiefs lack (until last year, that is). "In 1985, we began a prolonged period of strong growth with only mild recessions," he says. "Many of today's CFOs have enjoyed a long period of prosperity, and I think in many respects a pre-1985 CFO might have handled this current recession better." (Flaws knows whereof he speaks: he became a CFO in 1997, but has seen Corning last out six recessions since he joined the company in 1973.)
Yet CFOs who did not have "navigating an extreme recession" as a résumé bullet point have since received so much intense on-the-job training that Burchill cautions that some may find it hard to change gears and help lead their companies' growth strategies.
As for how precisely these finance executives will lead, Duke's Graham suggests that while any lingering doubts about the strategic nature of the CFO's role have been put to rest, the position will continue to evolve. "Global competition and complexity," he predicts, "will drive more specialization, at least at larger companies. I think we'll see more C-level posts created, such as chief risk officer and chief accounting officer, with the CFO being more of an overseer and less of a doer."
Will that prediction come to pass? Will there be a FAS (or IAS) 1,000? Will our 50th anniversary issue be delivered as a hologram? We very much look forward to answering all of those questions, and many more. Thanks for reading.
Scott Leibs is editor-in-chief of CFO.
Never a Dull Moment
If complexity, globalization, and technological innovation represent three profound forces that have reshaped corporate finance over the past 25 years, three other close cousins also merit mention: volatility, risk, and the ever-quickening pace of change. Consider the Dow's astounding rise and fall from 1999 to 2001, the deregulation and reregulation of the banking/financial-services sector, and the scandals of 2001–2002 that gave rise to the Sarbanes-Oxley Act and CFOs' personal liability for the accuracy of financial statements. Even when an impending change posed far less risk than first perceived (think Y2K), the boom in ERP implementations that it fueled accelerated the digitalization of the corporation (and the finance department in particular) and further propelled changes ranging from e-business and data-driven decision-making to offshoring and telecommuting.
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