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Having worked and interacted closely with many Chief Financial Officers, we have developed a sense of what makes an effective CFO. No longer just a controller of finances, CFOs are increasingly called upon to play a strategic role in driving growth and corporate success. In this article, we distill the key traits that are indicative of an impactful finance leader.

Taking Step-Change Over Incremental Actions

Finance professionals are known for their propensity to be risk-averse. While this trait is not inherently negative, it can hold back CFOs who are prone to making small, incremental changes that may be insufficient to drive growth or meaningfully contribute to the strategic position of the company.

This is not to say that CFOs have to make bold, all-or-nothing decisions. In fact, the actions they take should be characterized by iterative decision-making. However, the vision they strive for should be far-reaching and elemental in nature. This includes asking fundamental questions such as how the company can achieve double-digit growth while expanding gross margins or how it can redesign its cost structure by employing AI and automation.

Indra Nooyi, the former CFO of PepsiCo, portrays this trait. Seeing that consumers were shifting towards healthier snacks, Nooyi championed Pepsi’s focus toward “good-for-you” brands by overseeing the $13.4 billion acquisition and integration of Quaker Oats in 2001, a departure from the company’s then core focus on carbonated soft drinks. The move not only boosted Pepsi’s revenue but also enhanced its gross margins due to Gatorade’s deep brand equity. Furthermore, the acquisition enabled Pepsi to diversify its revenue streams and enter the lucrative sports drink market to compete with Coca-Cola’s Powerade.

Thinking in Returns, Not Costs

Given that many CFOs were trained as accountants, it is not surprising to see that they have a tendency to think in terms of costs and not returns. This is particularly true in the public markets, where executives may be reluctant to commit to capital projects that come at a high cost and delayed returns. We believe that while a CFO should be fiscally responsible, they should also have the conviction to (or allow others to) pursue projects that are not strictly limited by financial constraints.

An example of this balance can be seen in the structure Steve Jobs implemented at Apple. Under Jobs, only one executive “owned” a P&L: the chief financial officer. By creating a system where only the CFO managed the budget, Jobs allowed functional executives to focus on their strengths without the constant pressure of financial scrutiny. Managers at all levels of Apple rarely had to provide financial analysis or defend decisions based on potential ROI. As a former marketing executive noted, discussions were never about dollars or expenses.

This approach meant that Apple managers and employees operated with significant creative freedom, much like talented individuals with access to unlimited resources. They were encouraged to pursue innovative ideas without being hindered by financial constraints, knowing that the CFO and Jobs himself were the ones monitoring the budget. This system fostered an environment where innovation thrived, highlighting the importance of strategic financial leadership that balances fiscal responsibility with the freedom to explore transformative projects. This balance is crucial for long-term success, enabling companies to invest in groundbreaking initiatives while maintaining sound financial health.

Strategic Problem Solvers

Lastly and perhaps most importantly, we believe successful CFOs are strategic problem-solvers at heart. While they are first-rate financial professionals, they have a mindset designed to seek innovative solutions to problems.

For instance, Greg Greeley, a finance vice president at Amazon, exemplified this approach during a critical time in 2002. Faced with the challenge of making Amazon’s holiday-season free shipping a permanent offer, Greeley proposed a solution that enhanced customer satisfaction while balancing cost management. Inspired by the airline industry’s segmentation strategy, he suggested offering free shipping only for customers willing to wait a few extra days for delivery. This approach allowed Amazon to control shipping costs by utilizing excess capacity in their shipping trucks, effectively segmenting customers based on their urgency needs. This innovative thinking led to the launch of Free Super Saver Shipping, which eventually evolved

into Amazon Prime, highlighting the crucial role of strategic problem-solving in effective financial leadership.

The role of the CFO has evolved from merely overseeing financial operations to being a strategic leader who drives growth and innovation. Effective CFOs are those who can balance fiscal responsibility with bold, strategic decision-making. They must embrace step-change actions with a far-reaching vision, prioritize returns over costs, and excel as strategic problem-solvers. By fostering a culture of innovation and committing to transformative projects, CFOs not only become key drivers of success but also enhance their effectiveness as leaders.