One of the most talked about trends related to the finance function in the past three years has been the changing role of the CFO. But it’s not just changing; it’s expanding. Deloitte calls this phenomenon the “exponential” CFO—suggesting not merely expansion but rapid expansion.
According to Deloitte, the exponential CFO has three objectives: accelerate value creation, drive enterprise-wide operational excellence and shape talent and culture. That’s a considerably wider remit than the one finance textbooks circumscribe.
But does the exponential framework square with reality? And how will technologies such as GenAI need to mature to give CFOs the room to augment their responsibilities?
Dennis Johnson has been CFO of Qlik since 2018 and, before that, served as the data management and analytics company’s chief accounting officer. Three months ago, the Philadelphia Business Journal named him a CFO of the year.
In a recent interview, Johnson discussed role expansion, his expectations for GenAI and the additional responsibilities CFOs could assume in the years ahead.
What does the expansion of the CFO role mean to you, and what changes have you witnessed at Qlik?
CFOs have taken on a broader role. We were brought in as arbiters of the many big decisions the pandemic spurred, like transitioning companies to work from home. We continue to be involved with optimizing operations as the workplace evolves and business priorities shift. On top of that, the regulatory environment has become highly complex. Responsibilities like reporting and compliance must be taken more seriously than ever. I’ve also found it essential to have contingency plans in place for various positive or negative scenarios.
Being an exceptional CFO comes down to leadership. I lead by example in a way that is agile and adaptable to change. The right approach and attitude go a long way.
What will AI’s most strategic benefits be for the finance function as its use cases grow in sophistication?
It depends on the type of AI being considered. For example, automation has been a part of my workflow and many other businesses’ workflows for years. It streamlines analytics for me, removing some of the manual, nonstrategic tasks while providing more precise, up-to-date insights into operations.
However, when considering new AI functions like GenAI, we are still in the exploratory stage. We know there are productivity gains to be had with routine tasks, but I am more interested in what additional strategic value it could bring to finance. Things like governance and risk management come to mind. Across the business, I’m keen to see what other operational efficiencies GenAI could drive.
With the expansion of the CFO role, which top- and bottom-line metrics do you pay attention to, and why?
To measure the top-line performance and momentum of the business, I pay attention to metrics that measure sales and customer success—annual recurring revenue (ARR) growth, gross retention and net retention. The bottom-line metrics that I focus on are EBITDA and margins since they accurately depict the business’s operational performance. We concentrate on ARR and EBITDA because they drive free cash-flow generation. To me, free cash flow is ultimately the most important metric. It encapsulates top-line growth and operational efficiency.
What are the biggest opportunities for CFOs and the finance function in the years ahead?
Much like AI is set to transform business overall, it will also significantly impact the finance function. Finance leaders who take the opportunity to jump in and learn all they can about the technology will be the best positioned. You can’t lead a business through a vast technological transformation like this one without understanding the technology and using it in your own practice.
The second area that seems poised to be an opportunity for the CFO is ESG. Many finance leaders have dipped their toes in, and some have resisted. Still, the market direction dictates that enterprise-level environmental and sustainability initiatives will become increasingly important, especially for investors. It is prudent for anyone in my position to rise to the occasion and help the rest of the C-Suite navigate this increasingly complex requirement.
Third, CFOs need a strong voice in corporate strategy, especially M&A. Qlik has been able to significantly increase its market opportunity and create shareholder value through M&A over the past few years, and that will continue to feature in our plans.