Reimagining the CFO Role

There has been a surprising number of articles written about the sheer difficulty—the loneliness and even impossibility—of being a college president. We often hear about how challenging other cabinet-level roles are, from enrollment officers to student affairs leaders. We’d like to nominate another position as among the toughest leadership jobs in academia: the CFO.

With the immense financial pressures placed upon today’s institutions, the chief financial officer role has rapidly evolved from one that favored the pragmatic tactician (typically a CPA or comptroller) to one that requires a highly visible, creative and visionary strategist. Today’s CFO must oversee more than just business and financial affairs and go well beyond planning and budgeting, investment oversight and other traditional tasks. They are charged with exploring new strategic partnerships, revenue streams, creative monetization of campus properties and even new business models. Sometimes they are charged with oversight of human resources, and along with that, the task of brand-building and talent development. They must exhibit acuity if not expertise in: facilities and real estate development; information technology, financial systems and learning platforms; legal affairs; labor relations; procurement/purchasing; campus safety; and even auxiliary enterprises such as housing, campus stores and food services.

One sitting CFO told us, “I’m the CFO you’re describing, but I don’t want to do it anymore. It’s a thankless job in the best of circumstances, but it’s unrewarding these days.” Reasons include the plummeting public perception of higher ed, declining enrollments, higher fixed costs and thus fewer resources, low morale within strapped finance departments, and lack of authority and efficacy in an environment where nonacademic leaders are still viewed with skepticism.

“The industry is going through a long-needed evolution, and I don’t know what the next iteration will be,” the CFO added. “But whatever it is, it’s going to take a lot of work to get there. Many of us are tired and not interested in the challenge. Those that are up for it might not have enough experience to step into the role yet.”

The CFO role needs an earnest re-evaluation and perhaps a makeover or a different title in some situations. We don’t pretend to have all the answers but would like to explore some of the challenges in greater depth, as well as present some suggestions for ways to help institutions reimagine the role of their current CFO and better prepare themselves to recruit their next one.

An Abundance of Challenges

We see a few key pressures weighing upon CFOs today, elaborating on the points above.

• Sheer scope of the role. The CFO’s docket has gotten so complex that it’s hard to expect one person to have the training, expertise and vision to immediately lead all the functional areas within their portfolios. Finance leaders who have cut their teeth in academia have not necessarily been empowered to think and act strategically for their institutions, while more strategy-oriented leaders from outside higher education may struggle to adapt to an environment that still values shared governance and tends toward slow, incremental change. Making matters worse, we’ve witnessed a wave of post-pandemic retirements that has diluted the community of experienced and qualified CFOs.

• Constraints of the role. While difficult, the position holds modest glory or recognition within an academic context. The CFO (along with the president, of course) is held accountable for the institution’s financial outcomes, but often their hands are tied in meaningfully influencing those outcomes. The main challenge tends to be shared responsibility for academic budgets, in which managers (i.e., deans or department heads) are typically not held accountable for results to the extent that they would be in the private sector.

Provosts typically hold the largest portion of the budget (academic personnel) and most fixed or sunk costs (tenure, health care, learning management and other systems, etc.), yet many of these costs are uncontrollable. The relationships between the provost and the CFO therefore can become strained when the CFO wants to see a balanced budget but the provost can’t contain costs and revenue growth is elusive.

CFOs can also feel frustrated in their efforts to improve operations or effect meaningful change. They create solid financial frameworks and paths for sustainability but then must rely on others to implement them, leading to a feeling of disempowerment.

• Lack of career pathways. The college or university CFO role is essentially a terminal position. For some leaders, this is perfectly fine as a career capstone. Many finance leaders we speak with, however, want more—or at least the possibility of more. Within academia, this could mean ascending to the presidency (which can be difficult to do without a Ph.D. and academic bona fides). Meanwhile, because the CFO role in academia is unique in its responsibilities and reporting relationships, these leaders may find it difficult to translate their skills and experiences to other sectors.

Recommendations

The following are solutions we think should be considered:

• Consider the appropriateness of the title. In some instances, chief financial officer may not be the most appropriate title. For many roles we like “chief business officer” as it implies a broader scope and import. (And some campuses may opt for both a CFO and CBO or a vice president for finance and administration.) Selecting a title that more aptly suits a given institution’s expectations for the role—chief business and strategy officer, for example—may help. In some institutions, “chief operating officer” is coming into favor, which conveys breadth but perhaps not the requisite strategic imperatives to succeed. We understand that the CFO title still has currency, but on some campuses it may not communicate the full scope and scale of responsibilities.

• Recruit for a different skill set. Prioritize skills and competencies that are central to today’s evolved role. They include things like diplomacy, change management, risk management, organizational design and effectiveness, brand awareness, and a healthy amount of essential skills such as strategic communications and collaboration. This shift also requires a reimagination of the recruitment process to factor in how the person has led in addition to what they have accomplished.
• Cast a wider net for candidates. Beyond the typical accountant or comptroller pathway, consider hiring those who have been the business officer in a large academic unit. These individuals have worked with faculty, principal investigators, deans, and provosts and are intimately aware of faculty needs and the impact of curricular and student life decisions on resources. Professionals in these positions end up gaining many of the critical skills needed for the CFO role (e.g., diplomacy, communications, strategy) but are often overlooked because they haven’t worked in a central office. And yet, CFOs who skipped a step in academic units may struggle to be truly conversant in academic affairs and student success—a major barrier to their effectiveness on a college campus.
• Create a route to the presidency. Given the current demands for alternate revenue streams, sophistication in talent development and brand, and creative monetization of property, it’s time for boards to consider an exceptional CFO as presidential material. With a more strategic, expansive role as defined above, boards are missing out on the very talent they need at this time when they overlook CFOs in their presidential searches. And on the other side of the ledger, when overlooked for the top job, CFOs may feel capped out professionally or move from institution to institution where the setting is new but the challenges are the same. One sticking point for boards (and faculty) is clearly that most finance leaders lack doctoral degrees and academic credibility. We suggest this should not be a deal-breaker. Where boards do hire CFOs as presidents, those presidents would do well to invest in a top-shelf provost who brings the academic bona fides necessary to lead the academic enterprise.
• Give the CFO authority befitting the role. Transfer a greater portion of authority to the CFO and academic department-level budget officers, especially in terms of when, why and how faculty positions are filled/refilled. Professional associations have focused on training CFOs to become data informed, but how can they make truly data-informed decisions when academic costs are immovable? Institutions that continue to deliver programs with little demand because they have fixed costs in their tenured faculty are hamstrung in making sound business decisions.

CFOs should be involved in examining the margins of academic programs. It’s hard for a president or provost to advocate for investing in, consolidating or eliminating programs without clear data and rigorous analysis. CFOs need to be allowed to step in and help their colleagues navigate these initiatives in order to take some of the blowback off their shoulders. This won’t make these decisions any less controversial, and it will ratchet up pressure on the CFO, but at least it involves the institution’s top finance expert in what are monumental, existential questions.

• Hire someone to oversee traditional CFO duties. The CFO shouldn’t be the one developing the budget, tracking expenditures and preparing financial statements. Their staff need to be able to competently do these tasks in order for the CFO to be a strategist, translator and change agent. Budget officers, controllers and other direct reports are the expert tacticians needed to execute the CFO’s strategic direction.

Chief financial officer has never been an easy job. It has gotten progressively more challenging, however, suggesting a need for re-evaluation of the role.