CFO and finance function: what matters in value creation

Purpose: According to the CFO IBM Global Survey (2010) only few organizations (Integrated Finance Organizations) and only some CFOs role (Value Integrators) allow companies to generate value so to outperform their peers. Our research aims to gather additional insights on how the CFOs and Finance organizations effectively promote value creation in for profit organizations. Design/methodology/approach: Our research has been developed through the methodology of case studies. The method, despite its intrinsic limitations, offers a much deeper understanding of the organizational context within which value creation takes place. Our analysis is based on nine selected case studies of Italian industrial companies selected to assure comparability with the IBM sample. All companies outperform their peers. Findings: We observed that not only IFOs and value integrator CFOs support the value generation process. Our sample suggests a variety of other relevant and likely alternatives for value creation deriving from both FFs and the roles of CFOs. Our findings indicate that FFs adopt three distinct patterns to add value for the shareholders. The first option involves the FF taking the lead in setting a common language across functions, management processes, management and stakeholders. The second value creation pattern is when the FF establishes a strong and relevant support to business. The third option implies that the FF acts as an advisor assuring independent compliance. We also concluded that regardless of the CFO’s roles, influential CFOs are older, with a deep functional, company and industry experience. We also observe that some of this influence derives from “proximity” to shareholders, as all the more influential CFOs sit on the Board, enjoying a closer relationship with shareholders. Research limitations/implications: This study was based on clinical cases, the findings can be generalized reliably only for the population studied here. More research is needed for further tests and explorations of these findings especially in the area of CFO incentives and governance mechanisms. Practical implications: This research supports modern advice given to organizations in terms of the array of available alternatives to promote value creation with patterns and processes within the domain of the Finance organization and CFO’s personal characteristics. Social Implications: The paper contributes to untangle some gender issues, as we found that more influential CFOs are male. We also contributed to explain some dynamics of the "labor" market development for Finance professionals: we observed that the promotion for most influential CFOs comes through the ranks of a specific company and this questions if a market really exits for such professionals in Italy, and more generally in Europe. Originality/value: These results provide some useful support of prior findings and some modifications and extensions that further our understanding in this area of importance both to researchers and practitioners.