Photo: Jamie Tenser
NRF Big Show: Has the CFO Role Become More Important in Retail?
At the NRF 2024: Retail’s Big Show, the CFOs of Macy’s, Rothy’s, and Levi Strauss shared a panel that discussed how the CFO role in retail has changed due in large part to the need to invest in technology to drive growth.
“The CFO role is very different than when I started,” said Harmit Singh, CFO and growth officer at Levi Strauss. “It was more about creating shareholder value. More about control. More about the glass half empty. Today, because we live in such an uncertain time and because things are evolving at a fast pace, I think the new CFO really needs to embrace technology and agility.”
Singh added that the CFO role must now also take into account ESG initiatives or “doing right for the world,” but particularly focus more on ways to drive growth. Singh said, “If you embrace growth, the CFO’s life is a lot easier.”
Dayna Quanbeck, COO and CFO at the sustainable-focused footwear brand Rothy’s, said that while the CFO role traditionally has been “defensive” and emphasized record keeping and news reporting, the duties now include “actually informing and driving strategy,” including capital allocation and risk assessment.
Quanbeck, who last week announced that she is stepping up to the role of president, shared that the CFO role now involves “a lot of hats” that often conflict with each other.
“We’re math people first and foremost, and you can’t stop the rational math person from thinking rationally,” said Quanbeck. “But sometimes growth is not rational, and you have to be willing to make those calculated risks, even when returns are unknown.”
The expanding CFO role is reflected in the fact that each of the executives on the panel had dual titles.
Adrian Mitchell, Macy’s CFO who added the title of COO in March 2023, said that as CFO, he works alongside the CEO developing enterprise strategy, partners across teams to establish financial and operational targets, and focuses foremost on capital investments and shareholder needs. Adding the COO function has given him a better view of day-to-day operations to help inform capital allocation decisions, particularly technology investments.
Mitchell said, “Being in stores and distribution centers and thinking about the capital allocation decisions for technology, you just have a much greater appreciation around the magnitude of changes that are necessary.”
The panel agreed that across the C-level suite, the CFO often has the optimal holistic view of the risks and benefits of strategies and investments, particularly uncertain paybacks such as GenAI.
Rothy’s Quanbeck said, “If you think about it, we’re just translating strategies into numbers, and taking those numbers and translating them back into strategies constantly every day until we retire. So, you’ve got to be thinking about risk as well to help the teams make the best decisions.”
Discussion Questions
How has the CFO role evolved in retail? What new duties and responsibilities are now expected from the modern CFO that weren’t historically?
Poll
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David Spear
VP, Professional Services, Retail, NCR
Jeff Sward
Founding Partner, Merchandising Metrics
We are going through a more constrained era when capital is scarcer and more expensive. As such, the CFO role is especially important in allocating resources to where the best return on investment can be made. Retailers have umpteen things to spend money on, and most need to prioritize. This necessitates the CFO being more involved in strategy and business planning.
The CFO role is now more complex and more important than ever before. The rise of advanced technology and digital commerce has changed the game. The insights shared in this panel are spot on.
Thr CFO role has evolved well beyond the manipulation of financial levers to deliver shareholder value. Today, CFOs need to think like COOs and often act like CTOs too. There is no one linear path to growth anymore.
As technology advances, business strategies that drive growth must advance too; whether that’s capital investments, acquisitions or even employee training. The CFO now has a hand in all of this. This broad knowledge makes their role even more valuable in the C-Suite with a pathway to President or CEO that has not historically been overwhelmingly cultivated.
The modern CFO position is considerably more complex than in the past. While tools are supposed to make jobs easier, the wealth of information provided by these tools demands a broad knowledge of the business.
The scope of the CFO is surely broadening. So is the scope of every other C-suite position. I am uncomfortable with the CFO/COO combination. Does one person look at the company with the same mindset when each should be generating questions and alternatives on how to solve issues and create value?
Technology has moved so fast over the past 5-10 years that every C-level role has changed, including the CFO. This has forced every executive to understand the impact of technology and what it should do with internal/external sources of data, i.e. distill insights that lead to new innovation, new ways of working, new revenue streams.
As tech spend increases, there is a lot more focus on ROI. So we’re seeing the CFO getting involved in both evaluating the business case, and often the final decision making process. And often signing contracts.This can be challenging for organizations who aren’t used to building out a business case with the same financial rigor as the CFO expects. It’s also challenging for CFOs who don’t fully understand the technology landscape. Both will need to evolve.
Finance is always more critical at times of economic constriction, like we’re in now. Becoming more well-rounded and exposed to day-to-day operations will make CFOs more valuable to the organization.
I really like the way Dayna Quanbeck, of Rothy’s expresses it. It really does boil down to “translating strategies into numbers”. It’s all about risk, exposure, upside and downside, and of course ROI. I’m lucky to have worked with CFO’s who were true business enablers and builders. The big ideas had to be translated into numbers and budgets. All the pesky real-life details had to be considered and included. Timelines. The collaboration required across different silos. CFO’s help big ideas become reality by pressure testing from an arm’s length point of view. That’s healthy and necessary. It usually boils down to how well the Left Brains work with the Right Brains.
All C-level positions are increasing in scope and with that comes a stronger need to collaborate across the entire operation. The days of low interest rates/easy money are (at least for now) over, and with that comes a requirement for prioritizing investment in the business in a more robust fashion than what we have had up to now. The COO and the CTO need to be fellow collaborators with the CFO, which in turn requires the CFO to have people skills on par with their financial skills.
Brave new world.
Retail is coming out of a “growth first” fever dream that drove many brands and retailers into bankruptcy. Today’s CFO has access to almost real time data on all aspects of store performance and customer behavior, making it easier to monitor and manage profit margins. It’s also become evident that technology will be ever evolving, so investment in innovation and unknown future upgrades needs to be a line item on any smart CFO’s operating budget. CFO’s must move from a monitor and control mindset into a more creative attitude that balances investor demands with operational realities and the ever changing expectations of the customer.
I’ve been around this industry for a minute, and I never met a CFO who didn’t have entrepreneurial aspirations….they simply want to be more than glorified bean counters. So is this new? Not really.
I also have to confess that when I was a CIO or Development VP, I wouldn’t take a job if the position reported to the CFO. Still, the CFO is, and always has been part of the operating committee that allocates funds. I think the role was actually bigger in the pre-SaaS days, when you chose between using Capex to remodel or open stores or make tech investments. Now, because it’s up above the EBITDA line, it’s more about expense management than Capex management.
Just one woman’s opinion.
There was definitely more emphasis on the accounting side of retail at NRF this year. Given the unique state of the economy, retailers are pressed to do more with less and to ensure cost savings are there in the right ways. I do see the CFO role having more overlapping duties with tech teams now than before as a result.
Typically, the value of the CFO role varies based upon the overall health (competitively) of the retail company, and performance of two critical functional business areas – Merchandising (inventory) and Store Operations (labor). If the retailer is PE owned, or struggling in their competitive segment as a business, the CFO role is critical, and mostly focused on cost-control measures, often trying to prevent a ‘death spiral’ with growth ambitions out the window. If the retailer is a contender or leader in their competitive segment, the CFO has a lessor important role as the organization focus is growth, and assuming Merchandising and Store Operations are doing well to infuse profitability into decision making.
By Q2 2022 it was apparent finance was driving retail strategy. As inflation and supply chain chaos squeezed profits, more retailers promoted B2B revenue drivers like retail media and logistics services to protect margins.
Retail CFOs are now more data-driven and creative at identifying how to grow the top line, cut costs and invest in tech like AI to support agility.
It’s no surprise by now that inflation has significantly impacted the retail industry and individual brands. As a result, the CFO role is more nuanced than ever. The modern CFO has to find the fine line of balance between minimizing expenses while ensuring that overall operations and strategy still support providing the customer with a quality shopping experience.
They need to be more in tune with what is happening across departments in a way that previous CFOs were not expected to be to understand how every small decision adds up to future financial outcomes. In particular, CFOs must be heavily tuned in to their tech team. The right technology investments can significantly improve overall ROI, despite upfront implementation costs. That’s because a long-term, well-built, composable tech stack can efficiently power operations, an efficient, high-quality customer journey, and be adaptable to future change and innovation. The level of technical understanding needed now is only a more recent requirement for the role.
Today, from CFOs to CIOs and CMOs, all have become well-versed in domains of technology (AI everywhere), supply chains (reshoring), and customer experience (data and insights). Additionally, the successful ones have developed an appreciation for developing initiatives with solid ROI and a sensitivity to external investors. There are more overlapping skills in the C-suite than decades ago when the head of each pyramid took a myopic “departmental” view of the business.
So, when (not if) the promise of the Metaverse kicks in, we’ll have a narrative around the magic of CMOs harnessing the power of new customer engagement and relationships or CIOs introducing radically new IT platforms to create the needed agility to compete in a new retailing business model.