The U.S. Medal of Honor. (Photographer: Joshua Roberts/Bloomberg)

CFO Leaders: The Making Of Five Star CFOs 

The chief financial officer of India’s largest engineering and construction company, Larsen & Toubro Ltd., says he became CFO by default. A role, that R Shankar Raman says, ranges from book keeping and resource management to tracking safe man hours, building productivity models and, thanks to IoT, navigating a maze of machine-based data.

Shankar Raman spent 15 years of his career selling financial services. Starting 1994 he helped build L&T Finance Holdings Ltd. and was its first chief executive officer. Six years later he moved to the parent company and in 2011 was appointed its CFO. Getting out of that comfort zone was the most rewarding decision he took. “I did that when I was 40 and it is not an easy age to take such a call and switch”.

VS Parthasarathy also took a roundabout route - starting, in 2000, at automaker Mahindra & Mahindra Ltd. in human resources, then heading the information technology function and in 2013 making CFO. “I thought if ever I want to leave a legacy, then it should be a five-star CFO. One star being bean counter, three stars being a business partner and five stars is a value creating CFO.”

Like India’s Prime Minister, Parthasarathy has a penchant for acronyms. And rhymes. He describes the role of a CFO as A-C-E-S. Autonomous. Connected. Energetic/Empathetic. Shared.

Qualities that he propagates across the organisation.

When I came in 2013 as CFO, then I realised that I’m not leading an organisation of experts. I am leading an organisation where all skills will change in time. So, the first thing I did was create a finance academy. It meant acumen for all and excellence for the function. This kind of helps create an organisation which partners with others but also build skills based on learn, unlearn, not re-learn but again learn. Because it is going to be new kind of skills.
VS Parthasarathy, Group CFO & CIO, M&M

Expanding Role Of CFOs

Both CFOs are of course qualified chartered accountants but have had to draw on diverse skills to fulfil the changing nature of their roles.

A December 2018 McKinsey Global Survey of CFOs found that “the number of functions reporting to them has risen from about four to more than six.”

Source: McKinsey Global Survey
Source: McKinsey Global Survey

During Shankar Raman’s time as CFO, L&T substantially expanded its international operations and added international investors as shareholders. That required presenting the company in a “completely different light”, he says.

“For example, Environment Safety Governance (ESG) became a big anchor point for evaluating the company, not only from the point of view of investors’ acceptance or attracting premium, but also from the point of view of gaining customer confidence - as in how do they pre-qualify you. You are out in the world trying to compete with the best and so it is important that there are differentiators. The easiest differentiator would be price. We can say I am quoting the lowest and hence I should get the job. But the more difficult differentiator and sustainable differentiator would be how are you differentiated on your environmental concerns, how do you execute projects taking care of the socio-economic environment around you, how do you ensure safe operating conditions so that things shouldn’t blow up. Above all, how do you broadcast bad news first.”

ESG forced him to track things he never did in a finance role. For instance, the number of safe man hours. “Many times, we are asked how many million hours on a particular project, geography or client, have you been able to log without an accident? First it was just reporting fatalities or near fatal accidents. Then it started evolving into reportable incidents. We realised the entire organisation hated to report incidents because it sort of indicated that safety standards are low. So, we had to encourage the organisation to start reporting reportable incidents. We had to drop the threshold, so that people don’t feel insecure reporting reportable incidents.”

He lists several other challenges that have emerged in recent years;

  • Not just identifying risks but providing solutions, pricing risk and more importantly determining risk appetite.
  • Advocacy and leadership responsibilities.
  • Defining and measuring productivity.
  • Managing the flood of data—especially from intelligent machines. “CFOs today have too much data.”
The task however is that the basics cannot be forgotten. You cannot be carried away by all of these and forget what you are basically hired for in the organisation—which is to maintain financial hygiene, to make sure that the books are kept clean, to make sure that accounting policies are sustainable, the internal control systems and procedures work for you.
R Shankar Raman, CFO & Director, L&T

Focusing on people and their aspirations is at the core of all transformation, Parthasarathy says.

“Strilling, pulling aur feeling ke siva life me hai kya,” he quips.

Leadership Changes, Financial Stress And Balance Sheet Flexibility

But in moments of deep financial stress, managing people and governance can often become second priorities, says Kavita Shirvaikar. Shirvaikar earlied worked with engineering company HCC Ltd. and is now CFO at Patel Engineering Ltd. Both companies have undergone debt restructuring.

“One thing I have learned in this period - that maximum learning is in stressed period. That’s my experience. Let me be frank. Too much corporate governance, but now the focus is on survival of the organisation. My focus was on whether my organisation is surviving or not and then think of employees at large.”

Sameer Kamath, CFO of Avendus Capital posed a different challenge - the trade off between growth and return on equity.

“Many times we have seen that when we have excess capital, that also is a big problem. When you are capital starved, you tend to be more judicious. When you have excess capital and when it starts hitting your ROE (return on equity), because the business does not consume capital and you can’t dividend out much, that’s when businesses land up making wrong decisions. Because you move out of your comfort zone, you look at areas which are adjacent and outside your core competence.”


Watch this video on the challenges facing CFOs today.

The Future Role Of A CFO

Much may change in the future but maintaining a ruthless focus on ROE will always be critical for success, says Parthasarathy. That is the first theme he lists when talking about role of a CFO in the future.

“Five themes - I will call them Yield, Climb, Unmix, Fable and Prime.
Yield is ruthless focus on ROE because, unlike whatever you have seen in the past, the future is going to demand much bigger things. So, I call it - less input, input later and more output, output sooner. It is a very simple way to communicate the ROE need. Climb is for scaling up and investing in the future. Fail fast and move right.
Unmix is very important - it is simplicity. We have made ourselves very complex now. If we continue (like this), we will die. So, the next 10 years is about simplicity. Look at simplicity. Axe the complex as that slows down the pace dramatically, and the future is of those whose are agile.
The fourth is fable. Think of a CFO as a bard of the company. Each one of you needs to be a bard and sing, not just about the company’s performance but about governance. That is what will get us ahead.
Prime is - compliance as a rulebook and governance as gospel - because that will not change.”


Crashing timelines will be the biggest risk in coming years, counters Shankar Raman.

CFOs have to accept the limited shelf life of a business model now. So, keeping scenarios planned for a shorter length of time - that will be biggest challenge. It crashes the payback time for anything that you do. That will change the mindset to invest or take risk. According to me, crashing timelines and the ability to deal with that and fashion decisions around it and hence transform not only their function themselves but the ecosystem around them is going to be the biggest task.
R Shankar Raman, CFO & Director, L&T


The future role of CFOs? Watch to find out:

CFO Leaders is a knowledge and experience sharing series to engage the best financial leaders, understand their approach to conventional challenges, such as capital allocation and risk control, and new challenges such as rapid tech changes and a narrowing world.


Also read the next two stories in this series;

The Art Of Capital Allocation and Mapping and Pricing Risk

Watch the full CFO Leaders - Episode 1.