20 Apr 2021
The CFO Talent Crunch
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For the past 15 years, we’ve been tracking CFOs from Canada’s top 100 publicly-owned companies. Here’s what the latest data tells us.
From back-office number-cruncher to strategic thought partner – the CFO role has never been more critical or more in demand. But there is a growing gap between what companies want in their CFOs, and their ability to recruit and develop these top finance leaders. In other words, Canadian organizations are facing a CFO talent crunch.
We have been tracking CFOs from Canada’s top 100 publicly-owned companies since 2004 – measuring key data such as tenure, diversity, career path, education and designation in order to better understand both the changing role and the path to becoming a top CFO. When we last published this study, we concluded that the growing demand for strategic acumen, transformational capabilities and balanced oversight of an ever-expanding portfolio made the CFO role one of the most demanding in the C-suite.
Fast forward five years and the demands and expectations of CFOs have grown exponentially. In our new CFO Talent Report, we interview CFOs, board directors and executives from top Canadian organizations like Celestica, George Weston Limited and Shopify to explore the key trends that forward-thinking boards, CEOs and finance leaders should be paying attention to.
The importance of succession planning
CFO tenure is at an all-time low of 4.2 years, so companies are replacing their CFOs more frequently than ever before. This shrinking tenure also sheds light on why more than 60% of CFOs were appointed internally in 2020 – the highest number in 15 years. Succession planning in the finance function – identified as a top talent priority by many of the leaders we spoke with – is becoming more critical than ever.
Mandeep Chawla, CFO, shared some insights on the internal talent management strategy at Celestica, a multinational electronics manufacturing services provider.
“By having successors in place for our key roles, we are typically able to manage turnover at the senior levels without needing to hire from the outside. Rather, we focus on bringing in outside talent into manager and director roles, so we can then develop those leaders and prepare them for senior roles when they open up.” Celestica has successfully promoted internal CFOs since 1994 when it separated from IBM – an impressive track record.
Gender diversity and equality are still a challenge
Despite Canada’s wealth of diverse talent in the finance and accounting profession — and the fact that at least 50% of the accountants entering the workforce are women — today, you will not find any female CFOs within the top 20 largest Canadian public companies and only two in the top 50.
Experienced board director, audit committee chair at Shopify and former TD Bank Group CFO Colleen Johnston told us, "I still see young women entering the workplace brimming with talent and confidence, and some of them wither a bit in the corporate world. If we truly want change, we need to look at the whole experience of organizational growth and what's happening there."
Organizations need to work hard to address these systemic issues; otherwise, their CFO talent pool will continue to shrink, as will the pool of future directors and audit chairs.
Growing demand for multi-industry experience
As the CFO’s role shifts and becomes more complicated, organizations need leaders who can bring external insight and are comfortable with change and innovation. Companies are seeking finance talent who can bring diverse perspectives and expertise to support and complement the CEO. As a result, today’s CFOs are increasingly drawn from different backgrounds and sectors.
According to our research, 36% of CFOs at Canada’s top 100 companies have experience working in multiple industries – up from 29% in 2009. At Odgers Berndtson, we are seeing more clients recognize the limits of recruiting from within one industry as organizations focus more on bringing in finance leaders who have dealt with significant business complexity.
Kay Brekken, audit chair of RATESDOTCA and former CFO of First Capital REIT, Indigo and Medical Consultants Network, believes that CFOs with multi-industry experience can offer helpful perspectives to growing organizations: "The pace of business has never been faster. What was important three years ago may be completely irrelevant today, so finance leaders need to pivot and be comfortable with ambiguity and disruption. I think the experience of switching industries during your career can help make leaders more comfortable managing transitions and transformations."
Accounting for the importance of a designation
Broadening the criteria for finance talent is also key to building a broader bench for the future. We already see a softening in the number of CFOs with a CPA designation – from 80% in 2014 to 71% in 2020. While a CPA still holds significant weight within Canada, organizations are increasingly focusing away from accounting skills and towards skills such as strategic thinking, leadership and the ability to drive business results.
Celestica CFO Mandeep Chawla believes that it is valuable to have a CPA as it confers a certain technical acumen level when dealing with critical stakeholders such as the audit committee and investors. Chawla shared that “those aspiring to be a CFO would be well served by having a designation; however, eventually it becomes table stakes as experience, business acumen and the ability to lead are the most important attributes to getting the role.”
Interestingly, the number of CFOs with post-graduate degrees has spiked in the past five years: more proof that the demand for strong strategic acumen is increasing. Today 35% of top CFOs have an MBA or other post-graduate degree, compared to 24% in 2014.
What’s next for finance leaders?
For finance leaders on the succession plan, having breadth across the finance function is critically important. Still, the key to maximizing your chances of making it to CFO lies within partnering with the business and supporting commercial/strategic activities. With nearly half (44%) of CFOs promoted from an internal divisional, analytical or another operational role, the data supports this trend.
To build acceptance and trust, aspiring CFOs must maximize access and visibility to senior leaders, including the CEO and the Board. Externally, gaining experience interfacing with shareholders and analysts and learning how to tell the corporate story will be vital to shortening the learning curve.
In short, companies without a succession plan to bring internal, diverse talent up through the ranks are risking the future of their leadership team — and their organization. They’re also missing out on the advantages of having a more diverse leadership team and finance function.