Global leader in executive search, Odgers Berndtson, released a new report today examining the changing nature of the CFO role and issued a set of recommendations on what companies and finance talent must do to successfully deliver on this new mandate.
The report, Developing the CFO of the Future: The Changing Role of Finance Executives in Leading Canadian Companies, was unveiled in conjunction with Rotman Executive Programs at the University of Toronto at the launch of the Business Leadership for Finance Executives Program, a program designed to help bridge the skills gap for current and aspiring CFOs.
“What the world has seen is a major shift in the demands of the CFO – best in class companies are investing and growing their talent to meet these demands,” said Ross Woledge, CFO and Financial Officer Practice Leader at Odgers Berndtson in Canada. “It’s no longer just about the numbers. To succeed, CFOs need to serve as true business partners to the senior team in driving value and growth while playing the role of the sceptical optimist in the boardroom. We believe innovative leadership and career development vehicles can play a critical role in building this acumen.”
Leadership skills and business acumen are vital to the CFO role yet fewer are bringing MBAs to the role
Companies are on the hunt for CFOs that demonstrate strong business acumen, but the key to building this skill from within is to involve finance leaders in decision-making early on.
Hugh Arnold, Adjunct Professor of Organizational Behaviour and HR Management at the Rotman School of Management, is surprised by the fact that the number of CFOs with MBAs has declined over the past 10 years while more professional designations are on the rise. He sees this as counterintuitive to the critical training top CFOs require to successfully grow and lead businesses.
“While the majority of CFOs require incredible technical expertise, these skills alone do not equip them to be successful,” explained Professor Arnold. “Based on what we’ve learned from the advisory board, there seems to be an unspoken 80/20 rule in the C-suite. Only 20 per cent of the success of a CFO stems from having strong financial skills. The remaining 80 per cent is a result of leadership skills, which is what our new program will cultivate in rising finance talent.”
Gord Nelson, CFO, Cineplex Inc. believes it is the development of these leadership skills and big-picture thinking that has driven the role of the CFO into that of an esteemed business partner to the CEO. Nelson explained, “A decade ago, you would be walking down the hall and executives would turn the other way. Now the CFO is a value-added partner.”
Balance of skills and a diverse experience in their careers propel CFOs to the top
George Weston’s President, Pavi Binning believes in moving finance talent around the organization to develop a broader view on the business and ensure well-rounded professional competence. “Organizations need to be prepared to move their talent into different roles. While at Diageo, I had a 12-month sabbatical in our investment bank to develop my capital markets skills.”
As is the case with Binning, the report also revealed that executives with finance leadership experience are increasingly moving into the President role. In 2004, only 14 per cent of CEOs had served in an executive position within finance but by 2014, that number had risen to 22 per cent.
Finance Executives must develop political and communication skills earlier in their career
CFOs face greater scrutiny as it pertains to their biggest responsibilities — governance and accountability. Yet CFOs have had limited opportunities to liaise with external audiences like investors, analysts, suppliers and the media to establish trust and confidence in these relationships. Companies need to expose their future finance leaders to these external stakeholders early on, giving them the opportunity to hone their communication and political skills. Audit Committees also have a responsibility to ensure senior members of the finance team have an opportunity to present on key issues and initiatives, a fundamental requirement for success as a Chief Financial Officer.
CFOs groomed from within a company remain in the role longest; financial services sector leads in promoting CFOs from within
The report revealed that internal candidates tend to last longer in the CFO role — six years versus 4.8 years for external hires. From an industry perspective, the financial services sector leads the way in growing CFO talent internally. In 2004, 40 per cent of CFOs in financial services came from outside of the organization, compared to only 14 per cent in 2014. This is not surprising given the specialized nature of the industry and the challenges associated with bringing in talent from another sector. In contrast, retailers are most likely to recruit external candidates — even from outside the industry — with 80 per cent of retail CFOs having had experience outside of retail.
Strategic leadership and relationship building skills differentiate top CFOs
Contrary to general perceptions of control-oriented executives, the report found that leading global CFOs are strong relationship builders who aren’t afraid to step into the limelight, and who place a premium on innovation and new business thinking. “Not only are top global finance executives competitive and driven to succeed, they are also highly flexible, entrepreneurial and excellent at dealing with their Board or colleagues in the C-suite,” said Eric Beaudan, Global Leadership Practice Director, Odgers Berndtson. “They have the ability to inspire their teams to take bold action.”
About the report: Developing the CFO of the Future: The Changing Role of Finance Executives in Leading Canadian Companies
The report was developed using a three-part research process. Odgers Berndtson first examined the top 100 public company CFOs in Canada over the past decade, analyzing trends on how leading companies fill this position. They then examined the personality and leadership traits of close to 300 high-performing CFOs and Finance Leaders. Finally, in partnership with the Rotman School of Management, Odgers Berndtson conducted interviews with some of Canada’s most accomplished executives across the globe, including Board Directors, Chief Executive Officers, and Chief Financial Officers.
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