This article was first published in the October 2013 International edition of Accounting and Business magazine.
Are all bets off when we consider what the future CFO role will look like, and the career experiences that will equip the CFOs of tomorrow with the skills, experiences and capabilities they will need?
ACCA and IMA (Institute of Management Accountants) explore this question in one of the largest-ever global studies of current and future CFO career paths. The conclusions are set out in a new report, Future pathways to finance leadership, which looks at the career routes that current finance leaders have taken, and at their views about future career journeys, addressing the critical question for those seeking to join the next generation of CFOs: how do I get there? More than 750 CFOs, finance directors and C-suite finance leaders were involved in the survey.
The bottom line is that optimal career experiences are already being defined, a reflection of how the role of today’s finance leader is changing, as well as broader technological, social and economic trends impacting business and the finance function: faster business change, rebalancing growth across markets, the changing footprint of the finance organisation, and the proliferation of information and data.
Traditional linear routes through the finance function to CFO are applying less, and new stepping stones are gaining importance. As the CFO role rebalances between its traditional stewardship responsibility and the finance leader’s role in helping the organisation create value, so the capabilities and skills that must be brought to bear will change, as will the career experiences of value. Not that the finance leadership rulebook needs to be entirely rewritten: our research reveals this is a story of evolution, not revolution. So what are the words of wisdom from current CFOs on the career experiences that aspirant finance professionals should get under their belt?
Focus on your fundamentals
Future CFOs will still need a strong financial understanding and should target career experiences that provide them with that understanding across various points in the finance value chain. Ninety-five percent of current CFOs agreed it was important that future CFOs have experience in the core areas of financial and management accounting. Almost half of them have had six or more finance roles during their career. The finance fundamentals are not changing, but the context is.
The future CFO role in supporting strategic growth is more valued. Current CFOs cited strategy formulation and execution as the most important area in which future CFOs should have experience. Over the next decade the business landscape will be reshaped by market volatility, globalisation and transformational innovation. In a climate where ‘commercials’ will change quickly, deep business understanding will be prized. Future CFOs will gain from having the battle scars of commercial experience.
Analytics: the next big thing
How organisations regress, correlate and extrapolate data to drive better decision making is the next ‘big opportunity’ for tomorrow’s finance team as data grows and the multiplicity of information presents challenges to business decision-making. Today’s CFOs see insight and analytics as a key priority for how finance can add value moving forward. It makes sense for aspirant CFOs to get experience in this area.
Current CFOs said experience in risk management was the third most important area for future CFOs, and risk management challenges were seen as the second most important factor influencing the CFO’s future role.
Become a dealmaker
Merger and acquisition (M&A) activity was identified as the fourth most important experience area. As well as technical finance experience in structuring deals, such activity can help expand skills in change and project management. As operations rebalance and tap into growth opportunities, we expect more M&A activity in the future. Funding, capital market experience and investor relations are core future finance capabilities for CFOs of larger businesses too.
Know your stakeholders
CFO aspirants need to plan for roles that broaden their stakeholder engagement and cultivate strong relationship management skills. But the emerging powerhouse stakeholder that future CFOs need to be mindful of in an age of brand disloyalty is customers of the business. The future finance organisation will need to be attuned to the needs of different consumers and develop a culture which is customer-centric.
Develop the management skills that matter
While next-generation CFOs will need a wide range of skills, a number of standout management capabilities are needed. The top four skills identified in our survey were leadership, communication, strategy and change management.
Regulation and reporting
Regulation was cited as the third-highest influence on the future CFO role. Future chiefs need to be confident operating in a regulated environment and be adept at implementing structures and processes that manage legislative and tax requirements effectively. We can also expect ongoing changes in reporting requirements – a rise in integrated reporting, more involvement of the finance organisation in reporting on corporate performance measures, increasing use of financial and non-financial data, recalibrating investment assessments to account for environmental or social impacts, and so on.
Tomorrow’s CFOs need to be technologically adept and understand how solutions can drive better finance delivery and workflow. The convergence of social, mobile and cloud technologies may revolutionise practices, while other developments include plug-and-play technology, and access to real-time information that allows CFOs to cut data many ways to obtain an instant integrated view of business performance.
Expand your footprint
The future CFO will need to be able to manage the different demands between mature and emerging markets, and align their strategies accordingly. They will need to be adept at working in the global business environment, leading teams which are diverse and virtual across mature and emerging markets. Future CFOs who have cross-cultural, cross-market business and finance experience will be highly valued.
Teuta Bakalli FCCA, CFO, Pepper Europe
To achieve sustainable growth in the future, CFOs will really need to understand and be very competent in risk management. They have to recognise that the risks that businesses face will continue to evolve – for example risks relating to social and digital media, or risks as a result of globalisation and expanding the business into emerging markets.
Roberto Mello, CFO, GE Healthcare Greater China
Take the opportunities to have different assignments in different parts of the world. Understand how things are done, become more adaptable in your thought processes, to different cultures; working effectively in one country is not always the same in another country. Recognise that diversity is powerful, and learn how to leverage it.
Jeffrey C Thomson, president and CEO, IMA (Institute of Management Accountants)
Today’s CFO faces many challenges and these will only increase, especially in the areas of globalisation, technology, consumer sophistication and competition. CFOs need to have multiple lines of sight – oversight, hindsight, and foresight – and balance technical skills with leadership skills.
Richard Moat FCCA, CFO, Eircom Group
An important piece of advice I would give future CFOs is to gain commercial experience and business understanding. For aspirant CFOs who wish to lead larger listed organisations, getting experience of capital markets and merger, acquisition and disposal activity will be ever more important.
Chair of the ACCA/IMA Accountants for Business Global Forum
Today’s ‘classic career’
Most CFOs started their career in audit firms or finance functions, and most have never had a role outside the finance function.
Today’s CFOs started their careers in classic ‘finance’ training grounds. Forty per cent began their finance careers in public accounting firms, while 42% started in a finance role in business. The majority (61%) have never taken roles outside the finance team. This represents an ongoing challenge for finance leaders in developing their commercial acumen and understanding, and suggests much of this takes place in situ as CFO, rather than during the career journey.
Only just over a quarter of the current CFOs in the sample had spent time in an overseas role. Financial director and financial controller roles remain the prior destination of choice for those with their sights set on the top finance job. Meanwhile, 60% of current CFOs were recruited externally.