Expert view: What makes a great CFO

Stacey Nicholl on why FDs require credibility and engagement both inside and outside the organisation

The CFO of today is a far cry from the rigid, number crunching executive of old. No longer a square peg, a great CFO is a rounded leader who can add value beyond the finance function and deliver business results.

ALLY AND EQUAL TO THE CEO

From a headhunter’s perspective, the ability to influence and collaborate with the CEO emerges as the #1 skill for any CFO. Like the CEO, the CFO is instrumental in defining company strategy and needs to have the vision, determination and communication skills to gain buy-in and drive the agenda forward. Nobody is better placed to ensure that strategic decisions are based on a combination of solid financial rationale and business context. The CEO wants a business partner who can help grow the business, turn financial data into actionable intelligence and identify new potential revenue streams such as new geographies, new markets or potential acquisitions. In EY’s study, The DNA of the CFO, 73% of CFOs surveyed saw their role as a destination in its own right and only 10% harboured an ambition to be CEO. Whether or not the CFO wants to be CEO, the qualities sought by the headhunter are very similar.

DEEP COMMERCIAL ROOTS

A strong commercial mindset enables a CFO to go from good to great. The best CFOs are naturally curious and take a wide-angled view on what makes a business tick and drives financial performance. They tend to have a broad education, including an MBA, and not all CFOs come from the traditional accountancy background. The key string to the CFO’s bow is direct experience. While climbing the ladder, some finance executives acquire valuable experience in other functions – such as Operations, IT or Risk Management – where their forensic, problem solving and reporting skills can be put to good use. Having a genuine empathy with other functions, and an appreciation of the customer, equips the CFO to provide relevant data and insights as well as to make prudent decisions on the use of assets and resources.

STRONG BACKBONE AND SOFT SKILLS

Much has been written about the need for EQ as well as IQ among C-suite executives and this definitely applies to the CFO. A great CFO must be a persuasive influencer and an attentive listener. They must display strong values, cultural maturity and adaptability to change. To truly partner and challenge the CEO, the CFO requires credibility and engagement both inside and outside the organisation. This involves building strong trusted relationships with investors and opinion leaders, as well as the other members of the CEO’s leadership team. The CFO must also be tough enough to push back on the CEO, to cope with pressure from regulators, investors and the media, and to stand by difficult decisions such as redundancies and cutbacks. It’s a question of balance.

NEW DOG, NEW TRICKS

Many CEOs are hired for their track record in business turnaround and transformation. In KPMG’s The View from the Top report, CEOs also cite this as a vital skill in their CFO. Referring to the ‘Renaissance CFO’, the report states that the modern CFO has to manage ‘a vast ecosystem of expanding complexity with the goal of achieving competitive advantage’ but, alarmingly, concludes that almost one out of three CEOs feel their current CFO is not up to the challenge. Of course, the traditional core skills of the CFO are still important and the headhunter will need to seek evidence of effective cost cutting, cash management, financial controls, reporting and compliance. The candidate, however, must demonstrate an understanding of the commercial context within which these standard requirements have been met and a desire not just to safeguard the company but to promote innovation and stimulate growth. The best CFOs are as focused on outward looking KPIs, like market share as a percentage of market potential, as they are on inward indicators such as EBIT.

%MCEPASTEBIN%BUILDING THE TEAM

An essential skill possessed by the greatest CFOs is the ability to mentor and nurture talent. Whilst the CFO’s role is to coach the CEO and underpin the CEO’s strategy through financial planning, the CFO should also be a leader who can develop, inspire and mentor his or her own team beneath. Given that a CFO’s typical tenure is around five years, a greater focus on succession planning is needed. By knowing what makes a successful CFO, the incumbent can nurture a shadow CFO by ensuring that the team below gains all the requisite experience of other functions, benefits from learning & development progammes and masters new technologies. In KPMG’s report, almost all CEOs said that attracting and retaining top-notch finance talent was the most important or equally important contributing factor to improving the finance function, yet only 33% of CEOs gave their current CFO a thumbs-up in that respect.

IT SAVVY

Headhunters are placing increasing emphasis on CFOs having a penchant for technology. By harnessing cloud-based ERP systems, for example, the finance function can be more agile and scalable and can empower senior management across the business with real-time data they can react to quickly. The CFO does not need to be an IT wizard, but needs to understand that clever application of technology allows the finance team to spend more time analysing and interpreting data, instead of preparing it. The use of predictive analytics will only help this further. The role of the CFO has evolved beyond recognition. Exit the stereotypical bean counter and enter the three-dimensional CFO, aligned with the entire business and cut from the same cloth as the CEO. A great CFO who can stand alongside the CEO and have what it takes to transform a company’s fortunes is not easy to find. Gone are the days when swapping the same names around the FTSE 100 will do the job. It’s about time that headhunters changed too.

Stacey Nicholl is a Senior Consultant at Marlin Hawk, a leadership advisory and executive search firm with offices in London, New York, San Francisco, Hong Kong and Singapore. www.marlinhawk. com | enquiries@marlinhawk.com