The position of Chief Financial Officer thirty years ago bears little resemblance to the position today. Even though the markets have experienced at least six major economic downturns since the 1960s, the macro-economic trends that are a consequence of this current global recession are having a significantly greater impact in comparison with any previous recession, particularly on the way in which businesses operate, the priorities they face and the strategies they need to develop to achieve success both on a national and global platform.
The speed at which markets change and the ever-increasing global uncertainty means Chief Financial Officers are playing an increasingly important part in the executive decision-making process. As a consequence business leaders want CFOs who have the ability and experience to be their ‘right-hand man’, a key business partner who can support them and the Boards in making high-impact decisions aimed at improving corporate value.
On the other side of the net, CFOs are welcoming the new directions and challenges they face. Being considered simply as the senior controller of the company—conservative, number-crunching executives—no longer fits the job title. Today, they are being asked to deliver on a much wider range of tasks. For instance, CEOs expect them to fully analyse the financial impact of the company's objectives and strategies while they're still in the planning stages, not after the moves have been made as has traditionally been the case.
Companies must still have strong compliance and internal financial controls for which CFOs remain accountable. However, the days of focusing just on historical events are gone. As their strategies centre around creating shareholder value, the CFO’s vision is expanding five to ten years out.
Strategy and finance are becoming inseparable and this has resulted in changes to the way CFO searches are now conducted. Whilst formal training and experience in hardcore accounting, financial reporting, risk-management and unquestionable integrity remain the sine qua non, a deep understanding of business processes, competitor, customer and supplier environments, and the financial impact of industry trends, are additional competencies we are now looking for. For a business to manage risk successfully, it is essential that those making key decisions within the organisation are accurately gauging the environment around them.
The ability to work under considerable pressure has always been a key attribute, but today’s CFOs can expect the pressure to reach unprecedented levels. They will need to show that they can really support chief executives in identifying potential M&A targets, and new geographies and product lines to add where the margin gain can be seen as a real value add. Furthermore, they will need to be adept at finding innovative ways to raise capital and to make a positive impact with industry analysts, something which, in essence, may create a conflict; being creative on the one hand but conservative on the other. This is a relatively new phenomenon so those aiming for the CFO position must be able to clearly demonstrate that they can handle this potential conflict.
CEOs will generally want their organisation’s share price to remain high relative to earnings, particularly if the company has debt financing which is tied to company capitalisation, or if a new round of fund raising is being considered. Since future cash flows are often a major driver of the share price, CFOs must be able to confidently articulate these expectations, with a complete understanding of how they will occur. This will require them to have not only in-depth knowledge of every segment of their organisation and the respective business plans, but also their individual values.
Until the current global financial and economic situation improves substantially, Chief Executive Officers can expect tougher and more searching questions from the investor community. When consumer confidence in a company wanes, maintaining shareholder loyalty becomes increasingly more difficult. CEOs will be looking to their CFOs to become the key contact for the investment community. Therefore, the head of finance should expect to spend a significant amount of time discussing the company’s business and financial reports with equity research analysts and fund managers, so being an effective communicator has become another competency in our CFO search criteria.
Following the recent introduction of legislation that requires senior management to individually certify the veracity of corporate financial statements (the Sarbanes-Oxley Act being just one), many software companies are bringing to market new enhancements in compliance and auditing products that provide a seamless integration of IT and finance. This has resulted in an IT/finance alliance that is increasingly coming under the control of the CFO. More and more, we are finding that the Chief Technology Officer (CTO) position reports directly to the CFO, and where the CTO is not a board position the CFO is the voice of the IT division in the boardroom.
Since with most businesses the biggest capital expenditure they have is technology and its infrastructure, CFOs are now required to have a good understanding of technology (both present and developing) and its impact on the organisation. Today, with technology such as Cloud applications being seen as the potential way forward to support the organisation’s information, communications and decision making requirements, it becomes ever more important that decisions made are, strategically, the correct ones. Failure will be costly and the effects long-lasting.
Certainly the position of CFO in many industries has grown both in scope and responsibility. Those who are aiming for a top CFO position can expect their professional lives to be subject to greater scrutiny and even greater expectation. However, the opportunities for those with the right skills and experience have also increased substantially and the career prospects have never been better.
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