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It All Adds Up:

Totaling the Traits of a Top-performing Chief Financial Officer

8.08.2018
The role of CFO is expanding and evolving. It was not long ago that someone with a CPA, public accounting experience and a basic financial background could count on being reasonably qualified to serve as CFO. Nothing stays the same. Many companies became more interested in individuals who had a strong financial “deal” orientation—someone who came up through the finance function and perhaps had managed M&A, strategy or even investor relations. Many felt that someone with experience with the investment community would be a better CFO provided they had a strong controller supporting them.

But let’s pull the curtain back a little further. Assuming we have someone with strong accounting or finance pedigree and a wide range of experience, what will make him or her a top-performing chief financial officer? Interestingly there is no agreement. 

Ernst & Young says that a great CFO must have the ability to mentor and train a staff. E&Y’s competitor PwC doesn’t mention that as a requirement but instead focuses on an individual’s ability to understand company operations.

The Alexander Group has conducted dozens of CFO searches over the past decade for industries ranging from higher education and entertainment to law firms and life sciences. To get a more detailed picture, we examined recent CFO engagements.

The Numbers

Of the most recent CFO searches we conducted, 75% of candidates selected for the position had some form of graduate degree. 50% of those individuals had an MBA or an advanced business degree. 10% had law degrees.

60% came from business/finance backgrounds, demonstrating the current rising trend for a preference for those with finance experience rather than accounting.

 
40%, less than half, had some kind of CPA certification.


60% were hired within their own industry.
 
25% had undergraduate degrees outside of finance, business and accounting.
The large majority of them had backgrounds in STEM (Science, Technology, Engineering and Mathematics) or Political Science.

25% of hired candidates already had served as a CFO. 35% were already C-suite executives (either CFO or COO) 

 
15% were previously controllers before taking on the role of CFO. 

Beyond the Numbers

From this we can glean a few things. First, there is a rising preference for financial, rather than accounting, backgrounds.

A little less than half of the individuals hired had some kind of CPA, accountancy certification, proving our theory that a CPA nowadays isn’t necessarily the golden ticket to the CFO office.


Second, a sizable minority of people earned undergraduate degrees not related to business or accounting (though still with a head for numbers, obviously). We’ve recruited CFOs with science, engineering and international relations backgrounds. The unifying factor is that all these candidates went on to earn an MBA and are able to leverage their diverse backgrounds to bring a unique outlook on the business.

Finally, over half of companies prefer to hire candidates who have previous experience in their industry. This qualification is reflected not only in the candidates we recruit, but also in the position descriptions we develop in tandem with our clients. It is one of the most sought-after qualifications in our experience and reflects the evolution of the CFO role to not only understand the numbers, but the business strategy behind the numbers.

Adding It All Up

It is interesting to look back and observe shifting trends in the role of CFO, but statistics will never tell the whole story. When companies hire a chief financial officer, there are usually specific traits particular to that company, and its culture, that must also be considered.

Beyond general financial expertise, are there specific skills or experience required? Some companies hire a CFO to help them restructure or avoid bankruptcy; others hire a CFO to orchestrate a public offering and its strong investor relations component. Some companies hire a CFO to help with global expansion; some hire to dispose of assets or a division.

And then there are the intangible skills that influence almost every hiring decision but are difficult to quantify, such as emotional intelligence, strong leadership skills, chemistry with the board and management team, and innovative thinking.

For example, is the company looking for a change agent? The CFO will need to be a hard-charging, critical and independent thinker, willing to defy convention and innovate to get results.

Does the organization need someone who can bring a dysfunctional financial team together? Emotional intelligence should be integral to the role—someone who can build trust; provide honest, constructive feedback; be fair and consistent; and communicate with transparency.

Does the company need a CFO with global perspective and experience building relationships across boundaries? Businesses, markets and economies are so interconnected across the globe, that a global mindset is often a must.


Finally, what is the organization’s culture? Is the culture entrepreneurial and informal, or process-based and hierarchical? You can’t send a hard-nosed leader into a situation that requires finesse, and you can’t send a consensus builder into an authoritative organization. This applies not just to the finance team but to the board of directors and CEO as well. The CFO must be able to integrate into the DNA of the organization in order to be effective.

For more insights on profiling chief financial officers, please read “Don’t Judge a Book by Its Cover: Not All CFOs Are the Same” by Managing Director John Lamar.


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