CFOs today are expected to be superheroes. In addition to being Guardian of the Books, today’s successful incumbent has to be the business’ Chief Policeman, thanks to increasing regulations; a Manipulator of Space-Time, because 24 hours in a day is never enough; possess extra-sensory perception for early-trouble detection; and fearless Navigator, helping the business slice through the unchartered waters of new business deals, IPOs and M&As.
And as climate change becomes a business imperative, the CFO will be required to be green as well. “Even if there is an expert in the environmental impact of bio-fuels, the CFO will have to engage that knowledge and think about it and analyse it for their own organisation,” says Alex Malley, CEO of CPA Australia. He sees the CFO leading a new cadre of finance experts specialising in environmental issues, from measurement of carbon footprints to valuation of assets taking into account climate-change effects to the purchase and sale of carbon offsets and credits.
The challenge is that this green superhero must continually update his or her repertoire while making sure financial reporting meets regulatory standards. It’s a high-stakes juggling act that calls for quickly shifting skill sets that meet not only the demands of the CEO, the board of directors and shareholders, but also the CFO’s own finance team, the IT team, human resources, legal and compliance, not to say government and stock market regulators.
What dynamic qualities are needed by CFOs and aspiring finance chiefs to meet this new era’s expectations, regardless of their industry or company? And what steps can they take to acquire and enhance the skills and qualities required by their evolving job description?
“What organisations need now is the firm leadership and financial discipline for the immediate short term, and the confidence of knowing they possess a business model which is sustainable,” says Dr Steve Priddy, Director of Technical Policy and Research at ACCA, the global body for professional accountants. “As global economic conditions continue to be uncertain, CFOs have every opportunity to emerge as leaders and to rise to the challenges ahead.”
But the global economic crisis is providing Asia’s CFOs with opportunities to show how they can extend themselves beyond traditional finance responsibilities, the study concludes. In China, 82% of the respondents say they are now more involved in medium- and long-term strategy, with 79% of respondents in Hong Kong saying the same. When asked to agree or disagree with the statement that the finance function now works more closely with business units in strategic planning, 85% in China agree, versus 76% in Hong Kong.
However, in terms of how much time CFOs actually spend on contributing to strategic decision-making, the duration is relatively short: 35% of total working time in China and 29% in Hong Kong. These low numbers are actually on par with time spent managing operational risk and strategic risk: 28% in China and 23% in Hong Kong.
Operations and Strategy
It’s interesting to note the shift in CFO preferences amongst the world’s companies, starting in early 2008. MBAs are back in demand. According to analysis conducted by executive search firm Heidrick & Struggles, 62% of new finance chiefs surveyed in the U.S. in 2008 had at least one advanced educational degree, and 59% held at least one professional designation.
Another trait valued in CFOs is strategic experience. “There’s been a quick sunset on the need for capital-markets expertise,” says E. Peter McLean, chairman of the Global Financial Officers Practice of recruiting firm Korn/Ferry International. “We’re back to a focus on strategic and operational CFOs, real business people who have proven they are effective at driving value.”
Michelle Heid, managing partner in Heidrick & Struggles’ Financial Officers Practice, agrees. “In the private-equity sector, we've seen some people with treasury experience who were brought in to do an IPO that is now delayed,” she says, referring to U.S. companies. “The portfolio companies are switching their focus to operations, finance, restructuring, cost-cutting, and profit improvement. Raising funds is not as prevalent, except for companies that are highly levered and need to recapitalise.”
Beyond an ability to push operational buttons, the vision to link operations and strategy is equally important. The finance executives who will be in demand, predicts Gregory Carrott of Chicago-based executive search firm Cavoure LLP, are those “who can not only drive cost reduction, but also provide broader insights on opportunities to improve margins, manage capital more efficiently, and identify business opportunities that result from changing economic conditions.”
Companies that are no longer seeking accounting as its key requirement of a CFO are likely inclined towards strategic acumen. They will certainly require their CFOs to head up assessment of potential impacts on the company, as well as being the one to drive and implement upcoming strategies, says Carrott. That means CFOs will need to be leaders.
Part of being a successful leader is good old-fashioned communication skills. “What a lot of companies are looking for is the ability to communicate and interact with all the economic stakeholders,” says Christopher Langhoff, executive recruiter at Russell Reynolds, including “the board of directors and investor relations, as well as Wall Street and credit-rating agencies.”
With easy access to corporate information, thanks to the broad reach of the Internet, the premium on communicating financial information is now high. Not only is the message important; so is the messenger. Coaching in communications skills will be necessary for today’s well-rounded CFO.
“They will have to become much more effective at framing their company’s story consistent with the company’s financial story,” says John Connors, former CFO of Microsoft. And the CFO must be cogent. “There will be little opportunity,” adds Connors, “to explain detail or nuance.”
Rather than presenting tables of numbers, communicate your message with graphics and visuals, and keep the speech brief. “Even when the work behind something is extremely complex,” says Frank Gatti, CFO of U.S. educational testing institution ETS, “your audience really just needs to know the headlines.”
CFOs would also do well to their polish their charisma skills as a public face of the organisation, since a wide range of stakeholders now want direct access to the CFO.
Steffan Tomlinson, CFO of American networking vendor Aruba Networks, certainly did his homework. Before his company went public, Tomlinson was able to anticipate the questions analysts would pose when Aruba held its first conference call. That’s because he had listened in on over 20 conference calls by other companies and kept a record of the questions asked.
“Tone and tenor mean a lot, especially over the phone,” he says. “How you answer questions about competitors is telling.” During one of the calls, executives stumbled on certain questions, and some analysts concluded that the company was faltering.
CFO, Train Thyself
Training is crucial, and in today’s changing regulatory environment, CFOs need to make sure they stay updated. According to ACCA’s survey, a large majority of executives in Hong Kong and China agree that there’s still a need for more training. “It’s one area that I don’t want to cut,” says group finance director S. Venkateswaran of Mulitex Group, a Hong Kong garments company. “I’ve always believed that people have to be updated and they have to get skills which will be helpful in [difficult] years like these.”
Risk management is the most important training priority to companies in Hong Kong and China, while leadership, communication, and technical finance and accounting matters follow (in that order).
And when it comes to the training and information channels tapped for crisis-related issues, the winner in Hong and China was conferences and training courses, followed by external auditors and accountants, then professional accountancy bodies.
The varied approaches of different markets to crisis-related training are markedly different between Hong Kong, China and the rest of the world, however. Although 54% of companies in the rest of the world and 44% in China utilise external auditors and accountants, only 29% in Hong Kong tap this resource. Instead, Hong Kong prefers professional accountancy bodies (43%).
Management consultants for training in crisis-related issues are not as popular in Hong Kong. Only 17% there use this channel, whereas China and the rest of the world are about twice that amount (34% and 30%, respectively).
Though risk management and accountancy bodies are popular with Hong Kong companies, it’s interesting to note that there are currently no courses or seminars on risk management or the effects of the financial crisis offered by the major accounting bodies in Hong Kong (including the HKICPA, the ACCA, and CIMA), through their Continuing Professional Development area or otherwise.
Nor are there any confirmed for 2010 either, at the time of this article’s publication. Though they may have been hot topics earlier this year, it seems they have waned in popularity in Hong Kong — perhaps because the economy has showed signs of improvement.
In the end, professional development is something the CFO and aspiring CFO will have to take personal responsibility. One good example is Steffan Tomlinson’s initiative of listening in on other companies’ conference calls to pick up tips on communication skills.
Close involvement with the business’s operations is also helpful. Rather than immuring himself or herself in the finance office, it is a good idea for finance executives to interact with people on the factory floor, sales and marketing and other operational areas.
There’s something to be said about finding a mentor within the company, such as the CEO, group CFO and board directors. Peers and employees with specialist skills are also useful sources of knowledge and skills. They can function as well as sounding boards for new ideas, companionship and moral support.
As more companies make succession planning, recruitment and development a top priority this year, CFOs should be on the watch for personnel strategies their companies are taking, even when things seem to be going smoothly. Those who show adeptness and responsiveness will find themselves in a less precarious position, and the ability to prove their mettle will provide bigger bargaining power.
In short, being able to roll with the times will delay departure, voluntary or forced.
About the Author
Angie Mak is online editor at CFO Innovation.