CFOs and the finance organizations they lead are increasingly being asked and expected to shift their roles from corporate governance to strategic guidance. They are moving beyond accounting, budgeting and reporting roles to influence strategy, revenue and the profitability of their companies.
The problem: While many senior finance executives recognize that talent management is a key means of delivering value to the business, 87% of CFOs surveyed by CEB believe they don’t have the right talent mix to achieve this goal.
In a complementary study, CEB recently asked 670 finance managers globally to assess the competency levels of their team and what they are doing around talent management.
The research uncovered that, when it comes to talent management, the best finance departments are redesigning hiring strategies around critical competencies and embedding them into the skill development and performance management protocols. These departments are three times more likely to be involved in making strategic business decisions, two times more productive, and more than twice as successful in attracting and retaining the best talent.
Talent as Urgent Priority
The urgency to acquire, develop and retain the right talent is reinforced by the increased attrition risk, cost, and the growing dependence on Finance’s ability to guide and advise the business. The urgency is arguably more acute in Asia because of the following staff perceptions and behaviors, among others:
- Finance employees in Asia are more optimistic about job opportunities than the global average
- They are more active in job searching than their counterparts in the West and in other corporate functions within Asia
- They expect higher compensation premiums for switching jobs
However, for many large multinational companies, the critical competencies that enable Finance to provide better guidance have not been fully understood or addressed due to insufficient focus and investments on staff development in recent years. In fact, 51% of companies reported that their Finance learning and development (L&D) budget has been reduced.
Worse still, traditional HR competency models often overlook the critical differences between Finance and other overhead functions. Sixty-three percent of Finance professionals believe HR does not understand the jobs they are trying to fill. CEB has observed a growing gap between HR-led strategies and Finance’s unmet talent needs.
Mapping and Prioritizing Team Competencies
Not every finance team needs to be “best-in-class” in every discipline. As CFOs embark on the governance-to-guidance journey, they will need to “dare to be average” in non-critical areas because CFOs do not have infinite resources to serve all business partners.
To help CFOs prioritize their development resources, we analyzed and grouped all the behaviors demonstrated by finance staff into five types of competencies:
- Builder competencies (Sample behaviors: Creates vision and fosters buy-in, sets business-aligned goals for the team, reinforces efforts of team members);
- Persuader competencies (Sample behaviors: Articulates views clearly, uses experience to develop insight, simplifies complex ideas, adapts and tailors communication style);
- Strategist competencies (Sample behaviors: Has strong understanding of business operations, discusses financial performance in terms of key value drivers of the business);
- Learner competencies (Sample behaviors: Seeks feedback for own performance, looks for opportunities to improve, asks for help when appropriate);
- Doer competencies (Sample behaviors: Has strong functional expertise, is able to break down problems into manageable tasks, takes initiative and executes independently)
All finance teams have all these competency types, but CEB found that the most significant driver of finance department effectiveness is the Builder competencies, followed by the Persuader and Strategist competencies.
While the traditional finance staff profile of Doer and Learner competencies are good at execution and strong on functional expertise, these are just table stakes and do not differentiate the best finance departments from the rest.
It is impossible to get all these competencies from a single individual. Rather than trying to identify and recruit the perfect person, CFOs should build the perfect team. Here are five tips CFOs should use to develop the most critical competencies in their teams:
Tip #1: Hire, Coach, and Teach
CFOs need to determine the best ways to close talent gaps by distinguishing between innate, hard-to-teach and trainable competencies in their competency development plan.
For competencies where improvement potential and current proficiency are high, CFOs do not have to prioritize them during the hiring and interviewing process. These are mainly the Doer and Learner competencies, which are easy to train for.
There are some competencies, certain Strategist competencies for example, that are not extremely critical to hire for but very hard to teach where CFOs need to deploy extraordinary efforts.
The competencies that make up the Builder and Persuader types can rarely be taught. These are innate competencies that you need to prioritize in hiring.
Tip #2: Raise the Bar on Hiring
The best finance departments demonstrate more stringent hiring requirements across all five competency types and over-invest in Builder competencies, which are the most important for driving finance department effectiveness. They rely more on case interviews to evaluate candidates on the hard-to-teach and hard-to-observe competencies, which are difficult to assess through the typical Q&A-based finance interviews.
Tip #3: Get Creative in Sourcing
The best finance departments start with a clear idea of the competencies required to fill certain roles. Then, rather than relying on the typical hiring sources, they also access other non-obvious talent pools that offer equally (and perhaps more) compelling leads where they face less competition. For example, start-ups, media firms, and industry analysts are potential sources to identify candidates with leadership, communications or business acumen competencies.
Tip #4: Coaching Matters Most
Many finance departments have built extensive classroom training curriculums and intra-company rotation programs. These approaches are great as long as you recognize which specific competencies they are capable of developing.
Our research shows that the most effective way to develop those hard-to-teach competencies in finance staff is through an overinvestment in coaching. We define coaching as the provision of personalized guidance on maintaining professional growth and successful careers. The best finance departments spend 16% more time on coaching, compared with other finance departments.
Tip #5: Reward the Right Behaviors
Staff members with strong Doer and Learner competencies are likely to be considered high performers, and they are being rewarded for the competencies that have low impact on the overall finance department performance.
The best finance departments emphasize Builder, Persuader, and Strategist competencies. These are the competencies that they reward, and these are the competencies that they get.
Next Step: Have a Talent Conversation
The message is clear – CFOs cannot outsource finance talent development. We hope this article motivates you to audit your current talent practices across the hiring, developing, and performance management stages. We encourage you to use this 5-type competency framework to facilitate discussions among stakeholders to design your competency development plan for Finance.
About the Author
Brian Tsui leads research and advisory for Finance Practice in Southeast Asia at CEB, a US-listed research and advisory firm that boasts 85% of Fortune Global 500 companies as clients and/or network members.