Recently, I shared an article with my contacts in Executive Finance roles. A study conducted by a Finance Executive Recruitment Boutique revealed 4 essential behavioral traits CEOs are demanding from Finance Directors in 2015.
Quite some CFO’s sent me their feedback and view on the article.
Johan D’Hauw, a finance professional that took up several CFO roles states that fast industry evolutions force organizations to re-invent their business model. The CFO has a major role in transforming this model into a manageable financial model. CEO and CFO will collaborate closely. Important leadership traits are team focus, people management, result focus and business acumen.
François De Witte, Solution Partner Treasury & Financing @ USG Finance Professionals stated he was also requiring some skills, such as communication skills, stakeholder management, helicopter view combined with strong analytical skills, people management
Philippe Maeckelberghe, CFO @ Deceuninck, also missed communication, collaboration, compliance, co-pilot, .. all words starting with a “C”.
Wim Van der Smissen, VP Finance Europe @ Bemis Company Inc did not agree on the element “Dominant, Goal Oriented Risk Taker”, given the risk management challenges in most of the organizations.
So, obviously the findings in the article left room for discussion. Time for me to dig deeper…
Four profiles of today’s CFO
Management roles vary by organization, depending on a company’s history, the characteristics of its industry, and the demands of investors. And although fitting CFOs into a clear-cut typology may seem artificial, a McKinsey study found it useful to understand how companies are filling the role to get a clearer picture of how it’s changing. Based on research, McKinsey categorizes CFOs into four general profiles.
The finance expert. This type of CFO is particularly well suited to highly decentralized companies with stand-alone businesses or early-stage ones scaling up and professionalizing the finance function. Their strong finance-function knowledge across a broad spectrum of activities is critical to effective compliance and standardization of processes. The finance-expert profile may also be best for any company whose top team otherwise lacks strong finance leadership—or whose finance department is inefficient or in disarray.
The generalist. CFOs that fit this description tend to engage heavily in business operations and strategy and often bring strong industry and competitive insights. They are often found in companies in mature sectors, where operational similarities across business units provide a good platform to rotate managers among businesses and eventually into functional leadership roles; most are internally hired and already fill an executive function, often being groomed for a CEO role. These rotations give managers insights about different businesses that they need to support tightly run operations, allocate resources, and influence peers—which, regardless of industry or strategy, make them ideal for companies where personal influence is needed to get things done.
The performance leader. CFOs with strong track records in transformations both within the finance function and throughout the organization are what we have dubbed performance leaders. They tend to focus on cost management, to promote the use of metrics and scorecards, and to work to standardize data and systems. They are often hired externally, and many have previous experience as CFOs. Companies employing these types of CFOs are often highly diversified companies requiring rigorous analytics to compare performance across businesses, companies with aggressive growth or cost targets that must be met in the near term, or companies with scarce resources that must be carefully allocated.
The growth champion. Externally hired professionals are the least common type of CFOs, but they have risen to account for nearly 25 percent of new CFO hires. They are most common in industries with frequent disruptions that require dramatic changes in resource allocation—and in companies that plan to grow considerably or reshape their portfolio of businesses through aggressive M&A or divestiture programs. Such moves make external hires especially valued for their significant experience in M&A, as well as for their external networks, independent thinking, and strategic insight, often gleaned through working as a CFO or serving for years in professional-services firms.
Aligning the role with the company
These profiles are obviously not prescriptive; it would be simplistic to suggest definitive rules prescribing a specific CFO profile for general categories of company. That said, with the profile characteristics in hand, companies can more explicitly weigh them against the skills and capabilities they expect to require from the CFO as they shape, refine, and implement their strategy for the future. Whether this means selecting a new CFO or rebalancing the role of an existing one, they will need a candid assessment of their current corporate strategy, the skills and temperament of the CEO, the composition of the senior-management team, the current capabilities of the finance function, and organizational and reporting structures.
McKinsey proposes four questions that CFOs should answer when planning their own career-development plans—or that CEOs and boards should answer when beginning the search for a new CFO.
What are the key Leadership competencies a CFO should develop?
The Chief Financial Officer typically serves as member of executive management. As such, the Chief Financial Officer provides vision, policy, strategy and direction setting. The organization will depend on this person's enterprise and industry view.
The past few decades have witnessed significant growth in the demands on and expectations of finance leaders, particularly as they have become central to helping their organizations navigate an increasingly complex business world. In addition to being the financial gatekeeper, the CFO is also expected to participate in driving the organization toward achieving its objectives. As part of the leadership of the organization, CFOs are expected to increase their support of strategic and operational decision making in a “business partnering” capacity in addition to fulfilling traditional stewardship responsibilities relating to governance, compliance and control, and business ethics. In forward-looking organizations, the CFO and the F&A function are evolving from a transactional and cost efficiency focus to an increasingly value-adding strategic focus.
It is essential that investments in training and development go beyond developing technical skills, particularly for prospective finance leaders. Development needs should cover the acquisition of leadership and analytical skills and the behavioral competence and cultural mindset required to be successful outside of a specific job or role, which can all be molded and enhanced by exposure to non-finance areas of an organization, such as operations and sales. Although poor interpersonal skills are often the main reason for an employee’s failure to advance in an organization, organizations are far more likely to offer training in more technical categories—accounting or finance, and information technology—than in soft skills (Source: IFAC)
Individual performance criteria are no longer the basis for selection of a Group CFO. Increasingly, boards are looking for evidence of leadership skills and the ability to build effective teams. Three quarters of respondents of a recentEY publication (The Future of Finance Leaders) agree that Group CFOs need experience of managing diverse teams, while almost 80% think that the CFO role is primarily about being a leader of the entire organization rather than just being head of the finance function. It is almost impossible for a CFO to be an expert in the complete range of activities under his or her control, especially when IT, sourcing, and other functions are added to the CFO’s remit. Finance leaders must therefore be highly adept at building and leading effective teams around them.
High-performance organizations value competencies that build organizational capabilities – while lower-performing organizations focus on competencies that build individual capabilities.
Most organizations realize that “goal achievement at any cost” is not a long-term strategy for organizational health. High-performance organizations develop leadership competencies which are used to assess an individual’s ability and skills to be a leader or manager. At GE, for example, the four leadership competencies are:
Energy (passion and hard work)
Energize (ability to inspire others)
Edge (ability to make tough decisions)
Most companies have capabilities, such as “strategic decision-making” or “communication” as leadership competencies. While these words may seem very generic and uninteresting, they reflect each organization’s unique belief system about what type of people should be leading the organization. These competencies reflect the organization’s unique assessment of what leadership qualities actually “work” in the company’s culture. (Source: Bersin competency report)
With the role of finance constantly developing, it can be hard for organizations to know the standard to expect of their CFO’s.
The managerial competencies organizations need, can be classified as business acumen, people skills and leadership skills. In addition to technical accounting and analysis skills, finance professionals are expected to have an understanding of the organization’s strategic context, its competitive position, its business model and its key processes. And they need the people skills necessary toinfluence others and to contribute to leadership so as to ensure that the accounts, information, analysis and insights which they provide are applied effectively to improve the organization’s performance. (Source: CGMA Competency Framework and CIMA Thought Leadership – Ready for business)
Basic assumptions about leadership are changing. Today's most successful companies do not view leadership development as a training program - they have institutionalized it and made it part of the system.
Specific Leadership Development programs are designed to make attracting, developing and retaining leadership talent part of your organization's core culture. This systemic approach is the only way to ensure that your organization has the bench strength to create a sustainable competitive advantage.
An extensive Leadership Development Program is designed to enhance the skills and competencies of your company's current leaders and develop those skills in your future leaders.
Leaders must learn how to:
A good Leadership Development Program is highly customized to ensure maximum impact. While content is custom designed, there are typically four key areas of concentration:
We define a customized process to help you and your team accelerating your leadership growth and development:
We discover your business challenge and examine the internal and external business drivers of the problem
We diagnose your leadership need and connect your business challenge with the underlying leadership issues
We design your customized solution an draw the blueprint to your leadership solution
We develop the initiative and build your customized leadership solution to your specifications
We map the impact and demonstrate the real results you can deliver back to your organization
Contact me at firstname.lastname@example.org for challenging your personal leadership objectives.