CFO: a career destination – not a staging post to the role of CEO
- Two-thirds now act as public face of company
- Financial crisis has elevated role within business
- More operational responsibility bringing potential conflict of interest
- Many identify need to improve relationship with key external stakeholders
LONDON, 6 July 2010 ― A new report by Ernst & Young, entitled The DNA of the CFO, challenges the assumption that all chief financial officers (CFOs) are aspiring chief executive officers (CEOs) and instead finds that the majority see their role as a vocation of its own.
Of 669 CFOs interviewed across Europe, Middle East, India and Africa by the Economist Intelligence Unit for Ernst & Young, 73% saw their role as a career destination of its own with just 10% aspiring to be the CEO.
The DNA of the CFO also highlights a broadening of the CFO role beyond finance fundamentals, with the potential to influence corporate strategy and drive business change to such an extent that most enjoy a high level of career satisfaction. Almost two-thirds of respondents said they now act as the face of their company on all financial matters and performance, with a similar number agreeing that since the financial crisis, the CFO’s key priority is to increase financial trust in their business.
Paul Wood, Ernst & Young’s EMEIA Finance Leader for Performance Improvement, comments: “It’s become fashionable to say that any ambitious CFO wants to be a CEO. But our research highlights a different picture: one of a group of people whose unique view on the business has rightly earned them promotion to the forefront; a group that is embracing their increasing strategic remit; and who see their career choice as one to be celebrated and not a staging post to the CEO role.”
Financial crisis elevates role
Over 60% of CFOs have seen their standing within the organization elevated in the past three years. In part this is due to CFOs aligning the finance function closer to the business but also because the financial crisis has resulted in an unprecedented demand for the unique perspective and discipline of senior finance professionals to guide the business.
The report also highlights a shift in the perception of the finance function from outmoded “business prevention units” to an enabling partner to the business. For many CFOs, the acid test is the extent to which business managers consult them for advice on key aspects of strategy. Just over half of those CFOs surveyed agree that this now takes place routinely.
CFOs are also finding that they are taking on more operational responsibilities, mainly in the IT and property functions, which is natural given their financial discipline and management strengths.
However, Les Clifford, chairman of the Ernst & Young CFO Program in the UK and Ireland, warns: “For some CFOs, this dual responsibility creates a potential conflict of interest. There is definitely a delicate balance to strike between being the objective, independent voice of the business and assuming a broader responsibility for operations. CFOs have a duty to maintain this independence and objectivity, and sometimes the need for growth and performance in their operation role can test this to the limit.”
Who is the average CFO?
The research also provides a snapshot of the average CFO: they are most likely to be male; are highly educated, highly skilled and highly motivated; 42 years and eight months old; have worked in finance for most of their career; believe that five years and 10 months is an appropriate tenure for their role; and most likely to hold either a degree in finance (29%); MBA (27%) or a chartered accountancy qualification (27%).
The report updates the now clichéd story of the CFO’s migration from ‘scorekeeper’ to ‘strategic advisor’, by seeking to clarify exactly what strategic contribution means for the CFO: 35% of the CFOs questioned believe they make an active contribution to developing and defining the overall strategy for their company. But the majority of respondents say their contribution focuses on providing insight and analysis to support the CEO and ensuring that business decisions across the business are grounded in sound financial criteria.
Clifford comments: “CFOs see their role as going beyond being an ‘information provider’ or ‘aggregator presenter’. Their commercial understanding and analytical skills mean that this element of their role is a vital part of understanding how different decisions will lead to certain outcomes.”
While respondents agreed that the responsibility of setting the broader five year vision remains the domain of the CEO, the CFO acts in many cases as the co-pilot; driving the process of setting corporate strategy and bringing that vision to life.
Wood adds: “Leading CFOs may not be setting the five year vision, but they are an integral part to setting strategy. They are ideally placed to play a central role in strategy formulation. As a leader of the finance function, they are often more informed about a business’s operations and underlying performance than anyone else in the company.”
While CFOs are reveling in their newly elevated role, they are also coming up against the challenge of carefully balancing the development of company strategy with the renewed focus on finance fundamentals brought about by the financial crisis.
CFOs identified cost management, risk management and cash flow as their top three business priorities in the wake of the financial crisis. For almost four in ten CFOs, this means they are not spending as much time on strategy as they would like.
Public face of the company
CFOs are under greater pressure to be the public face of their company but recognize the need for investment in building stronger connections with a number of their key external stakeholders Less than half of respondents say that their relationship with investors is good or excellent, while just 21% say the same for their relationships with governments and 25% for their relationships with the media. Asked where they needed to enhance their skills and knowledge, respondents pointed to communication and influencing as the most important area for improvement.
“With increased calls for businesses – and namely the CFO – to engage more actively with external stakeholders, it would seem that CFOs fully recognize the need for investment in skills which to date may have fallen outside of the traditional curriculum of the CFO,” concludes Clifford.
About The DNA of the CFO
The DNA of the CFO is a study which provides fresh insight on the agenda of the individual CFO – role, priorities, aspirations and relationships – and the distinctive elements which define the CFO community.
Part of Ernst & Young’s EMEIA CFO program, the study is based on a survey of 669 CFOs across Europe, the Middle East, India and Africa, in addition to a series of in depth interviews with leading CFOs and key stakeholders.
- updates the ‘scorekeeper’ to ‘strategic partner‘ story and addresses what strategic partner really means
- challenges the commonly accepted wisdom of CFOs being CEOs in waiting
- addresses the elements to building key stakeholder relationships
- addresses the CFO as the ‘public face ‘of the organisation, despite lacking critical communication skills
- describes the essential ingredients of a leading CFO and guidance for the aspiring CFO
- and looks at CFO demographics and attributes
About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 144,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.
Ernst & Young expands its services and resources in accordance with clients’ needs throughout the CIS. 3,400 professionals work at 16 offices throughout the CIS in Moscow, St. Petersburg, Novosibirsk, Ekaterinburg, Togliatti, Yuzhno-Sakhalinsk, Almaty, Astana, Atyrau, Baku, Kyiv, Donetsk, Tashkent, Tbilisi, Yerevan, and Minsk.
For more information, please visit www.ey.com.