How CAOs and Controllers juggle bigger roles and greater unknowns

When CAOs and Controllers look internally for their successors, they often realize there are few viable candidates that are actually ready to step up. 

Ironically, one big reason is that the senior finance roles are continuing to grow in importance, with the CAO becoming the go-to person for new incremental projects. The problem is a disconnect with what is happening below, said many at the roundtable. As functions have become more complex, they tend to hold on to those who are “tried and true.” The result is an emphasis on specialization and a narrowing of experiences and skills. 

CAOs and Controllers have been pushing back, in part by having formal talks with potential candidates. At times, they have to encourage, even force, more movement from function to function and from domestic to foreign postings. “You can be a specialist, but you have to be competitive on a number of fronts,” one said.

When someone seems to be on the right path, another said, “we try to give them different opportunities to step up.” If no one pans out, though, it’s time to go outside. But before you get to that point, another attendee cautioned, be sure you haven’t overlooked someone good.

“There can be resistance to a lot of potential candidates, that they don’t check all the boxes. But maybe you didn’t either. We have to be open to take chances.” Are they smart? Do they have the ability – and the willingness – to learn? Do they have a high emotional quotient? 

“We also have to get people excited about the function: it has a great culture, it can be the place to develop the right mix of skills and it does provide fair rewards,” said Roselyn Feinsod, EY People Consulting Finance Leader. Getting people to commit can be difficult, though. Coming out of the pandemic and with the cutting of cords that led to the Great Resignation, many people now in the profession aren’t “looking for a destination so much as just always looking.”

As for succession to chief financial officer, fewer CAOs are getting the nod than in recent years, said Jim Lawson, Co-Leader of the Global Financial Officers Practice at Russell Reynolds, the executive search firm. For one thing, both CAOs and Controllers are very much needed in their existing roles. For another, investment bankers are increasingly being tapped for CFO, valued for their capital allocation strategies. 

That said, there still is a path to CFO for both CAOs and Controllers, albeit narrower than before, said Juan Uro, Leader of the EY Center for Executive Leadership.

In the running or not, CAOs and Controllers have to raise their profile, and that of the function, if they want to get a seat at the table and better claim their new mantle of value creator.

After all, said one executive, “we have an enterprise-wide view and can be a trusted counselor to the CFO. But we have a bad habit in telling our story often diverting to our expert quadrant when we talk about 10Ks and away from our other quadrants.” 

It is very important to “get more airtime” with the CFO and at some point have a direct conversation about the role you can play. One attendee recalled his CFO telling him to shake things up. “I want you to be the chief meddler.”

To the extent that CAOs and Controllers can indeed raise their profile, they may well make it easier to find their successors.

One financial executive is still pinching herself about turning AI loose in a straightforward search for anomalies in a data set. “How did I learn how to use AI? I asked it to teach me and it did. And it saved us a lot of work.”

But another executive, recalling a far more complicated software integration, isn’t as nostalgic. “We got lots of scrapes and bruises. I’m not saying it was a total loss. But we grossly underestimated the cost of some things.”

AI is still in its infancy, and its results are clearly mixed. To unlock funding, there is often a big push to make the business case and estimate the return on investment.

But like the internet in the 1990s, “we don’t yet know what the upside is,” said Corson, the roundtable’s host. “So how do you prepare for the unknown?”

You begin to find your way by not delegating AI to the tech side of the firm, said David De Cremer, Dean of Northeastern’s D’Amore-McKim School of Business and author of “The AI-Savvy Leader: Nine Ways to Take Back Control and Make AI Work.”

Finance executives, not IT, need to play the key role because their business perspective will be indispensable in hitching AI to the right tasks, De Cremer said. “The next great leadership challenge is creating AI value.”

You need to start with a business question. Will AI help with that question, by “augmenting” what you know by doing something with the data that you can’t do, or will it just replace your effort with its own, making the process faster but not “smarter”?

Keep the human at the center of the process, De Cremer said. “You can look at data all you want but at some point, you have to make a decision” about what it means and what to do with it. “AI can’t make choices – it has no judgment.” Put another way, the best practice is “humans first, AI second – it makes humans better at being human.”

And you also have to put soft skills to work, he said, encouraging resilience, adaptation, agility, curiosity and proactive problem-solving in your people. Create “sandboxes” for them to learn what AI can and can’t do. And be patient. “Trying implies failure.”

Short-term frustrations must give way to a broader view for investment. The real payoff, De Cremer said, will come only when AI “helps the entire organization, and that’s going to take some time.”

The attendees were brought up to date on changes emanating from Washington by two veteran observers of regulatory and tax matters: Mark Kronforst, EY Americas Director of SEC Regulatory Matters, and Ray Beeman, Washington Council Ernst & Young Practice Leader.

The Securities and Exchange Commission is still a work in progress in terms of setting a full agenda, filling its senior ranks under its new Chairman, Paul Atkins, and adjusting to the loss of 15 percent of its staff (all voluntary at the time).

Much of the SEC’s focus since the inauguration has been on matters related to cryptocurrency and other digital assets, Kronforst said, adding that it is developing into an agency-wide priority. Rulemaking projects related to digital assets appears likely, he added.

Some changes are already clear, Kronforst said. SEC staff members have indicated that the agency is open for business “and is very interested in having conversations” about potential ideas for change. Comment letter volume appears to be down although full statistics are not yet available. Capital formation is expected to be a significant focus of this Commission, which will likely include efforts to reduce burdens on smaller issuers and making IPOs more attractive.

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