As CFOs Gain in Stature, Succession Plans to Replace Them Falter

The role of CFO has steadily evolved over the past decade, according to recruiters who specialize in finding the best of them. David Westberry of BridgeStreet Partners discusses the rising influence and broadening duties of modern day CFOs. We also include some related findings from a recent Korn Ferry report. 
As CFOs Gain in Stature, Succession Plans to Replace Them Falter

March 19, 2018 – As with all things in the business world, the role of a CFO has evolved over the past 10 years.

Gone are the days of the CFO being the top accountant focused on the timely and accurate recording of transactions to generate a set of financial statements in accordance with GAAP.

While the accuracy of the financial information of an organization today is no less important than in years past, the use of the information has taken on major differences.

“Highly successful CFOs in today’s environment are expected to play a much broader role,” said Dave Westberry, managing director of BridgeStreet Partners, a boutique search firm founded in 2007. “These individuals are routinely looked upon to serve as a partner to the CEO and advisor to the other members of the senior management team. CFOs also take the lead in helping each business unit leader fully understand the financial ramifications of their decisions on their respective units, as well as the business as a whole.”

The CFO cannot accomplish these tasks without relying on highly competent individuals to lead each function within the financial department, such as the controller, financial planning and analysis, tax, treasury and others. “The additional leverage provided within each function allows the CFO to serve in capacities greater than the traditional job description,” said Mr. Westberry.

Vice President, Recruiting, Wanted at Chase Bank
You will need to act as a recruitment subject matter expert to design & develop meaningful recruiting strategies to help the development of a qualified candidate pool, including the use of technology and alternative sourcing techniques. Apply now on Ezayo! 

Mr. Westberry specializes in recruiting senior-level executives for companies in the technology, industrial, and service sectors ranging from start-ups to major multinationals. He also works closely with private equity firms and their portfolio companies to help recruit talent. He has recruited chairs and members of audit committees and financial experts for boards of directors.

Broadening of Duties

With top talent leading each function, the CFO is assured that high quality financial information can be tailored to the needs of each business unit manager, the CEO and board of directors, as well as banks, shareholders and other stakeholders. “Having this confidence allows the CFO to spend her or his time concentrating on improving the operations of the organization, utilizing the information for a more predictive approach to financial planning and analysis, and developing a more detailed strategic plan,” said Mr. Westberry. “This broadening of duties has allowed individuals with backgrounds other than accounting to step into the CFO function as operational experience and analytical skills have become the critical skills sought for the role.”

Related: DHR International Recruits CFO for Southwestern Energy

Although this is a positive trend, it also means that less time is being devoted to broadening the experience of each functional head as they become more focused in their respective areas of concentration, especially in middle market companies. “This broadening of the CFO role, while narrowing the focus of functional roles, has a very real possibility of developing a group of seasoned financial professionals that are not qualified to meet the demands of today’s CFO,” said Mr. Westberry.

Transitioning CFOs Seen Fast Tracking to CEO
La Quinta’s naming of Keith Cline as company president and chief executive officer is the latest in a running catalog of completed CEO searches that have resulted in the winning candidate coming from the CFO slot. Korn Ferry took on the search last fall after Wayne Goldberg stepped down from the post last September.

Clearly, this is not the same financial function as 10 or even five years ago. “Today’s CFOs need to face this reality and incorporate into their daily routines the coaching and mentoring necessary to develop the next generation of financial talent needed to lead in today’s ever-changing economy,” said Mr. Westberry.

Lacking CFO Succession Plans

With the role continuing to evolve and gain importance, recruiters say the need for top-flight financial executives is only growing, putting CFOs in greater demand than most C-suite leaders. A new survey by Korn Ferry, however, reveals that many organizations are unprepared to have a successor in place for the CFO role.

The survey of 700 CFOs found that only 34 percent agreed that their company has a succession plan for their role. Further, when asked if there is an internal, ready-now successor, 81 percent of the CFOs surveyed reported that there is none. And yet a recent Korn Ferry analysis found that 51 percent of CFO appointments at the top 1,000 U.S. companies by revenue were filled internally.

“While many companies may not have a formal succession plan in place, they are still relying heavily on their internal options versus external,” said Bryan Proctor, senior client partner and global financial officers practice lead at Korn Ferry. “A formal succession plan can bring great value as it enables strategic development of potential successors and instills confidence in the CEO and board of their succession options.”

Related: Turnkey Search Fills CFO Position for the Milwaukee Brewers

If these survey results are extrapolated to the middle market, which is estimated to be 200,000 companies which comprise approximately $10 trillion of the U.S. economy, the need to develop strong CFOs becomes even more apparent, said Mr. Westberry. Companies tend to promote the CFOs from within based on several factors, he explained, including the belief that an understanding of the company is of major importance.

“Recruiting top talent from outside of the company may not easily fit into a company’s compensation structure and the risk that an outside candidate may not fit the company’s culture,” said Mr. Westberry. “Although all of these factors are important considerations, promoting from within without a formal succession/ development plan will not address the most important factors needed for a new CFO to succeed, such as strong leadership skills, strategic thinking, and the ability to understand and analyze data.”

When asked what capabilities they are most focused on developing in their direct reports, the CFOs’ top responses were leadership skills/executive presence (31 percent) and strategic thinking (21 percent).

“Making the step-up to CFO requires candidates to not only possess strong financial acumen, but general management experience and leadership skills,” said Mr. Proctor. “CFOs who focus on developing their people in these areas will have a greater chance in grooming successors for the CFO role.”

Rise of Data and Analytics in Finance

When asked what their most important strategic priorities are for the year, the largest percentage of CFOs (31 percent) cited the optimal use of data and analytics. A vast majority (84 percent) reported that they are already leveraging data in different capacities, such as helping optimize operations, evaluate risk and analyze customer behavior to drive decisions.

Moreover, when it comes to what CFOs wish they could spend more time on, “data and business intelligence” (BI) was at 23 percent the second most common response after strategy. As CFOs look to instill analytics into the day-to-day operations within finance, different skill-sets on their team may be needed to make the transition. CFOs reported data/BI as one of the three most important capabilities that they are focused on developing in their direct reports.

Related: Phillips, DiPisa & Associates Finds CFO for Spectrum Health

“Because the CFO role has transitioned from recording transactions and reporting results to serving as a partner to the CEO and advisor to the senior management team, the ability to understand and make sense of increasing amounts of data has become a critical skill of a successful CFO,” said Mr. Westberry.

All this gives the CFO role great potential, said Mr. Proctor. “In this age of information and the ability to be more predictive, CFOs have the opportunity to drive key business decisions if they have the tools, data and team to interpret,” he said. “Data and BI can be a huge differentiator in edging out the competition.”

Eye on Diversity

When asked about diversity on their teams, 59 percent of CFOs agreed that their team is diversified enough to reflect their customer base. “This contradicts what we generally see in the market – considering our analysis of the top 1,000 U.S. companies by revenue shows only 16 percent of CFOs are diverse,” said Stephanie Buckles, Korn Ferry senior client partner. “The good news is that our clients are requiring a diverse slate of candidates when recruiting at all levels of the finance function.”

Diversity Hiring Is Lagging At CEO and CFO Levels
Across the executive ranks, five times more men than women were appointed to new positions, according to a report by TRANSEARCH. The study, which looked at more than 3,000 C-level appointments found that only one fourth of newly appointed senior level executives were diverse candidates.

“Diversity in the CFO ranks will continue to improve, at least in middle market companies which offer a better work/ life balance,” said Mr. Westberry. “I cannot remember the last CFO search for a middle-market company that did not have a diverse slate of candidates, not because the client insisted but because of the level of talent.”

“When I received my accounting degree and joined what is now one of the Big 4, approximately 25 percent of my class was female; from what I can tell that number is now approximately 60 percent. Just look at the leaders of several the major CPA firms,” Mr. Westberry said.

Related: Shelli Herman and Associates Lands CFO for the Museum of Contemporary Art

Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; Stephen Sawicki, Managing Editor; and Andrew W. Mitchell, Managing Editor – Hunt Scanlon Media

Share This Article


Notify of
Inline Feedbacks
View all comments