How the CFO Position Continues to Evolve

The CFO role goes beyond financials. When hiring for this position, considering potential is just as important as technical skills, according to a new report from Egon Zehnder. Let’s take a closer look inside the study.

June 2, 2023 – The last few years have challenged the chief financial officer role as navigating often unpredictable economic and geopolitical scenarios while striving to meet the expectations of the CEO, the board, and shareholders amplified its complexity, making this position increasingly multifunctional and strategic. A new report from Egon Zehnder’s Ângela Pêgas and Bruno Carrasco says that as new competencies have been added to the CFO playbook, the expectations placed upon these executives have also evolved, leaving many clients with this question: Is it sufficient to focus only on the technical skills of candidates when choosing a new CFO?

“Undoubtedly, a highly technical and qualified profile is a starting point,” the Egon Zehnder report said. “However, for a successful hiring, considering an individual’s potential is just as important as their technical expertise. The focus is on discovering how a person can adapt and develop not only in the present, but as circumstances change over time.”

Egon Zehnder says it assesses those traits through its “potential model,” a methodology that examines individuals across four dimensions: curiosity, insight, engagement, and determination. The firm says that having this level of clarity helps organizations determine which talent best suits their current and future needs, leading to more confident decision-making.

The New Competencies of the CFO

While future potential is a valuable tool for making the right hire, it is also essential to understand the broader context and how the role of CFO is evolving:

• The function has broadened to act as a co-pilot in the organization, according to Egon Zehnder. This includes providing recommendations to the CEO and supporting institutional initiatives of human nature that motivate teams and ensure high performance.

• “Another characteristic is greater flexibility of thinking and action,” the Egon Zehnder report said. “CFOs must be deeply curious about the world around them—lending agility, pragmatism, and openness skills to new scenarios in local and global contexts.”

• More recently, CFOs have embraced the role of bringing the ESG agenda into the company due to their proximity to shareholders and potential investors, as well as considering the requirements of the market. “They are deeply involved in the ESG strategy, identifying connections between ESG performance and company results, and defining the best way to communicate with internal and external stakeholders,” the report said.

• Finally, Egon Zehnder points to the growing digitization also plays a defining part in the CFO function due to organizations’ increasingly need for a deep and real-time view of their performance, calling for an ability to use algorithms in decision-making. The firm says that this skill will facilitate the CFO’s work as the business co-pilot, strategy formulator, and people leader.

Blending Leadership Archetypes

Drawing from Egon Zehnder’s work with thousands of CFOs over the years, the firm has outlined four CFO archetypes. The firm says that expanded capabilities of the role, however, require highly flexible leaders who can adapt to circumstances and lead beyond what they were traditionally prepared for. “In this context, the four archetypes can serve as additional tools in the CFO’s toolbox, but the prevalence of each archetype will depend on the moment and the executive’s adaptability skill,” the Egon Zehnder report said.

1. Operational/Transformational CFO. Generally, this profile has a more directive style to achieve rapid results, according to the Egon Zehnder report. “Works well with externally oriented and highly strategic CEOs,” the report said. “Typically, brings experience in roles such as operations or general management, being knowledgeable in different businesses and with strong industry insights. May also have a robust track record in leading transformation, an action-oriented mindset, and ability to mobilize the organization for change.”

2. Corporate Strategist CFO. Egon Zehnder explains that this individual plays a crucial role developing and executing business strategy. “This CFO has a broad understanding of the company’s goals and market trends, uncovering new business opportunities,” the report said. “Critical thinking is essential for this archetype—it needs to strategically evaluate financial and operational information to identify growth opportunities and potential risks. Moreover, this CFO profile has a strong external reputation and relevant experience in resource allocation, investments, and growth or restructuring strategies across a portfolio of assets and/or businesses. He or she may have been prepared within holding company structures with diverse lines of business.”

Related: Financial Services is Booming, CFO Role Continues to Evolve

3. Super Controller. This used to be the most common CFO archetype, the Egon Zehnder report says. These individuals possess a deep grounding in accounting, processes, systems, and controls, and are typically more efficient in situations where governance and controls require significant attention and market trust needs to be restored.

4. Externally Focused CFO. This archetype is generally more efficient when having strong functional teams below or around them to support key finance functions such as accounting, FP&A, treasury, taxes, etc. This type of CFO tends to have significant experience in M&A, capital markets, investor relations, extensive external networks, independent thinking, and strategic insight. In addition, they may have a background as a former banker, strategic consultant, etc.

Selecting Your Next CFO

An assertive hiring process doesn’t happen overnight, and it’s crucial to analyze where the organization currently stands, where it wants to go, and how the CFO fits into this puzzle.

The Evolving Role of the CFO
Given the speed at which market conditions, business strategies, and operational structures have changed in recent years, businesses are more aware than ever of the crucial role the chief financial officer plays in shaping and driving a company’s strategic direction. A just-released report by BoardEx of ‘The Role of the CFO 2022’ examines more than 1,400 CFOs who lead major publicly traded companies across 16 countries around the world. Let’s take a closer look.

Egon Zehnder’s Anna Auerbach and Cesy Cenudioglu wrote in a recent article, that it may be interesting to add some questions to your selection process that can assist recruitment teams: What are the underlying themes that drive the individual? What inspires them or gives them energy? When are they at their best? “These questions will help uncover the type of person the candidate is and how they may behave going forward,” the firm said. “As organizations evolve and expectations on the CFO grow, it is increasingly clear that a highly technical profile will not be the sole pointer of success. At the same time, it’s important to keep in mind that most of these executives were not traditionally prepared to play roles so distinct from the original core of the function. The ability to have an impact on the organization is greater in the co-pilot seat, but the potential that each leader brings to the role must be considered. This will make all the difference in the long term for organizations.”

“The modern CFO is not only a technical and tactical leader but also a strategic leader who must be curious, agile, open to new ideas, and capable of inspiring and leading their team to ensure high performance,” the Egon Zehnder report said. “The end result is a multifunctional, adaptable, and high-impact CFO role where an individual’s potential is as important as their technical skills.”

Egon Zehnder currently ranks as a Top 5 global executive search firm, according to Hunt Scanlon Media. With more than 500 consultants in 68 offices and 40 countries around the globe, Egon Zehnder works with public and private corporations, family-owned enterprises, and non-profit and government agencies to provide board advisory services, CEO and leadership succession planning, executive search and assessment, and leadership development solutions. Since 1964, the firm has been at the forefront of defining top leadership in the face of changing economic conditions as well as major transitions in the executive search field.

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

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

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