LONDON, 11 MARCH 2011 - It might be a new way of putting it, but according to new research, the term describes what the next generation of finance chiefs will need to aspire to be in order to meet the challenges of the future.
In the view of Ernst & Young, CFOs will be working in an environment where "a volatile financial market and regulatory change, globalisation and the rise of emerging markets continue to reshape the competitive landscape and redefine organisational strategy".
In that context, the CFO is faced with a choice: retreat into the traditional silo of finance and protect the bottom line, strip out costs and serve as a brake on any excesses on the board; or, adapt to the new reality, plug any skills gap they might have, and position themselves as leaders of the finance function. For many CFOs this won't be a choice at all.
For companies, too, there is a choice: rely on importing finance chiefs from outside the corporate culture, or develop a programme to spot and develop talent within the existing organisation. Again, for most it's now a no-brainer.
In compiling its report, the firm says that it sought to diagnose the biggest issues facing CFOs in the future, and to develop a list of key attributes and skills that any aspirant to the position will likely need. Clearly, it's not a short list.
Tellingly, two thirds of the respondents to the wide-ranging survey now believe the title CFO no longer adequately describes the role. Indeed, the survey shows that in order for an up and coming finance professional with their eye on the top job to succeed a lot of boxes will need to be ticked.
It's long been held that those looking to reach the CFO spot need a 'balanced CV'. And that has often been the advice handed down by incumbent CFOs to the next generation: get as much experience as you can, immerse yourself in all aspects of the business (not just within the finance function).
The vital attributes required of tomorrow's CFO are defined as the following:
• Gain a breadth of finance experience
• Develop commercial insight
• Seek out M&A experience
• Obtain a balance of traditional and non-traditional skills
• Develop leadership and team-building skills
• Get international exposure, particularly in emerging markets
• Gain experience of finance transformation initiatives
• Get exposure to the market and its stakeholders
• Build effective relationships with the board
Of course, while the aspirant CFO is gathering experience and building relationships across the organisation it means little if their efforts aren't recognised. The research shows that amid all this, a new element of group CFO role has begun to emerge: talent spotter.
Among the respondents, 82 percent agree that CFOs have a duty to mentor and coach prospective finance leaders within their company. "It's a core function of the CFO role to make sure that you have capability in the organisation, and that you get involved in that at all levels," says Helen Kilpatrick, director-general of financial and commercial at the Home Office in the UK. "You need to make sure that you have that pipeline of talent over the long term."
Boards and investors now expect senior members of the management team to take responsibility for succession planning in their own department. Indeed, given the amount of time the CFO at mid market level and above will be expected to spend on investor relations, technology, strategy and operational matters, it's a wonder any CFO would find the time to spot, mentor and develop the next generation of finance talent.
Not that CFOs are feeling sorry for themselves. "You have to find the time for talent development, because it's too easy for it to slip down the agenda," is the view of Jean-Marc Huet, group CFO of Unilever. "In a large global organisation, you're only as good as your team. If you don't invest energy in them, you might save time in the short term, but you're storing up problems for later."
And it's interesting to note that talent development is now increasingly seen as a key performance indicator for the CFO. Many finance chiefs now accept that a failure to spot and develop talent will be a black mark against them, but also are more than aware of the difficulties.
Succession planning is by its very nature long term. The results of careful and clever staff training and development are usually not immediately apparent and they won't make for exciting reading in the annual report. But board colleagues and, increasingly, investors want to see the CFO taking responsibility for this. There is increasing evidence that "high potential" programmes do deliver long term benefits.
Hartmut Hillebrand, senior vice president of global head of HR for finance at SAP, says these programmes must reach beyond finance and -- crucially -- focus on finding the best people early.
"In order to build candidates that have the necessary breadth of experience, companies need to start very early," he says. "If you rotate young, high-caliber professionals around into different functions and locations, they start to gather the experience that will give them the foundation for senior finance roles."
And that is the overarching message of the survey -- the next generation of finance leaders need to gather all the experience they can. And in order to do that, they need the help and support of their organisations through talent management programmes that recognise barriers exist. And given that one of the report's key findings is that "experience beyond pure finance will define the top contenders", surely businesses owe it to themselves and their employees to take a lead in this and focus on aiding cross-functional development.
Indeed, it may be that some companies, in seeking long term efficiencies, may be robbing themselves in the long term. Revealingly, the survey shows there is a danger that the transformation projects so beloved of corporates may be raiding the breadth of skills the next generation need. The move towards shared service centres is a case in point.
For companies of a certain size, levels of inefficiency increase as the business grows. Particularly if the company grows internationally, tiers of unnecessary support services can soon embed themselves in the business structure. Shared service centres offer a way of taking these processes out of the business. The model is simple: take processes common to various parts of the business and centralise them in one place. The result: leaner business model with reduced cost.
Under the shared services model, divisions are then freed up to concentrate on delivering operational excellence without having to devote investment and resource to the various back office operation now covered by the SSC. But the research shows that despite the sizeable benefits, these transformation efforts could impact the long-term talent pipeline.
"By migrating transactional processes to centralised or outsourced providers, organisations may no longer be giving finance professionals experience of the fundamental skills of finance," the survey finds. "Also, the big project experience of implementing and managing a shared service center is increasingly becoming a core competence for senior finance professionals."
However, the flipside of this is that the process of identifying areas for transformation and implementing that change can present an excellent opportunity for aspirant CFOs to increase their skill set.
"Talent management programmes that enable finance professionals to manage this type of project and include temporary rotation into shared service centers can help to fill these gaps."
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