Compelling Insights for Career Opportunities in Finance

 

Increasingly, corporations worldwide are recruiting chief financial officers for their boardrooms. In addition to affecting current CFOs, it’s an encouraging bonus for financial professionals who aspire to become a CFO.

A 2012 Ernst & Young study shows there’s an unprecedented clamor for CFOs to serve on corporate boards. What are the catalysts? They include a challenging economy, government regulations, and the ever-increasing capabilities of CFOs.

“Regulatory pressure is driving a major increase in demand around the world for CFO experience on boards, says Ernst & Young’s EMEIA Markets Leader Jay Nibbe in a press release.

“In many countries, a CFO’s financial expertise is not only highly valued, but also mandatory,” he adds. “Additionally, as companies grapple with a volatile economy and the diverging growth trends of developed and rapid-growth markets, they increasingly want good insights and support for cost, risk, and cash flow management – three areas of focus that fall squarely within the CFO’s skill set.”

However, there are professional risks. A board position must be the right situation with the right timing (more on the risks later).

The report, “CFO and beyond: the possibilities and pathways outside finance,” includes responses from the following:

• 800 CFOs
• A 10-year review of the careers of CFOs at 347 companies with revenue in excess of $5 billion (US)
• Interviews with notable academics, CFOs, and governance experts

The study also indicates current and former CFOs are intrigued. They want to improve workings of boards of directors, develop innovative concepts, and create opportunities for boards to learn dissimilar cultures.

Key findings:

Rising demand for growing number of CFO competencies

• 79 percent of respondents agreed their financial expertise means they are in more demand than ever for board level roles.
• 14 percent of board members from the world’s largest companies studied were serving or former CFOs, up from 8 percent in 2002.
• The proportion of audit committee chairs who are serving or former, CFOs has doubled in the last decade (41 percent in 2012, up from 19 percent in 2002), perhaps reflecting the demand for increased transparency on company balance sheets.

“Although they are crucial, financial skills alone don’t necessarily make for a good board member,” adds Mr. Nibbe. “Many CFOs today have the financial skills as well as a unique combination of analytical, technical and strategic capabilities.”

That explains the trend.

Benefits of CFOs taking on non-executive roles

Seventy-five percent of respondents say a board position provides new perspectives, which enhances their skill sets.

“Experience in a different sector is seen by many CFOs as particularly valuable, with the opportunity to gain knowledge and transfer best-practice across industries,” Mr. Nibbe observes. “There can also be a ‘halo effect’ for those companies whose CFO is serving on the boards of large well-respected companies.”

Professional risks and distractions from core role can be a deterrent

• Despite the benefits, more than 40 percent think it is inappropriate for them to take on part-time roles.
• Board directors are often personally liable if it can be demonstrated that they have neglected their executive duties. For some, the demands of their core responsibilities are too great, and the risk of being overstretched is too significant. As corporate governance legislation becomes more stringent, the time required to be an effective non-executive director is increasing.

Note: Despite the appetite of CFOs to take on non-executive roles, there is a growing mismatch between the amount of time they feel able to dedicate to such a role and the recommendation by corporate governance best practice.

More than half of CFO respondents confirm that they can only spare five hours or less per week on a supplementary role, yet the minimum recommendation from the 2009 UK Walker Report (30 days per year) corresponds to at least that.

CFOs should adopt a long-term view and anticipate board composition changes

• Among the CFO respondents, those who identified themselves as long-term planners were significantly more likely to have taken on additional roles than more opportunistic CFOs.
• CFOs are also taking on board positions at a younger age than they were a decade ago. The increase in those CFOs from the companies studied who have taken on non-executive directorships is most marked among the younger generation – those aged between 40-49 years old.

Mr. Nibbe’s conclusions

“CFOs and future finance leaders interested in taking on a board level role should start early – competition for roles and expectations are rising so career planning is critical. They should do the research and choose the right role carefully and for the right time,” he asserts.

“They should also expect that, over the next decade, boards will increasingly value knowledge of rapid-growth markets, analytics and other dynamic technologies such as social media,” he adds.

“Finally, board recruiters are now looking for deep technical know-how, such as M&A and capital markets. Building deep experience of a particular domain will give candidates a good chance of being matched up with certain positions on certain boards.”

I agree. These are notable career insights from Ernst & Young (www.ey.com), a global leader in assurance, tax, transaction and advisory services. Globally, the firm employs 167,000 people.

Copies of the study can be requested at www.ey.com/cfoandbeyond.

From the Coach’s Corner, from this portal’s Finance category, here’s suggested reading:

• Finance: The Intrigue of Sovereign Wealth Funds
• To Finance Your Startup, How Bloggers Can Impact Your Quest for Venture Capital
• Cutting Costs: 9 Best Practices to Avoid Making Reactionary Decisions
• Tips on Understanding the Mindset of IRS Auditors

“Under capitalism, man exploits man. Under communism, it’s just the opposite.”

-John Kenneth Galbraith

 

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Author Terry Corbell has written innumerable online business-enhancement articles, and is also a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.

 

Study – CFOs Still Calling the Shots in IT Decisions

 

The top IT decision-maker for many companies is not the chief information officer. Instead, the chief financial officer is, according to a Gartner study.

The chief financial officer is becoming the top technology decision maker in around half of businesses, according to Gartner research released in June, 2011, which is entitled: “Financial Executives International (FEI) Technology Study.”

In fact, more IT departments are overseen by the CFO, not the chief executive or other senior managers. But this is ill-advised, and I’ll explain later.

The study’s conclusions:

• 42 percent report to the CFO
• 45 percent IT investment strategies made by the CFO
• In 38 percent, the IT department is managed by the CFO
• In 7 percent, the CFO is the lone decision-maker

“Understand that the CFO views the impact on business process and business enablement as the top technology issues,” said Gartner analyst John Van Decker.

“Therefore, applications and analytics are the top investment priorities, and the enabling technologies that support these initiatives need to be viewed as equally important,” he added.

The study also indicated that analytics and applications are the No. 1 investment priorities by the CFO.

While this trend probably makes financial executives happy, it doesn’t make for best practices.

It raises at least three questions:

• Do such CFOs have the necessary tech knowledge to understand the value of each decision? Sufficient steps have to be taken to ensure due diligence in IT security and other decisions.
• When will CEOs reconsider such strategies because of the negative impacts on the teamwork and morale of IT departments? An IT thought leader will resent such intrusions on the chain of command in organization structure.
• What will CIOs do about it? CIOs must take the proverbial bull by the horns to exert more leadership.

My bottom-line: Agreed, the CIO should adhere to all financial checks and balances. But there should be balance. As with human resources management and marketing whom the chief people often aren’t sufficiently respected, in essence, the top IT decision-maker should be the chief information officer with input from the CFO and other managers.

From the Coach’s Corner, here’s related reading:

• How CIOs Can Get More Respect in the C-Suite
• Tech Trends: CFO’s the Boss, IT Departments Are Disappearing
• Tech Planning: What If There’s A Double Dip?

“Men are respectable only as they respect.”

-Ralph Waldo Emerson

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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.

 

Career Strategies: How to Get a C-Level Job

 

If you’re climbing the corporate ladder and have designs on the C-suite – CEO, COO, or CFO – a Stanford University professor has some excellent advice. In essence, he advises getting a strong, generalist-background in business.

“The higher you get in an organization, the more likely you are to encounter problems from a variety of different areas,” says a Stanford Graduate School of Business labor economist, Dr. Edward P. Lazear.

He believes it’s important to be a generalist, especially for professionals wanting to become a CEO because of the broad issues the job entails. Dr. Lazear contends “those people have to be generalists” according to Stanford GSB News in its Sept. 2010 newsletter.

The economist has won numerous honors, and written 11 books and more than 100 articles. He was an economic advisor to President George W. Bush, and was chair of the Council of Economic Advisors from 2006 to 2009. He’s also counseled the governments of Czechoslovakia, Romania, Russia, Ukraine, and Georgia.

“A good CEO is someone who’s very good, possibly not excellent, but very good, at almost everything,” he asserts.

“People who are most likely to end up in leadership positions are ones who have had many different roles throughout their career,” explains Dr. Lazear. He points out that successful companies make it a practice to give various jobs to talented employees to groom them for leadership. In other words, the broader the skills –the more desirable a person is for the CEO’s role.

A salient skill: The CEOs ability to hire the right people to fill the senior executive’s gaps in knowledge or experience is very important. CEOs must understand enough about the company’s needs in any given area to evaluate, recruit and hire talent.

“Putting together a team is a generalist’s skill. ‘Just hiring someone’ is not so easy,” says the economist.

He believes specific highly visible jobs, such as banking, high-level finance or marketing, are great catalysts leading to the C-suite.

Dr. Lazear says jobs in “publicly observed decision-making situations” puts ambitious people in the right environment at the right time so that others can watch them in action. He believes it’s inevitable that others will become followers as the leader is born.

But he has a warning for an ambitious person – don’t just go through the motions – don’t assume that a variety of jobs or working in a marketing job is enough. He suggests something akin to physical training for the Olympics – increase your strong points in multiple areas so “you can enhance your probability of going into leadership.”

From the Coach’s Corner, here is additional reading:

• 7 Tips for a Young Professional to Become a CEO
• Leadership Strategies to Profit from Employee Respect
• 10 Characteristics of a Successful CEO

“Leadership is the art of getting someone else to do something you want done because he wants to do it.”

-Dwight D. Eisenhower 

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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.

Tech Trends: CFO’s the Boss, IT Departments Are Disappearing

 

Two developments are clearly underway in information technology. Increasingly, the chief financial officer is in charge and IT departments are shrinking in size.

First, regarding the shrinking size of IT departments, a Corporate Executive Board study indicates they’re diminishing in size, according to writer Joe McKendrick  at SmartPlanet.com.  It’s not a cutback in jobs, just a shift in how IT professionals are put to work. He writes companies are either are tapping IT service providers or clouds.

The study indicates IT department will be 75 percent smaller by 2015, and 80 percent of IT budgets will be spent on IT vendors’ services.

What’s driving this phenomenon? Probably best-practices in consolidation as CFOs assume more authority.

A study by Gartner and Financial Executives Research Foundation (FERF) was based on the perspectives of senior finance managers. It’s entitled, “2010 Gartner FEI Technology Study: The CFO as Technology Influencer.”

Findings include:

• Forty-two percent of IT departments report to CFOs
• Thirty-three percent are supervised by the chief executive officer
• Sixteen percent report to the chief operating officer
• Two percent are overseen by the chief administrative officer
• Seven percent to other executives

Most importantly, the CFO has a major say in 75 percent of IT departments and a minor input in 20 percent. In 5 percent, the CFO has no influence.

Part of the problem: Two studies indicate a need for IT pros to get businesslike.

“In most organizations, the CFO and CIO work together daily to finance IT and provide information that supports financial processes, but there is also an opportunity for them to form a powerful alliance that generates more value for the enterprise,” said Bill Sinnett, FERF’s director of research, in a statement.

“The CFO and CIO are well-positioned to work together at generating superior performance from the enterprise,” he added.

The  study makes it clear IT department personnel, especially the CIO, should understand an organization’s big picture and how they can best contribute to the  firm’s welfare via the CFO.

My Biz Coach conclusion from the two developments:  IT success hinges on acculturation with the finance mindset as well as a higher degree of integration with the rest of the organization. It’s different but it’s the wave of the future.

From the Coach’s Corner, more resource links:

• Nervous About Your New Boss? Here’s How to Deal with It
• The 22 Do’s and Don’ts for Successful Negotiations
• 9 Dos and Don’ts for Best Decision-making

“I wasn’t a financial pro, and I paid the price.”

-Ruth Handler

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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.