VideoTalk about silver linings: thanks to the recession, the core skill set of the CFO has been highlighted like never before. From working-capital management to cost control to scenario planning, the CFO's expertise has proven to be the critical factor in corporate survival. Finance chiefs across the country have also taken the lead in explaining the economic crisis to skittish workers, fielding questions about everything from vendor and customer viability to ravaged retirement accounts. They have strengthened risk-management policies, identified a host of supply-chain vulnerabilities, and found ways to navigate in an environment in which forecasting is virtually impossible. As a result, the CFO role has arguably never been more important, more visible, or more respected.
But will the spotlight continue to shine as brightly as the economy begins to recover? Has the hard-won experience of the past two years permanently raised the profile of the finance chief, and will that translate into rosier career prospects? Most important, perhaps, will CFOs who made the tough calls on layoffs and budget cuts during the recession be able to change gears and help drive growth, be it at their current company or their next employer?
The top finance job has been in the limelight before, perhaps most notably — or notoriously — in the early part of this decade, when CFOs featured prominently in numerous fraud cases. That gave rise to the Sarbanes-Oxley era, during which CFOs became their companies' top cops and an intense focus on internal controls was the order of the day.
No sooner had the dust settled on the regulatory front than the economy began to sputter and then crash, providing CFOs, ironically, with a golden opportunity for redemption — and ascension. Regardless of whether the CFO role was deemed "strategic" (see "Are You 'Strategic'?"), it certainly became more valued.
"The recession has heightened the importance of the CFO because, in most companies, CFOs have had to roll up their sleeves and make sure that the business can survive," says John Leahy, finance chief at iRobot, a publicly traded robotics company with approximately $300 million in annual revenue. "The CFO is really the prime person who needs to protect the franchise."
Onward and Upward?
Nearly half of the finance executives responding to a September CFO survey agree with Leahy, saying their roles have become more important and respected over the past year. A similar number say the recession has boosted their career prospects, and that the CFO role has evolved into a suitably strategic post. (For complete survey results, click here.)
Leahy, who joined iRobot in June 2008, just a few months before the stock market crashed but with the recession already under way, says he has spent a significant amount of time educating employees about the importance of cash-flow and working-capital management. "We literally went through Finance 101, teaching people what EBITDA [earnings before interest, taxes, depreciation, and amortization] is, what operating cash flow is, and what levers each person can pull in his or her role to have an effect on the business," he says.
In a small company without a huge cash cushion, says Leahy, "the CFO has to focus on ensuring the company's survival and rallying people around the idea of controlling costs and aggressively managing working capital." In this process of educating employees, a task undertaken by many finance executives since the recession began, the finance chief has become much more visible to the workforce at large.
At Lockheed Martin, CFO Bruce Tanner has been reaching out to the company's far-flung finance team and thousands of employees by nearly every means possible: with Webcasts, podcasts, postings on the company Website, and town-hall meetings. The company also created an internal-communications post dedicated to the finance department.
"There was so much going on in finance, we wanted to make sure we had a line of communication to the rest of the organization so that everyone understood our goals," says Tanner. One such goal: making sure bids for new business reflect the changed economic environment and don't expose the company to too much risk.
Don Mulligan, finance chief at General Mills, the consumer-packaged-goods company, says the recession has provided an opportunity for the finance department to continue to preach its gospel of gross-margin management throughout the company, urging employees from all parts of the business to find ways to reduce their costs in order to free up cash to reinvest in product development. "We've galvanized the entire company around the idea of margin management," says Mulligan.
The finance department has also taken advantage of the credit crisis to further educate employees about return on capital and the fact that cash, not just earnings, is a critical metric. "The crisis has certainly raised the importance of that key financial measure and, by extension, the finance organization," says Mulligan.
But if the recession has increased the stature of the CFO, it has not yet yielded many opportunities for advancement. On the plus side, CFO turnover (both voluntary and involuntary) has dropped over the past year as risk-averse finance executives have decided to stay put and boards have declined to replace top management. Indeed, slightly more than one in five CFOs say the recession has hurt their career prospects by creating fewer opportunities within or outside their companies, a sentiment echoed even more strongly by vice presidents of finance and controllers. "Over the last year or so, the market for C-level executives has really slowed or even frozen," says Leahy.
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