Hard Evidence the CFO Role Is Getting Tougher?

Analysis suggests aspiring CFOs should make lateral moves outside of finance to get the broad experience companies are seeking today.
David McCannApril 1, 2019

Most CFOs likely would agree that the job has only gotten tougher in recent years. While that’s a subjective viewpoint, a new analysis may offer some objective evidence for the statement.

Using publicly available information, KPMG studied the backgrounds and experience of the CFOs at 100 technology and communications companies globally, as well as the immediately prior finance chiefs at the 75 companies for which such information was available.

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The chosen sectors are “currently at the front of digital disruption, where continuous change, constant adaptation, and rapid innovation has become part of everyday life,” KPMG wrote. It added that the sectors “offer very relevant learnings for other industries that have yet to feel the full force of digitization.”

Here are some notable differences between the current and former CFOs, all of which speak to companies’ wish to have more broadly experienced executives in the role:

  • 79% of the sitting finance chiefs were external hires, compared with 58% of the prior ones.
  • 40% of the existing CFOs had “strategy experience” prior to taking the job, against 24% of the former ones.
  • 36% of the new-generation finance chiefs had prior operating experience, where the same was true for just 20% of the ex-CFOs.
  • The proportion of today’s CFOs with MBA degrees is 55%, 11 points higher than their predecessors.

The premium placed on operating experience may be particularly relevant to a current CFO’s success.

KPMG defined “outperforming” finance chiefs as those who satisfied both of two criteria: (1) their company outperformed the NASDAQ composite index during the CFO’s tenure; (2) the CFO either remained in the role for at least five years or moved up to a new, higher-level role.

While the overall outperformance rate was 41% for the entire dataset, it was 50% for finance chiefs with prior operating experience.

KPMG advised aspiring CFOs to “consider a lateral move outside the finance function to build strategic and operational experience prior to pursuing a CFO role.” The firm further recommended that they “be willing to look outside of their company, and even their sector, to accelerate their career path.”

Additionally, KPMG offered several questions that CFOs should be able to answer in order to position themselves for success:

1. Have you prioritized the key technology or market trends that will have the biggest impact on your company’s P&L in the next 36 months?

2. Are you actively involved up-front in strategy formulation efforts driven by your CEO, COO, or chief strategy officer?

3. Have you provided clarity on the financial requirements and expectations of delivering on your strategic priorities?

4. Are your strategic, financial, and operational planning processes closely aligned with common metrics and quarterly review cycles?

5. Do you manage your investments (opex, capex, and talent) allocated to “run the business” separately from those allocated to “transform the business”?

6. Do you know how your company’s portfolio of transformation initiatives is performing versus expectations since last quarter?

7. Can you quantify the ROI on your company’s investments in key initiatives that are driving operational or transformational change?