Is an Accounting Background Important for Today's CFOs?
Over the years, I’ve had many discussions with public-company CFOs that went something like this: Me: So tell me about your background. The CFO: I came up through investment banking (or business development, or FP&A, or treasury — anything but accounting). Me: No accounting? The CFO: No. I understand accounting, but I don’t have a degree and never really had any formal training. Me: How do you feel about signing off on the accuracy of your financials, at some professiona ..
It’s pure and simple: Leadership and strategic ability are more important than technical accounting skills for today’s CFO.
That perspective is based on an insider’s view of the financial officer executive search process, the increased emphasis on CFOs by boards of directors as part of CEO succession plans, and the current cultural influences on business leaders’ overall decision making.
After nearly two decades of recruiting CFOs and having personally interviewed thousands of financial officers, I see a clear pattern emerge in what separates the highly successful from the mediocre. The big themes are perseverance through adversity, taking the initiative to architect important strategic projects, and consistent development of staff.
Highly successful CFOs always have a trail of talented people who formally worked for them who have gone on to CFO jobs of their own, often surpassing the accomplishments of their former boss.
I once interviewed the former treasurer of a major automotive company who had been adamant about refinancing debt before the credit crisis, when no one thought it was a good idea. This person would not take no for an answer and in effect wore down the leadership team with that point of view, until they gave in with the green light. It could be strongly argued that this single decision saved the company. This example highlights leadership, strategic know-how, and perseverance.
The emphasis by public-company boards of directors on having a robust bench of succession candidates for the CEO position has thrust the CFO chair into the spotlight as an obvious first or second contender. This has evolved the Fortune 1000 CFO role toward strong leadership and strategic skills and away from the traditional view of the accounting-focused finance lead.
Conversely, companies that still insist on a CPA and strong technical accounting backgrounds for their CFO usually do not consider the finance chief in the CEO succession plan.
Different CEOs employ their CFO in different ways, but the clear momentum on succession planning at public companies places leadership and strategic abilities above technical skills.
This has also been made possible because Sarbanes-Oxley heightened the importance of the corporate controller position. We see many more chief accounting officer titles for public companies, and the positions are filled with highly talented and technical people who manage the controllership function in support of the CFO.
Finally, there is a strong pull in our culture toward short-term thinking. It pervades every aspect of life, from government and politics to business, economics, and the media, and all the way to healthcare and spirituality. Everyone is looking for a quick fix for the latest colossal problem.
This trend has heavily influenced the CFO position over most of the last 25 years. The role historically focused on stewardship of the backward-looking financial results, forward-looking financial projections, and the related funding and financing in support of those projections. Mix in tax planning and investor relations activities, and you get a strong CFO who can manage accounting, financial planning and analysis, treasury, corporate development, and IR, to the applause of a satisfied CEO and a supportive board.
Now, fast forward to 2016. The pressure on CEOs and CFOs to produce results now and avoid missteps or PR disasters (see Chipotle) is almost unmanageable. The importance of a CFO with leadership, strategic vision, conviction, and character, who focuses on the long term while being flexible and aware to address short-term pressures, cannot be understated.
In summary, the CFO is a key value creator for an organization. The highest priority for unlocking value for today’s finance chief should be placed on leadership and strategic abilities.
The evidence of the key skills that set the high-performing CFOs apart, the focus on the CFO in CEO succession planning, and the cultural pressure on business decisions all point to leadership and strategic abilities as the most important skills for a chief financial officer.
Josh Wimberley is the managing partner of LeadChange, an executive recruiting firm focused on financial officers, and the co-founder of Lead5, a web application providing executives with a platform to discover, assess, pursue, and share career opportunities.