The Evolving Role of the CFO Part 2: How to Find Your Next-Level CFO

As we discussed previously in this series, The Evolving Role of the CFO Part 1: Making the Shift from Reporting on the Journey to Leading the Way, the role of the CFO is dramatically changing.

This is due to many factors, but leading the way is digital transformation, the war for talent and the disruption we’re seeing in virtually every industry.

These changes are requiring CFOs to reach beyond their traditional role as reporters of the financials and advisors to CEOs and into a new role as key strategic growth advisor, innovation leader, calculated risk taker and even creative thinker.

Supporting the CFO in succeeding in this new role is access to more decision-making data than ever before, which, if they know how to use it, allows CFOs to look further into the future, quickly analyze information and provide more reliable strategic growth guidance to the company.

And that’s the key: If they know how to use it.

At McKinsey & Company’s 2019 CFO Forum hosted by Kapil Chandra and Matt Stone the theme was “Reinventing the CFO” and Stone, reflecting on the event during a post-forum podcast had this to say when asked what he found most provocative about the discussion:

“[What stood out to me is] the capability building that’s required in the finance function, in terms of the new skills that are required around data science, analytics and so on. One of the phrases used by one of our colleagues was, ‘The future of finance is finance quants hacking the business.’ What that means is not spending your time controlling the numbers, but rather being the one that can take all the different data sets and constantly look for new insights and really going toe to toe with the business and with the other parts of the organization to ask, ‘Where’s your performance? Where could it be better?’ and being a constructive challenger to the business.”

It’s the shortage of CFOs who have built this capacity and who understand to how to support the organization in new ways that’s making finding a next-level CFO extremely difficult for companies.

In truth, the market isn’t flooded with this type of CFO, and those who do have the experience and have already taken a company to high-level growth, often don’t want to repeat that role at a new company. They’ve been there, done that and their skill has bought them the freedom to move onto new adventures. 

Adding to the challenge of hiring a next-level CFO is the high cost. Not only the large six-figure salaries they demand and deserve, but the recruitment cost of finding the right candidate and the potential cost of making a bad hire.

Additionally, a company may need to make that investment multiple times over the years as the turnover rate for CFOs is high.

According to a 2017 report by executive search firm Spencer Stuart, “14% of Fortune 500 CFO positions turned over in 2016” and “the Fortune 500 saw the highest annual CFO turnover in 2008, when 19% of CFO positions changed hands.” A 2016 Russell Reynolds Associates study “revealed that the average time in the portfolio company CFO role is less than four years.”

So, given the skills companies now require from their CFOs and the challenges of finding and keeping the right individual, how should organizations go about the process of securing their own next-level CFO?

Desire vs. Reality

The complicated role of the evolving CFO means that companies have a high set of standards and parameters for filling the position. Pending the company’s goals and situation, they (and in some cases their boards’) desire candidates who check multiple boxes, including:

• Local (to minimize turnover and hiring cost)
• Expertise in the company’s industry
• Experience working with public companies
• Experience working with private investors
• Proven specific growth experience (e.g. has already taken a company through an IPO)
• Held CFO position previously

Along with these background and experience requirements, companies seek CFOs who have the attributes needed to be successful as one of today’s evolving CFOs. They want to see candidates who are:

• Independent thinkers
• Quick learners
• Strong intellectually
• Collaborators
• Problem solvers

They also need candidates who have the personal presence and leadership and people skills to stand in for the CEO when necessary.

Even though these requirements are essential in many ways, it’s a tall order.

Thus, the reality is that holding onto this long list of requirements too tightly will likely prevent a company from finding its ideal next-level CFO. Especially, if that company isn’t in a major market, sexy industry (a.k.a. technology) or large ($200M+).

The Keys to Attracting the Next-Level CFO of Your Dreams

Clearly, attracting and securing a next-level CFO is difficult. The good news is that search firms have found that if a company is willing to compromise – and get creative – they can find the right CFO for the position: A CFO who can meet the challenges of this new and evolving role, even if they don’t check all the boxes.

To succeed in the search effort, it’s vital to emphasize attributes over experience. Here’s how:

• Don’t be too concerned with industry experience: A CFO with the right attributes is a go-getter and will do the work necessary to become familiar with your industry – likely before their first day on the job.

• Offer commuting as a way to attract a CFO who might not want to move to your location:  Some of the most experienced CFOs – and who do already have the next-level experience you’re looking for – may be happy to live where your is located if it can be part time. Side benefit: If you find a CFO from outside your area and allow them to commute, you will also have a CFO who’s solely focused on your company 24/7 during the week.

• Let go of requiring specific types of experiences: Thanks to the shortage of next-level CFOs, those who have successfully led a company through an IPO, for example, were in many cases doing it for the first time. It’s one of the reasons a seasoned next-level CFO is so difficult to find; they’ve been through that intense experience and they’re ready to move on. So, keep in mind that other CEOs and investors who wanted to take their companies to the next level of growth, very likely took a chance on someone less specifically experienced too. Of course, it was a very risk-reduced chance given the qualities they did demand, but a chance nonetheless.

• Be willing to consider CFO consultants who do have experience in your industry: Often CFO consultants specializing in a specific vertical are looking for a new challenge and enjoy working with younger, high growth companies until a full time CFO is brought on. However, it will be important to find the right individual.

• Put brainpower above all else: Again, hiring for the right attributes over past experience can be a true win-win for your company and your new CFO. The question is how do you shape the individual with those desired attributes into a true next-level CFO?

Mentoring & Coaching: Possibly the Best Path of All

Whether it’s with an outside candidate or your existing internal top financial department performer, shaping an individual with the right attributes to be successful as a next-level CFO can be a wise approach.

So, what is the case for mentoring and coaching? And what does going that route look like? We’ll answer that question next time.

Did you miss any part of our Evolving Role of the CFO series? Find them here:

PART 1 – The Evolving Role of the CFO: Making the Shift from Reporting on the Journey to Leading the Way

PART 3 – The Evolving Role of the CFO: Is Your Next-Level CFO Already Working for You?