The silos of technical, commercial, and shared services in the finance function are creating a problem. In ten years’ time, it will be much harder to find well-rounded finance talent. As discussed in a previous post, this increasing focus on specialisms within the function are hindering succession planning.
Currently, the most common route to becoming CFO is to come up through a group finance role, move into FP&A, followed by getting divisional FD experience, before heading finally towards the number one position. But with the development of specialisms, what does the future path to the top look like? Where will the next CFO come from?
The responsibilities of CFOs are now less around business performance and more about being results-oriented. If success means a focus on more than just the numbers, perhaps we’re most likely to see a commercial CFO in the top spot. They will be outwardly facing; the ones dealing with analysts, the media and the city, and the ones looking at the strategy and direction of the business.
This theme was echoed in the results of this years' BIE finance succession planning survey. The finance professionals we spoke to felt the next CFO would come from commercial finance (33%), followed by group finance (29%) and FP&A (26%).
If the next CFO is coming from a commercial finance background, will they have the technical experience that’s also necessary to be successful at the top? The reality is that they won’t.
In this scenario, it’s likely that a commercial finance CFO would be reliant on having a number two - a Director of Finance. With a highly organised and process-oriented approach, they would act as the inward facing CFO. They would be responsible for running a tight ship, meanwhile leaving the outward facing CFO to drive the business forward.
However, the challenge with this partnership is that there has to be complete trust between the outward facing CFO and the inward facing Director of Finance.
How the CFO sits within smaller companies would be more of a challenge, and maybe they continue to have more rounded skills than people who come up through the ranks. It would also be fascinating to see how PE firms deal with this. Does the CFO revert back to just being a bean counter and ensuring that all the covenants are met and the business keeps on track, and the CEO has to play more of that role of managing the PE firm and the outward direction of the business.
In the end, who makes it to the top spot may just come down to personality. There are two types of people in finance. There’s the more introverted person, who wants to look internally and a run a tight ship. Then there’s the more extroverted person, who wants to go out and about and drive the business forward.
The CFO will be part of the board and need to be able to interact with the other members of the board. Being outgoing, gregarious and able to speak their mind will help them get their voice heard. But on the other hand, introversion helps with focus on financial rigour. Ideally, the CFO will be able to adapt their behaviour at the right times to do both.
Perhaps there’s a bigger question here: how does an individual’s personality affect their career in the finance function? The extroverted individual may be more likely to come into the business eager to build a relationship with the CEO. How does this impact on their ability to reach the number one spot?
Though currently investment is going into commercial finance, there is an expectation that at some point the focus will switch back to cash management. This means the CFOs of the future will need to have the rigour that comes with reconciling the balance sheet. Organisations need to find ways to help balance the breadth and expertise across all financial disciplines to enable people to build up the experience needed to make an impact in the top spot.