Where have all the CFOs gone?

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Chief financial officers are made, not born. Their training is long, arduous and unforgiving and their professional lives are constantly exacting. There are no nuances in figures, explains Mark Lewis of Rutherford Cross.

This is why good CFOs often rise to the top of the commercial tree, often going on to become chief executives or managing directors with a huge range of responsibilities to add to their accounting roles. But are they becoming an endangered species?

Increasingly, CFOs are called on to provide strategic guidance and business and commercial leadership in addition to traditional financial management roles as companies emerging into a recovery phase still continue to try to “do more with less”.

And there is no argument that CFOs have had a turbulent few years since the recession really kicked in with a vengeance in 2009, with exponentially growing regulatory pressure, increased public scrutiny and companies which remain in bunker mode.

There is a substantial perception of a talent shortage in the arena of financial expertise, exacerbated by the fact that, at one end, the graduate intake was drastically scaled back at the start of the downturn and, at the other, long-serving CFOs who have weathered the storm are getting ready to hang up their boots.

But just as supply is starting to become an issue, demand for financial talent is increasing as companies gear up and boards are considering their leadership teams to take the company past the survival stage.

Private equity is also competing strongly with public companies for exceptional people and, in a regulation-heavy environment, financial services firms are bolstering their functions to deal with new disclosure, compliance and risk management requirements.

One of the factors affecting the talent pool is that succession planning in finance has not been top of the list in recent years. Pre-recession, CFOs may have had two or three people they felt could step into their shoes. In the years when the hatches were battened down, however, teams were reduced to business-critical levels.

Companies, instead of moving people through a progressive structure, concentrated instead on retaining them and working them hard. The upshot is that the normal CFO progression has effectively missed a generation.

So what can be done? How can enterprises shore up their finance functions and rethink their finance talent retention strategy? Is there anything constructive that can be implemented in the short term?

In-house people development, though it may not have been a priority over the past few years, is important and it is desirable that it re-starts. If the burden on the CFO increases, empowering the teams on the next level down is the obvious first step.

Internal empowerment can be preferable to an external process – bringing someone in can be a quick fix for a CFO, a ready-made solution as it were, but it can have a negative effect on the people below, who see their direction of travel blocked.

Certainly, CFOs may not see the skills they immediately need internally, but they should consider all the options and, if they decide to take the external route, they should include inside people in the process, rather than presenting them with the fait accompli of a new boss.

Interim management can be an option for a harassed CFO. It has been in favour since about the financial downturn as a means of keeping people off the headcount, even though it could cost more than a permanent hire. However, typically this will be a short term fix rather than long term investment.

However they go about it, firms should be thinking now about what steps they need to take to rebuild their finance talent pools to position their companies better for future succession planning as well as maintaining their current talent infrastructure.

Mark Lewis is head of the CFO Services practice at Rutherford Cross, a part of the Livingston James Group, a market leading portfolio of executive search and leadership advisory firms.