What’s next for CFOs?
By J. Carlitos G. Cruz
First Published in Business World (1/7/2013)
The start of a brand new year is usually a time of introspection and reflection. We look back on the accomplishments of the past year, and look forward to opportunities yet to come.
This exploration of possibilities is particularly true for Chief Financial Officers (CFOs), whose unique set of skills and experiences opens up many opportunities outside the finance function. In the recently released Ernst & Young publication titled CFO and beyond: The possibilities and pathways outside finance, CFOs are perceived to have the most career options in the corporate hierarchy. In fact, the study shows that there is an unprecedented demand for CFOs on corporate boards, perhaps due to the uncertainties in the global economy. This may seem ironic considering that most CFOs have traditionally considered their positions as career destinations rather than as staging points. Nowadays, more and more companies want leaders who can provide analytical, technical and strategic capabilities, backed by strong financial expertise and regulatory knowledge. In fact, in some countries, this level of knowledge and capability is not just valued, but is mandatory.
The survey reports that out of 800 global CFOs interviewed, a quarter have already taken on additional jobs, and 40% would consider it in the future. The reality is that in addition to personal and professional benefits, CFOs stand to gain a great deal from taking on supplementary positions, such as exposure to different organizations and perspectives, experience in different sectors, acquisition of new knowledge and transfer of best practices across sectors. Several of the respondents also chose to take part-time positions as board members or trustees of charities or cultural institutions, believing that they can make a positive contribution to society. Such a role is not only highly fulfilling, but it also provides excellent networking opportunities, and provides younger CFOs with valuable experience in the dynamics of group decision-making.
Speaking of being younger, the report points to a growing trend for CFOs to pursue non-executive directorships at a younger age – with many being in the 40 – 49 years age bracket. There is also a welcome increase in diversity for boards in terms of gender, background and experience. These changes are certainly refreshing. With the level of uncertainty in the global economy, companies need to be open to change, technology, social media and many other new paradigms that are redefining modern business.
Of course there are many things to consider, foremost of which is the danger of overstretching, as well as the risk of conflicts of competitive interest. Many CFOs are concerned about the time commitment, with more than half estimating that they could only spare five hours or less each week. Some companies (11%) also discourage their finance leaders from taking on external positions, although a majority (60%) of the companies support the idea of C-level executives taking on part-time roles.
CFOs who are looking to expand their horizons should carefully reflect on their level of preparedness for an increased workload, as well as their own circumstances. For example, if the company is under stress or planning major strategic initiatives, then it may be difficult for the CFO to take on another job. They should also consider the length of time served and level of experience before taking on the challenge of an external position – which some experts believe should be roughly 18 months after first taking on a CFO role.
It is also important to evaluate and conduct due diligence on the reputation and financial position of the external company, including its strategic goals, culture, and board and management dynamics. They must ensure that the new role is appropriate to them and their career, e.g. are they serving as a member in an audit committee or chairing it? Will they fit in with the other board members? Will they need to delegate some of their responsibilities to subordinates in order to manage the expectations of the external position?
The ultimate question that arises concerns value. Will taking on an external appointment add value to the CFO’s career and personal development, and will they be able to make valuable contributions to the part-time position? If the answer to both is “yes,” then certainly a CFO should carefully consider the potential rewards to themselves and their companies.
For CFOs who are also thinking about their onward journey to other roles, the survey also illustrates the career paths other CFOs have taken. These include transitioning to CEO, moving from listed companies to private equity portfolio companies, or taking non-executive directorships. Each of these comes with its own considerations, but what is notable is that the presence of the “financial DNA”, the experience CFOs have in cost management, efficiency and risk management, and a CFO’s insights and experience into business strategy development, operations and commercial decisions are becoming increasingly more desirable for CEOs, given the presence of various regulatory challenges today.
Given these possibilities, forward-looking CFOs should evaluate their level of readiness to take on additional roles or transition to the next stage in their careers. What is important is to have a destination in mind, be practical about how to get there, and start planning early. Part-time positions, just like full-time ones, have to be taken into account in career planning. The right skills and experience have to be developed, and perhaps even the right industry exposure – which means taking a proactive approach to developing one’s résumé more fully.
J. Carlitos G. Cruz is the Deputy Managing Partner and Assurance Head of SGV & Co.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the author and do not necessarily represent the views of SGV & Co.