We’re taking this week to take a deeper look at what it takes to become a CFO. All week we’ll be looking at the next generation of finance leaders and what they need to do early on to elevate their careers to the top echelon. Know someone who would benefit from this coverage? Forward this email and let them know they can sign up for CFO Daily here.
So you want to one day be the chief financial officer?
Yes, your job description still requires closing the books, ordering fees, and talking to investors. But that’s just for the beginning. The role has evolved radically over the past decade, and now includes: being an effective strategic partner to the CEO, creating value, and aligning talent with business priorities.
Here’s what experts say CFOs should consider when it comes to skill sets, educational backgrounds, and credentials.
First of all, what major is the best fit?
Crist Kolder Associates, an executive search firm, just updated its Volatility Report to cover the end of 2022. The findings are based on data from 681 companies in the Fortune 500 and S&P 500. Sixty-one percent of CFOs have a bachelor’s degree in business. . Of those, 47% were accounting majors – the highest percentage among business majors (including economics, finance, and business administration). And 51% of finance chiefs have an MBA, while 35% have a certified public accountant (CPA) credential. “CFOs with MBAs have steadily been on the rise, while the number of CFOs with CPAs has been on the decline over the past five years,” Clem Johnson, president of Crist Kolder Associates, said.
‘seismic shift’
Finance chiefs are focused on a path ahead that includes key trends in digital transformation, new e-business models, and “seismic shifts” in corporate responsibilities and goals, said Tom Hood, EVP of business engagement and growth for International Association. Certified Professional Accountant.
Hood explained what the Association’s Future of Finance Leadership Advisory Group (a group of 40 senior finance leaders at large companies formed in mid-2021 that meets regularly) found to be the top skill sets for CFOs of the future:
– Leadership DNA: The CFO is the co-pilot of the business together with the CEO who directs the direction of the company. It is important to highlight the team’s superior experience and manage change.
– Digital and tech-savvy: This may include experience with financial systems and software, cloud computing, analytics, and other digital technologies.
– Effective stakeholder engagement, communication, and collaboration skills: For the CFO role, it is important to highlight experience with interdepartmental collaboration.
– Ability to drive value: This may include experience with strategic planning, business development, and performance management.
– Strong financial acumen: Experience in financial management, budgeting, forecasting, and financial analysis.
– Stories and experience with data-informed decision-making: Ability to tell business stories to executives, board of directors, and Street, if any, using data.
– Strategic knowledge of industry trends and regulatory reporting: This is necessary to navigate the complex financial and regulatory environment. For example, environmental, social and governance (ESG) reporting requirements.
Additionally, CFOs must have a strong ethical foundation, Hood said. “The CFO is essential to maintaining the trust and integrity of the business, both externally and internally,” he said. This can be demonstrated by professional certifications and credentials like CPA and Chartered Global Management Accountant, Hood said.
CFO of the future
Academics share a similar perspective. About the CFO of the future: “It is a person who is strong in strategy, risk management, technology, and strong in numbers,” says Mark T. Williams, a master’s lecturer in the finance department at Boston University’s Questrom School of Business. “Do you remember, I mentioned the last number? It’s a given that if you’re going to rise to CFO, you need to know those numbers. But that alone doesn’t make you a good CFO.
Prior to his 20-year teaching career at BU, Williams worked as a senior trading floor executive, bank trust officer, and as a bank examiner for the Federal Reserve. He said the university’s graduate-level mathematical finance program focuses heavily on “assessing risk, measuring it, and deciding when to take it.” For example, when you see the collapse of the crypto company FTX, it is about fraud, but there are also weaknesses in risk management, Williams said.
When it comes to tech-savvy CFOs, understanding fintech is important because it “pervades the entire industry,” he said, citing peer-to-peer lending and robo-advising. And today’s fintech combines the technology trends of artificial intelligence and machine learning, he said.
But once graduates enter the workforce, they still have a long way to go. “Don’t assume that just because you have an MBA, that’s going to make you a CFO in the next 10 years,” Williams, who earned an MBA, said. “You really have to look at the work environment as an opportunity to round out your skill set.” And networking is important too. Take every opportunity to engage with senior management, he advises.
It’s also important for future chief financial officers to have good communication skills, and to understand that you make better decisions when you have a diverse team, Williams said. “That’s really the strength of a good company,” he said.
Barbara M. Porco, clinical professor and associate dean of graduate studies at Fordham University, echoes that point. “The CFO must not only be well educated in ESG but must have an understanding of it from multiple lenses,” Porco said. “And you just get it in different places, and in different C-suites.”
“For a new CFO resume, I would say you need communication skills that can reach different audiences and bring about change,” he said. For example, “You want to be able to understand not only what you don’t know, but what other people don’t know about climate risk,” she said.
At Fordham, ESG literacy is applied to the curriculum “from freshman year to our MBA program,” says Porco. He learned how to “consider the impact of not only shareholders but stakeholders,” he said. These are skills that should be on any CFO’s resume, Porco said.
Part 2 of our series for aspiring CFOs will dive into technology. Forward this email to the CFOs you want in your circle – they can sign up for the newsletter here.
See you tomorrow.
Sheryl Estrada
sheryl.estrada@fortune.com
big problem
The CFO partners with the CEO to help direct the company’s strategic priorities. PwC’s recently released 26th Annual Global CEO Survey found that inflation and macroeconomic volatility are more prominent than other major threats in the next 12 months than in the next five years when CEOs believe there will be an increase in cyber and climate risk threats. change. The data is based on a survey of 4,410 chief executives.
It’s from PwC
Deeper
“How Sunk Costs Affect Firms’ Investment Decisions,” an article in the Wharton business journal discusses research by Wharton’s Marius Guenzel. Companies systematically fail to ignore “sunk costs” in lost ventures, leading to significant investment distortions, according to Guenzel. Sunk costs are not an issue in investment decisions because those decisions should be forward-looking, he found.
Leader board
Sally M. Cunningham named SVP and CFO at Hamilton Beach Brands Holding Company (NYSE: HBB), effective March 17. Cunningham will join the company on February 13, initially as a senior financial advisor. Cunningham was most recently a finance operations partner with private equity firm One Rock Capital Partners. Previously, he served as SVP and CFO at Synalloy Corporation, now known as Ascent Industries Co. He also previously served as VP of finance at ICF International, a technology services provider, and held various finance roles at Genworth and Cadmus Communications. Cunningham began his career in auditing with Arthur Andersen LLC. He is a certified public accountant and earned his MBA at the University of Richmond.
Claudia Jaramillo promoted to EVP and CFO Jacobs (NYSE: J), a provider of engineering, technical, professional, and construction services, effective August 14 Jaramillo will succeed current EVP and CFO Kevin Berryman. Berryman will serve as a special advisor to Jacobs CEO Bob Pragada. Jaramillo joined Jacobs in July 2022 as EVP of strategy and corporate development. Prior to joining Jacobs, he spent more than 20 years at Schlumberger where he served in a number of executive roles with increasing senior leadership responsibilities in finance and general management. Most recently, he served as vice president, group treasurer, and corporate officer, and was involved with the environmental, social, and governance functions at Schlumberger. Jaramillo sets up sustainability-related financing and represents the company on the UN Global Compact CFO Task Force. He holds an MBA from The Wharton School.
Hear
“Maybe it’s a cliché, but I want to prioritize my health. Preparing healthier meals, exercising five days a week, including weekends, and getting back into my daily meditation routine, are at the top of the list.”
—AT&T CFO Pascal Desroches shared in a recent LinkedIn post about the health decision he made for 2023 “a year of personal reinvestment” after realizing that in the past three years in the midst of addressing global challenges, self-care may be in order. back burner. “I want to encourage each of you to remember that taking time to step back and fill your cup should make a positive impact in your personal and professional life,” Desroches wrote.