How To Choose The Perfect CFO

As businesses around the world and those here in the UK battle with consistent and wide-spread financial uncertainty, there is one person who could make or break your business: your Chief Financial Officer.

Choosing the right CFO to ensure long term financial success for your organisation is a significant challenge.

The Financial Times devoted a whole conference to exploring the attributes of high performing CFOs, described by them as “An exclusive, invitation-only event for leading, cross-sector CFOs and their successors exploring which traits define CFO leaders, the critical factors for progress towards the C-suite, how to achieve gender balance on boards, the impact of digital, the role of innovation and future skill requirements for NextGen finance leaders”.

One thing is for certain: the days are long gone where the CFO was merely a specialist in all matters finance and a person who could inform the whole business on the mechanics of implementation.

Commercial roles and responsibilities have expanded across all employment sectors, keeping pace with astonishingly rapid changes in our social, political and economic lives.

The Key Characteristics of High Performing CFOs

According to organisations in the UK such as the CBI, Institute of Directors and various industry leaders, there are certain key characteristics needed by all CFOs.

A review of their forecast as to what a 21st Century CFO needs to look like is interesting. Some key themes to emerge are:

• Ability to collate and disseminate critical financial information to key stakeholders
• The specialist knowledge of acquisition, mergers and debt management
• Knowledge of implementation/development of company-wide P&L processes
• Results-oriented with an equal mix of technical and interpersonal skills
• Maintaining and developing existing processes
• A team player with the ability to influence behaviour at all levels
• Collaborating cross-functionally to maximise revenue
• Ability to demonstrate a continuous financial improvement attitude
• Experience in maintaining financial health during transition
• Implementation of financial best practice
• Establishing key financial processes to deliver business objectives
• Establishing and leading teams to implement financial adherence
• Key senior stakeholder engagement
• Instrumental in securing new business
• Motivating and engaging teams to take ownership of achieving financial targets
• Professional accountancy qualifications with knowledge of international finance controls
• A skilled negotiator with the ability to listen to all levels
• Experience of successful organisational financial transformation
• Solution-focused with the ability to inspire
• Track record of positively influencing financial culture
• Financial planning and risk management specialist

So let’s navigate through the characteristics and competencies in choosing a CFO which I believe have stood the test of time, whatever business you are in.

#1 Trust

A central theme highlighted by business author Steven Covey is that without trust, we really don’t have a basis to move forward in any relationship.

Imagine a scenario where there was not complete trust between a CFO and the rest of their C-Suite colleagues and senior management team.

Or for that matter between the CFO and any other member of the business.

Setting sail with a CFO who does not engender the trust of others will mean your ship is destined to run aground.

The thing is, gaining the full trust of someone can only be achieved effectively with a mix of both competencies in the form of skills and experiences and intangible assets: attitude and behaviours.

As clear as some of these leading organisations might be as to what’s required to trust someone to lead your business to financial success, some companies are in still in the red when it comes to achieving a healthy balance sheet.

#2 Technical Ability

Many firms appear to be biased heavily in favour of appointing a CFO with technical knowledge and experience.

Knowledge of implementing financial systems, risk management, financial process adherence, knowledge of successful acquisitions, a track record of organisational data forecasting and analysis, and experience of implementing strategic financial strategy all highlight a drive by some companies to prioritise technical over interpersonal.

Whereas interpersonal skills and mindset were mentioned, in effect they took a back seat.

One example I saw this month of a company seeking a new CFO is symptomatic of the approach. Twenty four requirements relating to technical knowledge were cited as pre-requisites with only four elements related in any way to proactive people skills.

#3 People Skills

Just as some companies are driving the balance too far into the technical spectrum, there are others over-compensating at the opposite end.

Here, the bias is heavily weighted in favour of a people approach, with the majority of requirements targeting softer skills.

In several recently advertised roles budgeting, strategic planning, acquisition management, and organisational regulatory compliance had given way to a need for strong leadership skills, cultural integration, positive influence, inclusive stakeholder engagement, open mind-set, and world-class communication skills among others.

Whilst technical knowledge and experience were still required by these firms, it was clear that the ‘people approach’ through skills, mindset and behaviour was uppermost in their minds.

Why a balance is important

What is significant with the list outlined earlier is not just the sheer volume of attributes required (and that is just a representative sample), but the fact that in the modern era, the requirement to have strong technical skills and strong interpersonal skills is of equal importance

A survey of the way in which many firms choose a CFO reveals that some businesses have specifically targeted a balanced mix of competencies and characteristics whereas others have not.

The devil here is in the detail. The above comparative analysis of two different approaches – in this case, the weighting different companies give to certain required attributes, highlights this all too clearly

Companies undoubtedly know what they need today. It may not, however, necessarily cover everything they need long term, in choosing a CFO who can hold their own whatever the situation.

Understandably, in reaction to commercial pressures, businesses need a CFO who can come in and address the financial situation quickly. However, John Adair, pioneer of organisational leadership and strategy, noted that only complete balance is the key to long term organisational health.

Adair’s approach, implemented by many businesses, mandates the ability to focus on people and technical or task aspects when required, whatever your position.

Once we focus too much in one area, it is widely believed that the others start to become weaker.

Logic would suggest then, that we need CFO’s who are able to demonstrate both technical and people expertise in equal measure.

Having one or the other is good, having both is ultimately essential.

Requiring less of a multi-dimensional approach from a CFO may well be effective in the here and now, but whether this is sustainable when a different approach is required is open to serious question.

Herein also lies an irony where a CFO has been recruited for industry-leading financial acumen only for the business to evolve to require world-class interpersonal skills or vice versa, due to commercial or organisational change.

When we’ve recruited at either end of the spectrum, asking someone to sit at the other may not be that easy for them or for your organisation.

Understandable it may be, but as any good CFO will tell you, churn at any level is a major red flag to financial stability.

Why is a balance not achieved?

If the attributes needed by a CFO have been well documented, the question is: why isn’t this information being grasped with both hands by all?

The reasons, of course, can be many and varied.

One of the commonest of barriers however, in choosing a CFO is that we all have our own internal bias system.

The phrase ‘people like people who are like them’ is reflective of human nature.

But this concept, known to be a pitfall in taking on a new member of the senior management team, is not always thoroughly factored into the recruitment process.

After all, whoever heard of a process to avoid personal bias when hiring your next CFO?

Thankfully many organisations are not only all too aware of this pitfall but ensure it is actively avoided.

What we are talking about here, of course, is not personal values, but how the job is done. As we’ve seen, however, many are still in the red in overcoming this most human of limitations.

Despite the best of intentions, achieving an exacting balance in choosing a CFO does not always have the desired positive long-term impact.

Perhaps then there is a real need, for those who do manage to balance their books in this regard, to continue to show others the way – with a mix of technical and interpersonal skills.

In Summary

In choosing your next CFO it is paramount that you:

• Avoid being reactive and consider future needs
• Ensure that your approach is balanced between technical and interpersonal aspects
• Remain conscious of your own approach to avoid unintentional bias
• Factor in the possible future development needs of your CFO
• Be realistic and optimistic in balance: great CFOs are out there but they might not be your first caller!