Secrets of CFO success: nine essential steps
What makes a good CFO great? ICAS talks to a cross-section of leaders to find out what essential skills are needed for success.
Nobody gets to the chief financial officer/finance director level without a good technical grounding and a grasp of how to handle the numbers. It is generally accepted, however, that these skills alone are not enough to make a success of the CFO role. So what additional skills are required?
Angus Cockburn CA, CFO with services business Serco, says: “You need an understanding of how a board works in terms of its governance and dynamics. A CFO needs to be very cognisant of the external environment and to quickly develop a radar or scanning capability. The person needs to be able to see round corners from a strategy perspective and to draw pictures from a scattered set of independent data points.
“An ability to understand what each external stakeholder wants from a CFO and to communicate with analysts, shareholders, bankers, advisers, regulators and so on is key. This ability to develop a public persona is vital.”
The nine essential steps
EY’s Finance Forte study, based on interviews with CFOs, identified nine key steps for CFOs to take, to ensure they are prepared for the challenges of the role at group level. They are:
1. Gain a breadth of finance experience.
2. Develop commercial insight.
3. Seek out M&A experience.
4. Obtain a balance of traditional and non-traditional skills, including the “soft skills” of building relationships with colleagues and external stakeholders.
5. Develop leadership skills.
6. Get international exposure.
7. Gain experience of finance transformation initiatives.
8. Gain exposure to the markets and stakeholders.
9. Build effective relationships with the board.
The role of the final decision maker
Gregor Alexander CA, Finance Director with energy business SSE, notes that the CFO may well pick up some of these skills en route to their current job but, he says, being the final decision maker means there is a difference.
Alexander stresses: “Additional skills and experience are required with external relationships – in particular, dealing with shareholders, bankers (commercial and investment), regulators, rating agencies, pension advisers/actuaries, the media and in some businesses, like ours, a significant time with politicians. [You also need] to build on board relationships and in particular the wider growing requirements for corporate governance, sustainability and risk management.”
Alexander notes that cybersecurity is an increasingly important area and this responsibility is often given to the CFO. “The CFO role over the years has progressed to that of an all-rounder as the number of executive directors on the board reduces. When I started as CFO 15 years ago we had five executive directors and now we have two,” Alexander notes.
The CFO is the conductor of the orchestra. To get the best sound, you need to make sure you have the right music but, more importantly, musicians who understand their part and are able to play together.
Ellie Laidlaw CA, CFO with Ausure, one of Australia’s largest insurance and finance advisory networks, says: “Technology is important and will become more so. You need to keep on top of automation and how it can be rolled out to help create efficiencies.”
Paramount, she believes, are people skills – relationship building, communication and leadership. “It’s mostly about soft skills at this level," says Ellie.
Soft skills are crucial to a successful CFO
Ian Swanson CA, CFO with Delicato Family Vineyards in Napa, California, agrees that soft skills are crucial. “Up to this role you were a technical adviser adding to the business discussions. As CFO you are playing a leading role in the business discussions, with an expertise in finance. You are no longer leading with your technical skills; those are just the lens you use to manage and direct the business,” Ian explained.
As Angus Cockburn puts it: “The CFO does not play an instrument but is the conductor of the orchestra. To get the best sound, you need to make sure you have the right music but, more importantly, musicians who understand their part and are able to play together. Soft skills or a highly developed EQ are critical for a CFO in developing a rapport with the audience (banks, analysts, employees, shareholders, board members etc) and in playing the leadership and influencing roles that are required.”
Ross Paterson CA, CFO at transport group Stagecoach, says the FD’s role can vary significantly across different businesses, so the skill set required will also vary. He adds that the CFO/FD will tend to need a wider skill set than a CA in a subordinate, more specialist role.
Ross said: “I see digital and technology skills as increasingly important for the CFO/FD. The CFO/FD need not have specialist skills on technology implementation and management but should understand the commercial risks and opportunities of technology.”
Neil Redford CA, Finance Director with Angus Soft Fruits, agrees that an understanding of technology is vital “…not only to be able to get the best information out of the available data, but also to appreciate and mitigate the risks”.
Neil adds: “You also need mental flexibility and dexterity to cover the more strategic/outward parts of the CFO/FD role while being able to operate at all other levels right down to basic transactions and also across functions. Frequently you need to be able to change level between sentences of a discussion.”
ICAS offers a comprehensive range of professional development courses, resources, training programmes and specialist qualifications that will help you to meet your annual Continuing Professional Development (CPD) requirement, maintain your expertise and advance your career.
Developing your leadership approach
Executive coach Russell Borland is a partner in consultancy Leading Figures, ICAS' Coaching Partner. Russell said: “We spend time working with FDs on their leadership style. Many can be great leaders, it’s just that their training and development has often focused on the technical aspects of the job, so dusting down their emotional intelligence and reflecting how to motivate and inspire can initially be an experience.”
The other key area is resilience. Russell explains: “It’s always tough in business, but the pace of change seems to be increasing (or perhaps we are just getting old!), so developing and applying strategies that help people bounce back and keep going as effectively as possible can be very helpful.
“Our coaching services provide an opportunity for people to discuss issues which might be challenging to talk about within their own organisation. It gives people some comfort to find they are not alone and that their challenges are often not unique just to them. Having another person's perspective can be very helpful too. Our coaching helps to improve lives, relationships and business performance.”