In the first part of this two-part series, we discussed the evolution of the CFO’s role from value preservation to value creation, and the changing role of finance within the organisation. In this second part discover the 5 crucial skills for the next generation CFO.
In the past the finance function got on with business as usual and delivered on what was assigned to them. However, in recent years the CFO’s role has gone through significant changes, and now the finance function is required to develop skills not always traditionally associated with finance. Today, the skills most valued by organisations of their important CFO fall into the following categories;
First of all, they need to provide evident ethical leadership. Finance chiefs need to provide a direction, a longitude and latitude if you'd like, for businesses to operate and yet make it feel like they have infinite flexibility. It is a real skill to allow free expression and innovation while also providing the services of a cross functional team player.
Next, they need to be a trusted advisor to more than the CEO. The new CFOs as trusted advisers to business requires that they are able to inform the lines of businesses (LOB) where the biggest risks lie and inherently covert industry/economic black swans to ‘grey’ ones as much as possible. They also have to be able to be progressive about the advice they give which requires a keener knowledge of business intelligence and predictive analytics. Knowing how to use new reporting tools for decision support is a mandatory skill.
They also have to be sensitive to the new workforce that is entering finance and business. Talent management, especially in finance, is a top concern. The new finance employee is very concerned about their progression through the company - wanting to see a clear career path and the ability to enhance their skills broadly through the company. There are so many firms that are competing for talent that the CFO has to be careful about attracting and retaining talent and so understanding workforce planning and working closely with the HR leader is a very important part of the role.
It goes without saying, that the CFO has to be a very good communicator because they have to satisfy and engage the investor community, and also internally to offer value to the LOB customer. To do this right, they have to speak to different levels of the organisation and also to business partners and to investors. Since over 40% of all small and medium businesses are owned by private equity firms, they also have to be adept at speaking the language of these owners.
Finally, the CFO has to be a master at deal making. This is important for the CFO to assimilate early into their careers. Keeping acquisition integrations moving smoothly, realising synergies and retaining top talent is all part of the deal-making expertise required. Deal making also includes negotiation skills: whether it's negotiating a lease, a large contract or an acquisition, these skills are sought after and the salaries of capable CFOs reflect this.
The CFO has to retain critical talent, anticipate risks, wear a strategic hat and communicate effectively to the organisation. Finally, to steer the company from a period of low performance towards high-performance demands softer skills: patience, maturity, negotiating skills, political skills as well as the hard technical accounting and finance skills. These are not easy to find, so once developed within a business, it's vital to keep that talent.
It is not uncommon to find today’s CFOs put finance talent into other lines of business, with a round trip ticket to come back to finance at a later time. The result is a deeply valuable finance player who understands how the business works and how resources should be effectively and efficiently deployed. This talent becomes highly valuable in a discussion with management, helping these leaders take calculated risks in order to make their companies wildly successful. And they are then rewarded well for these skills!