Keeping executive talent on board can be tricky when you have highly qualified leaders who excel in what they do. When a senior leader like a CFO decides to leave the organization, it can spell trouble for the rest of the company — this is one reason CEOs try to keep close relationships with their CFOs.
However, preventing a CFO from leaving isn’t always possible. The call of a higher salary, more stock options, or simply a fresh new challenge can be all too alluring, leaving a significant hole in the leadership team.
The rise of CFO departures isn’t new; many executives have left their organizations in the past. Some found the macroeconomic challenges they faced exhausting and chose to retire. Others decided to pursue innovative startup opportunities or move to other companies.
Whenever a CFO leaves, the CEO or another executive must step in to handle their duties. However, that fix won’t last forever; an interim CFO and a replacement CFO are generally the next steps.
Most CFOs in prior decades earned their roles by following a specific path. They’d start by gleaning experience at a Big Four firm for a few years, then transition to a corporate role at a large organization.
As they built up their skills, advanced their education, and strengthened connections with key players in the company, they’d gradually earn new promotions.
Traditional CFOs had accounting backgrounds. They were accomplished CPAs with years of auditing experience to show off. Their expertise in the intricacies of financial reporting was helpful, especially in the tumultuous years following the Enron and Arthur Andersen accounting scandals.
This traditional model kept most employees at the same company for years or even decades. However, employees who weren’t quite the right cultural fit, or who lacked some quality that was attractive to executives, could quickly find themselves boxed out from top senior leadership roles.
The traditional CFO path continues in some organizations, particularly those in the energy, manufacturing, and industrial sectors. However, more leaders are turning away from old-school thinking and looking for fresh talent to propel their companies forward in an evolving world.
Today’s CEOs keep one eye on their business operations and the other eye on their investors. The need to continuously show progress toward short- and long-term objectives is paramount. Investors won’t put up with executives who don’t meet their goals, and they’ll let their displeasure be known if problems continue.
That’s why it’s crucial for CFOs to have experience not just in finance and accounting but in other areas of the company. Regular communication and collaboration between teams aren’t just good for business — they can dramatically impact a company’s culture and future profitability.
A CEO seeking a CFO they can count on will likely look at the candidate’s expertise across various business areas, including sales, operations, and IT. A well-rounded CFO will understand the objectives of each department and manage them appropriately, much like a conductor of an orchestra.
Of course, teamwork and collaboration will only get a CFO so far. Strong relationships between departments can improve productivity and increase the odds of meeting objectives, but if the CFO can’t translate their successes into visible metrics that stakeholders understand, they’ll eventually hit a wall.
A qualified CFO will look past traditional key productivity indicators and financial ratios to represent the company’s performance to shareholders accurately. They’ll consider operational, sales, and technology-related factors, not just revenue and comparisons of year-over-year profit margins.
Aside from expertise in a Big Four firm and an advanced degree, like an MBA, a good candidate will have a variety of experience in different types of organizations, from Fortune 500 companies to startups and venture capital–backed companies.
Seeing business operations from all directions, rather than just from well-entrenched organizations, helps CFOs understand the business lifecycle and the different problems that arise in each stage.
CEOs often face significant obstacles: achieving x dollars in revenue over the next year or introducing innovative new products to the market. Some CEOs receive culture-related goals, like enhancing DE&I in their hiring practices or improving employee engagement within specific departments.
Such varying goals can make it hard for CEOs to know where to start. That’s when a solid relationship with their CFO can genuinely help.
CFOs with broad experience across different organizational departments see much further than their annual financial statements or the latest expense forecast. They know how to incorporate the company’s financial position into business objectives, and they can easily explain how a change could impact the organization’s stability.
Their insights can help CEOs stay on the right path toward their goals while remaining focused on any potential financial limitations.
Such partnerships don’t benefit only CEOs; they are also an advantage to other leaders in the organization, including CMOs, CTOs, and COOs. The CEO may be the visionary, but the CFO provides a reality check when the CEO sets the bar too high.
The best CFOs don’t dive too far into the details. They should be able to trust their supporting staff to handle the books and prepare accurate forecasts. Of course, if they don’t have the right team to help them, they may spend more time on minutiae than they’d prefer.
CFOs must be willing to hand over critical tasks to their team members and assign them complete responsibility for the work. When employees know they’re accountable for essential duties, they’ll step up to the plate and handle tasks appropriately. Ownership can also increase engagement among team members, leading to better business outcomes.
While the standard path to the CFO corner office was tenure, accomplishments, and experience, that’s changing. CEOs see the benefits of hiring executives who understand business operations from different perspectives, not just financial ones.
In the future, CFOs will likely come from varying backgrounds, and this change will be an advantage as they turn an exacting eye toward other departments while acting as the CEO’s right hand.
Our hands-on CFO executive recruiters have experience working with private, public, pre-IPO, and non-profit organizations. Clients are typically $50 million in revenue to Fortune 1000’s or have assets between $500 million to $15 billion.
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