Are you wondering about what skills you might need to succeed in a senior finance role? Headhunter Tim Beckh considers the sage advice of a former secretary general of the ICAEW.
In 2007 my former colleague, John Collier, wrote an article in Finance & Management (F&M 142) about the essential qualities needed for success as the CFO of alarge listed company. His comments were couched in a gentler pre-crash, pre-Brexit and pre-Trump era of 10 years ago when the world, perhaps, seemed a more predictable place.
Despite the turbulent happenings of the past decade, much of John’s advice on how to secure, and succeed in, a senior finance role remains relevant. John, who is now retired, knew a thing or two about such things. He had been a partner with PwC before his stint as secretary general of ICAEW. He became a headhunter in 2006, evaluating and advising finance professionals and other senior executives for the many non-executive and board-level appointments he made on behalf of his clients. His advice below, updated for today’s environment, covers some thoughts on the different types of listed environment and some practical considerations when preparing yourself for the top job.
As in 2007, there is always a demand for good CFOs; the precise skills needed may shift over time but the core requirements remain the same. CFO appointments with large public companies have a high profile (and therefore need people who can cope with the pressures that this can bring), but roles that are not always in the public eye can be just as demanding and rewarding.
There has been a number of major international mega-mergers, market consolidation and a continued prominence of private equity firms who are once again taking businesses private on the basis of cheap, readily available debt. There are exciting opportunities with companies on the alternative markets and the emergence of second generation internet businesses has created a raft of organisations with impact and influence well beyond their physical size. New online and digital business models abound, bringing with them new regulatory, reporting and international taxation challenges not to mention staggering preprofit valuations. The life of a CFO, regardless of the type of business in which they are operating, remains an exciting one.
Concentrating on the listed market sector in more detail, there are important differences worth considering. If you have ambitions in this sort of organisation it is helpful to have a realistic goal. Some companies in the FTSE 250 will not be for you… ever. But others might be, if you manage your career in the right way. Think about the capabilities required by a CFO for each of the following types of listed business.
FTSE 30 – the top 30 companies
These businesses are huge and global. Their scope is vast and their boards often quite large – up to 20 directors or more – including people from each of the major markets where the group operates. Some of them are listed not only in London but perhaps New York, Tokyo and Hong Kong as well – different markets with different reporting requirements and cultures.
Balance of the FTSE 100
The next grouping is the balance of the FTSE 100. Again most of these are organisationally large – although occasionally market sentiment may ramp a share of an organisationally more modest-sized one so that on market value it creeps into the bottom end of the FTSE 100. Boards tend to be smaller (up to 12).
And then there is the FTSE 250 where companies vary hugely in size and complexity. Market capitalisation can be a poor determinant of what really goes on within each business. But these companies, just like the FTSE 100, have to comply with the UK Corporate Governance Code (previously known as the Combined Code) or explain why they are not doing so. They do feel different and act differently from many of the remaining 2000 or more UK listed companies.
If you are setting your sights on a job as CFO of one of
the larger listed companies, here is what you should be:
- technically strong and up to date;
- prepared to be a business partner to the CEO;
- prepared to be more strategic;
- able to communicate, persuade and influence;
- prepared for greater exposure to the City, investment community and shareholders;
- able to handle the formalities of the audit committee and to develop a good relationship with its chairman;
- prepared to deal with a new breed of non executives;
- internationally aware and comfortable operating in a global environment; and more familiar with technology, the use and protection of data.
It is rather taken for granted that you will have laboured over International Financial Reporting Standards (IFRSs) and the ever-increasing complexity of our corporate tax regime. You will be up to date with the Listing Rules, the requirements of the Companies Acts, Sarbanes Oxley (perhaps), the UK Corporate Governance Code and any special regulatory requirements. You will probably not be company secretary as well as CFO (as is often the case with smaller companies) but unless you have a lawyer on the board or as an integral part of your senior executive management team the board will look to you as a first point of call on most legal matters.
A potential business partner to the chief executive
This is normally the key relationship for a CFO. Whatever the other attractions, if you do not think you will get on with the CEO then do not join the company. On the other hand this can be a highly rewarding relationship.
It does not always mean playing second fiddle to the CEO. Not all CEOs are outgoing and charismatic (though lots are). There are a number of examples where the CFO is the public face of the business especially where the CEO is based overseas (usually the US). Who else on the board or within the top executive team has the same breadth of knowledge across the whole of the group’s span of activities?
Yet you must never lose your independence of mind or be afraid to speak up. If the CEO seems to want a ‘yes man’, think twice before taking the job.
Prepared to be more strategic
You will no longer be seen as just a numbers person, and will need to be able to work with others on the board as a team.
However, do not totally believe the cliché that modern technology frees up accountants from the drudgery of number crunching and enables them to contribute across the whole range of a business activity. If the annual report and accounts plus the 10k is 300 pages long, you are the one board member who does have to know what is in there. It may be a huge business but look round the board table and ask who else will have done so – certainly within the executive team – and you will have your answer.
Able to communicate, persuade and influence
This ability is more important than ever. Being technically up to date is not enough. You have to be able to communicate technical complexity in a straightforward and understandable way – beginning with your CEO, then the wider board and your investors, not forgetting the press and other media. How do you deal with journalists, what do you look like in a webcast and how much can you say to members of the public? Often the medium really is the message. How you say something as a CFO is sometimes nearly as important as what you say.
Prepared for greater exposure to the City, investment community and shareholders
Your shares will be more widely followed, and by better analysts, than those of a smaller listed company. Most analysts following big companies are deeply knowledgeable technical accountants who have followed a particular sector for years. Can you hold your own with such people? It’s vital that you do. You will need to be on top of your brief and be expected to be proactive in your engagement with these important constituents.
Able to handle audit committee formalities and forge a good relationship with its chairman
There is no doubt that in the last few years the audit committee has introduced another significant dimension to the CFO’s working life. Not only are you a part of the team led by the CEO, not only does the board chairman look to you as the keeper of the numbers round the boardroom table but there is now an audit committee chairman on whom the other, non-financial members of the board, increasingly rely. An audit committee chairman knows this, has a public profile and has a report in the annual report and accounts – so they will take a very close interest.
Whatever the size of the business, the audit committee chairman’s relationship with the CFO is a critical one. But this is particularly so within a FTSE 250 business. You will have to accept a degree of formality not found within smaller companies. Some audit committee chairmen make a point of keeping some distance from the finance director; others see it as more of a mentoring role. This is another relationship you will need to weigh carefully before taking a job, and work hard on after doing so.
Striking the right balance between confident candour and sticking to the precise line set out in your PR material or the public statement is an art, and getting it right can do you a lot of good
Prepared to deal with a new breed of non executives
The responsibilities placed on the board of large listed companies are considerable and this is cultivating a new breed of non executives. Expect them to be technically capable, engaged in the detail and increasingly committed. They will offer challenge and advice and should be considered a valuable resource for any CFO. Communicate openly and use them as your confidant and advisor.
Internationally aware and comfortable operating in a global environment
We live in an increasingly global environment and regardless of whether you are CFO of a predominantly UK-focused business, you will be expected to think globally. Whether it is sources of finance, international partnerships or the unexpected takeover approach from an overseas competitor, the CFO will need to have all of this on their radar.
More familiar with technology, the use and potential of data
Much as we live in a global environment, so we operate in a digital world. Technology permeates all aspects of running a major corporation and the CFO must understand the opportunity this provides not just to speed up reporting but to deliver insight, create new value streams and deliver operational efficiencies.
The best career path?
It is worth considering how many moves you should make to gain experience in a range of roles and sectors without giving the impression of failing to stick at anything for very long. Even if you achieve the ‘right’ number of moves on your way upwards – what is the ‘right’ route? Internal audit, subsidiary finance director, group financial controller, and then group CFO, for example? Or straight from a smaller company CFO role (mid cap or even AIM) to the top?
There is no ‘right’ answer, but if newly qualified in a Big Four firm and planning my future, I’d probably work my way up in a bigger corporate environment. If you start with small companies you tend to stay with smaller companies whereas there is greater movement in the other direction.
When the ‘ideal’ route is not possible
The ‘ideal’ route is not always possible, though. What should you do if you are out of work, or feel the way forward is blocked? There may be all sorts of reasons why you are out of work – a takeover, rationalisation involving closing your part of the group, a family or personal illness. So how do you get back in?
Applying for advertised jobs (almost all online these days, though the Financial Times’ Thursday supplement is also good) is one route. But be warned: good-sounding jobs can attract literally hundreds of applications. You need to make sure you meet all the requirements listed and try and do something in your application to make you stand out a bit from the crowd.
Taking an interim role is clearly another option and might give you the experience you want but, again, be warned: experienced interims are usually preferred over people who are really looking for a permanent job. Also beware of becoming branded a career interim, if this is not your intention, by staying put too long. You may find it hard to work your way back into a permanent role.
If you are employed and the way forward seems to be blocked then your best bet is to make the most of what you have and, for example, get involved in preparing for investor presentations, attend audit committee meetings (and make a good impression when you do) and do important, high-profile project work to get the experience and to get people’s attention.
But whichever route you take, you definitely do need to
get noticed. You should consider:
- public speaking and talking to the media;
- impressing your non-executive directors;
- taking on a non-executive director role yourself;
- impressing the City or fostering relationships with private equity;
- being part of a ‘success story’; and
- taking calculated risks.
This comes naturally to some, but for most of us it requires application and effort. At each stage of your life you get to know people, often very well but then you (or they) move away or get promoted and in spite of your best intentions contact gets reduced to Christmas cards (or e-cards) and then fades away altogether. The best thing is not to let relationships fade but, if you do, take heart. A call out of the blue to someone you have not spoken to for years will almost certainly be warmly welcomed and a lunch together can be arranged – and then away you go. There are plenty of tools to help you. LinkedIn is probably the best well known. Hunt out your former colleagues and reconnect, join some groups and contribute to the new threads with interesting commentary.
Public speaking and talking to the media
It is far better to be proactive and manage your own profile than it is to be noticed for the ‘wrong’ reasons, eg for being highly paid although your profits and share price are going sideways.
However strong your desire for a senior finance role, you do need to do your due diligence before taking any post. This may seem obvious but if you are offered a big step up your objectivity may suffer
Impressing your non-executive directors
Impressing your non-executive directors (and especially your audit committee chairman) always helps. Although the days of large non-executive portfolios are mostly behind us, many non-executives (who have usually retired from full-time executive work) have more than one appointment and inevitably compare the performance of the executives in those different businesses.
Taking on a non-executive appointment yourself
upside of becoming a NED yourself is that it lets you see another business and increases your exposure to other senior business people. The downside is that non-executive work can be very demanding especially if you are not only required to serve on the audit committee but to chair it as well. Finding your first NED role can be tricky but to help you along the way you might consider offering your services to a charity or trust pro bono.
Impressing the City or fostering relationships with private equity
Impressing analysts and your shareholders is vital. Even if you are not a natural presenter and are not too confident on your feet you must work at gaining confidence and using PowerPoint really well. Striking the right balance between confident candour and sticking to the precise line set out in your PR material or the public statement is an art, and getting it right can do you a lot of good. When headhunters are taking soundings on your suitability for a prospective senior role, we will talk to the City and analyst community and will expect to hear positive things.
You might consider developing relationships with Private Equity firms who invest in a portfolio of businesses and look to high-calibre individuals for their other investments. There may become a time when you are tapped up for your turnaround experience or based on their recognition of the impact you have made elsewhere.
Being part of a ‘success story’
If at all possible, be part of a success story. If you have chosen the right company to join, are working in a business sector with potential, and have a good CEO then some of the positive ‘halo’ for your business in the market will reflect on you. So as part of your career route, think before you join, get in at the right time and make sure you respect the CEO.
Taking calculated risks
Be prepared to take risks – but only calculated ones. If you believe a business which has been going through a bad patch may be about to turn, or you believe in an (as yet) untested strategy, or you think you can work with the CEO – then go for it.
Speaking to respected executive search firms
Those executive search firms that handle senior-level CFO appointments for large listed companies will operate on a retained basis. This means that they are driven by the needs of their clients and will be focused on the projects they are handling at the time. However, it is worth fostering relationships with headhunters and making them aware of the sort of role you are looking for next. It can be difficult to get them to engage outside of a specific process but the more enlightened firms will take the time to get to know the rising stars.
And finally... ask around
However strong your desire for a senior finance role, you do need to do your due diligence before taking any post. This may seem obvious but if you are offered a big step up your objectivity may suffer. So ask friends, colleagues and people you know in the investing community and listen to what they say. Although you may think the headhunter handling the recruitment wants to fill the role at any cost, they will be working for the long-term success of their client and the candidates they represent and should be honest with you when it’s not the right role, company or career step for you.