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CFO and beyond

Possibilities and pathways outside finance. Addresses the unprecedented demand for CFOs to serve in roles on top of their job as finance leader, and as an onward step. In this edition of our CFO series, we explore some of these possibilities and pathways, providing insight into the appetite for CFOs in these other roles, and how those who have gone before have navigated the transition.

Laurent Leloup
Laurent Leloup
Possibilities and pathways outside finance

In 2002, just over a third of top tier CFOs had non-executive roles. Ten years on, nearly half have them.

Proportion of serving CFOs at the largest companies with non-executive roles in 2002 and 2012.
In our earlier studies, we showed that most CFOs see their job as a career destination and not a staging-post to the job of CEO.
It is a paradox, then, that unprecedented demand for their unique skill set outside of the finance role — both as a complement to their serving position and as an onward transition — makes them arguably the individual with the most career options in the corporate hierarchy.
Not all will be drawn by this interest in their skills in roles outside of the top finance job. Many will understandably consider the job to offer all the opportunity and interest that they need.
And yet, more CFOs are exploring the options open to them, and many are using the experience of these additional roles to enhance their performance as CFO.

Unprecedented demand for CFOs on corporate boards

The appetite of shareholders and boards for CFOs to serve on corporate boards is big and getting bigger.

Seventy-nine percent of the 800 CFOs surveyed for this report agree that their financial expertise means that they are more in demand than ever for board-level roles. Analysis of how board composition has changed in the world’s top companies over the past decade supports this.
In 2002, 36% of CFOs from the world’s largest companies held non-executive directorships. A decade later, this proportion has increased to 46%.
As companies grapple with the aftermath of the financial crisis and a two-speed global economy, they want executive and non-executive leaders who can provide comfort and confidence in an uncertain world.

With their unique combination of analytical, technical and strategic capabilities, CFOs are very well placed to provide it.

Should serving CFOs take on non-executive directorships?
The pressures of a CFO’s day job make it extremely challenging to fit external roles into the schedule. Yet, despite the obvious constraints, part-time positions can bring powerful professional and personal benefits for those who can find a way to juggle their responsibilities.

Understanding board dynamics from a different perspective is the principal benefit of serving on a corporate board according to 75% of the CFOs surveyed. Most CFOs spend a lot of time engaging with their own board members but it is only by sitting on the other side of the table they can fully understand how the boardroom works. Over half see it as an opportunity to gain exposure to another company or industry, which enables them to learn lessons that have valuable applications in their core role.
For those CFOs that are fortunate enough to serve on the board of a very large, well-respected company, there is also a "halo effect," whereby the organization on which a CFO serves in their executive role also benefits.

…but lack of time is a major constraint
More than 40% of CFOs think that it is inappropriate for them to take on part-time roles. For many, the demands of their core responsibilities are simply too great and the risk of overstretch too significant.
As corporate governance legislation becomes more stringent, the time required to be an effective non-executive director is increasing. Despite CFOs’ appetite to take on non-executive roles, there is a growing mismatch between the amount of time they feel able to dedicate to such a role – on average around four hours a week – and the time recommended by corporate governance best practice to fulfill the role appropriately.

Maximize your chances of securing a place on the board

While CFOs are in demand for roles beyond finance, competition for the top board positions is fierce and getting fiercer.
As regulatory requirements heighten, younger candidates join the fray, and board expectations increase, career planners will win over opportunists for a place on the shortlist.
The guidance from recruiters, and from serving and former CFOs who have successfully secured board roles, is to start planning early. To start positioning yourself for such a role at the time you want it may be too late, especially when boards are looking for an increasingly specific skill set.

Our research also shows that CFOs have started to secure non-executive directorships at a younger age, with the increase in acquiring non-executive roles most marked with those under 50 years old.

Eight steps to prepare for a place on the board
Although every role has unique requirements, our research suggests that there are eight key ways for CFOs and future finance leaders to make better career decisions and maximize their attractiveness for executive and non-executive positions:
1: Develop a coherent CV
2: Take on roles outside finance – and even business
3: Build networks
4: Build relationships across the business
5: Build your personal profile
6: Gain international experience
7: Don't get stuck at headquarters
8: Start planning early

Candidates need to prepare for shifts in board composition
Part of planning is anticipating future change. Over the next decade, boards will increasingly value knowledge of rapid-growth markets, analytics and social media, as structural shifts in the global economy and ever greater use of technology impact business practice.
And, as boards become more diverse in terms of gender, background and experience, opportunities will open for some, while for the 55 - 60 year old male that typically dominates boards today, gaining access to the boardroom may become more competitive.

The board of the future
Those finance professionals who want a directorship in 5 to 10 years time, cannot assume the scope and responsibilities of the role will be what they are today. So how do you prepare now for a board of the future?
- Demands will increase
- Prestige no more: functionality will drive board composition
- Social responsibility will bring a greater mix of perspectives
- Diversity is more than gender: An international board to bring an international outlook
- Technology skills will be a differentiator
- Boards will drive the shift toward longer-term business planning

Possibilities post-CFO

CFO is still a destination role for the majority. 62% of the 347 large company CFOs in the role in 2002 are either still CFOs today, or the role was their last executive post.
Only 15% have transitioned to the role of CEO or CEO and chairman, 4% to chairman and 3% to COO.

CFO and beyond

Based on analysis of 347 group CFOs from the world's largest companies in role in 2002
However 82% of the CFOs we surveyed for this study expressed an interest in some kind of role post-CFO, which either means that more will pursue executive options outside of the CFO domain in the future, or, more likely, explore non-executive or non-corporate roles.
What is evident is that for most, the skills they hone as CFO will be used in some capacity. We explore the onward paths that some leading CFOs have taken to:
- Listed to private equity
- Non-executive director portfolio
- Chairman

About the report
This study, in our series that focuses on what it is to be a CFO, looks at some of the possibilities and pathways open to CFOs today. We explore the options for CFOs to take on non-executive directorships on corporate, charitable and cultural boards, as an addition to their finance role.
We cover the opportunities for CFOs to transition to the role of chairman, CEO and to move from public to private ownership. We look back at how the careers of the leading CFOs from 2002 have unfolded over the past decade, and we look forward to how board composition will evolve in the decade to come.
This is for CFOs who are interested in the experiences of others within their community, and for future finance leaders, who need to plan now for a career in the long term and the broadest sense.

The study is based on three main elements
1: A survey of 800 CFOs world-wide
2: A study of the career paths of group CFOs at 347 of the world's largest companies over the past decade
3: A series of in-depth interviews with leading CFOs, governance experts and academics.

Source: Ernst&Young

Download the survey (PDF 68 pages in english):$FILE/CFO%20and%20beyond%20-%20The%20possibilities%20and%20pathways%20outside%20finance%20-%202012.pdf

Laurent Leloup

Vendredi 16 Novembre 2012

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