The numbers are firm, and they’re not encouraging. You may very well be a skillful, seasoned finance manager, but many other people — both inside and outside your company — can say the same. And in every company, there’s room for only one CFO.
The first, most important step you can take toward landing a CFO job is to get your name on the short list — or, more to the point, not to get your name crossed off the list. We spoke with CEOs, executive recruiters, consultants, and others who consider the merits of prospective CFOs at both public and private companies. Many candidates, they told us, are weighed in the balance and found wanting; heed their advice, and you need not be among them.
Of course, one black mark from this list — or even more — won’t necessarily ban you from the executive suite for life; all of our “ten sure signs” can be addressed, in time, if you’re willing to invest the effort. You might also argue that a number of our signs conflict with each other. Should you stand up to the boss, or should you tone down the ego? Should you get more involved with operations, or should you lighten up on the bean counting? Finding the right mix of skills for your career is a lifelong pursuit; here’s a good milepost to see where you stand.
Have any “sure signs” of your own? Send them to MarieLeone@cfo.com.
1. Deep Down, You’re Still a Bean Counter
“There’s more to being a CFO than getting the numbers right,” asserts Marc Pfefferle, a principal in the Carl Marks Consulting Group, a turnaround firm based in New York. Financial technicians, however skillful, can’t rise to the top without practical operating experience, says Pfefferle. Good CFOs have always been strategists, whatever the size of their company, he adds; only a bean counter would fixate on the profit-and-loss statement while ignoring day-to-day indicators like cash flow.
The CFO is more than just “the funnel that all information passes through,” adds Raymond Vennare, president and CEO of ImmunoSite, a private biotech-research firm in Pittsburgh. The finance chief must distill all that information, insists Vennare — becoming, in effect, an analyst who understands what the market is telling the company and who determines what the company should be telling the market.
So, if it behooves candidates to break the bean-counter mold, does it matter if would-be finance chiefs have a CPA? Yes, maintains Jim Cederna, president and CEO of Pittsburgh-based manufacturer Calgon Carbon. Even without the latest round of regulations from the Securities and Exchange Commission, says Cederna, public companies would be hard-pressed not to have a CPA at the finance helm — unless the team already boasted a very strong controller. (And lately, as we’ve noted, good controllers have become a scarce commodity.)
For private companies, notes Vennare, it’s more important to have a CFO who understands the industry, but a CPA is always a bonus.
2. You Can’t Handle Office Politics
When a company has many capable financial executives competing for attention, says Chip Clothier, “one of the things that allows an executive to rise to the CFO spot is the ability to manage the politics of the business.” Adds Clothier, the managing partner of executive search firm Howe and Associates, a winning CFO possesses the “executive presence” to juggle the concerns of corporate constituents — the CEO, unit managers, directors, Wall Street analysts, bankers, and the finance department — without being skewed one way or another.
“Corporate constituents have to trust the numbers and the CFO,” says Pfefferle. That means more than simply managing the organization downward; a CFO must also “manage upward,” presenting facts and ideas to the CEO and the board. On occasion this might mean standing up to the boss; on rare occasion (headlines aside), this might even put the CFO’s job in jeopardy. A finance chief who decides to play it on the safe side, or is outmaneuvered because of a lack of political savvy, will likely find himself or herself in a weaker position the next time around. Certainly, the company will suffer.
Too many people pay homage to their bosses rather than engaging them, explains ImmunoSite’s Vennare; the finance chief needs to be able to argue a point with the CEO and not shrink away the next time they meet. “I love a CFO who doesn’t mince words or worry about my feelings when he’s got observations that need to be aired,” says Cederna. The CEO and CFO form such a “tight-knit team” — bonded partly by respect and trust, and partly by chemistry and other intangibles — that a vacant CFO spot is very attractive to an incoming CEO. In fact, the privilege of hand-picking his own finance chief was one of the factors that drew Cederna to Calgon Carbon.
For a CFO to be a successful strategist, says Melissa Halpert, a managing director at institutional investor Providence Capital, he or she need to understand the board, not simply to ask the right business questions. That requires a significant storehouse of management experience as well as financial expertise. “A good CFO knows the board’s modus operandi,” remarks Halpert, who adds that the finance chief should strengthen the board by using its members’ expertise to enhance the business.
3. You’ve Got a Swelled Head
Dealing with the CEO requires self-assurance, notes Pfefferle, but all too often, bright managers are cocky, strong-willed, and overconfident. Executives with big egos tend to overlook little things, or things they deem insignificant, says ImmunoSite’s Vennare, who has “turned down [prospective] CFOs because of their egos.” Swelled heads can lead to missed opportunities, adds Pfefferle, when information about those “little things” ceases to flow through the organization.
Even well-intentioned finance chiefs can be hurt by their egos. When he was the incoming CEO of another biotechnology firm, Vennare arrived just in time to squelch a disaster. The CFO had been hired by Vennare’s predecessor because of her biotechnology expertise — a good move for a small private company, says Vennare. Yet her myopic view of the industry, and her refusal to survey new advancements in the market, caused the CFO to trust only her own company’s technology. Instead of farming out a complex imaging project to the industry leader, the CFO cobbled together a business plan and started raising funds for a two-year, $8 million IT infrastructure project that almost destroyed the company, according to Vennare.
The worst kind of arrogance, say most of our sources, is the type that covers up insecurities. Why? Finance managers with this particular failing squirrel away information as a power play, releasing only half-truths or partial facts so they remain in control of their team — but again, leading to missed opportunities for the company. Worse, they have a hard time accepting blame or admitting errors. (A thorough regimen of “360″ reviews can often provide a cure.)
4. You’ve Got No “Heart”
Cowardly lions need not apply. Most executives have their fair share of basic integrity, says Pfefferle, but a CFO needs enough “heart” to stay the course under pressure.
To some extent, says institutional investor Halpert, a CFO’s job is to rein in the CEO. Cederna calls the fortitude to expose potential scandals “managerial courage”; in other words, having the mettle to “do the right thing.” It’s more than just speaking up, he adds; “it’s having the confidence to fix things, too.”
If a public scandal emerges at a company, will the finance managers who work there carry a stigma when they leave? Not according to executive search expert Clothier, who says that only a small minority of managers share the taint of their companies. Unless an executive is indicted, it shouldn’t be stumbling block for a good candidate, maintains Clothier, although the job seeker should expect extra scrutiny from search firms and prospective employers.
“There’s always more to the story” than you’ll see in the news,” adds Lee Shull, a managing director for interim-CFO firm Resources Connection. When you’re looking into a scandal, says Shull, “you really have to determine the candidate’s level of involvement.” In fact, adds Shull, Resources Connection just hired a financial manager from a company made infamous by accounting improprieties — but only after Resources Connection and the client were comfortable that the candidate wasn’t part of the malfeasance.
5. You’re Too Content with the Status Quo
Letting things brew and dealing with them later is an approach best confined to the office coffeemaker; it’s certainly not the mark of a successful CFO candidate. Sometimes, taking the initiative with a business problem means stepping out of the finance role to become, for example, an operational catalyst.
While CFO at a private scientific research company, Stewart Griffin identified a major new piece of equipment — an automated microscope-slide feeder — whose return on investment was disappointingly low. The variation in slides from one client to the next, it seemed, nearly wiped out the saving that the automated feeder was intended to generate; each batch of slides had to be painstakingly recalibrated.
Griffin, who took on the task of making this expensive slide feeder pay its way, determined that a further investment was needed — standard slides, which the company would provide to its clients. The standard slides cost his company another $7,000 — and returned a $300,000 saving to the research lab.
Writ large, this is the same approach that a successful turnaround artist might take to overhaul a troubled company. Turnarounds are a bit of a specialty, of course, and you’re unlikely to find yourself tackling such a job until you’ve spent some time in the trenches.
6. You Don’t Care Enough about Operations
Finance chiefs have to travel to plants and facilities, attend industry conferences, and visit clients, says Calgon Carbon’s Cederna, so they understand what’s behind the numbers. There’s no other way, he maintains, for them to become “true business counselors and advisors.” Worthy CFO candidates don’t view finance as an isolated function, adds Pfefferle; they see past the numbers to explore how corporate finance can help usher in business improvements.
A prospective CFO also needs to dig into the company’s core competencies, says ImmunoSite’s Vennare, who demands that his finance chief understands the company’s business and financial model, not to mention its relationship with the capital markets. “If the CFO is still learning about my business, the learning curve is already too long,” notes Vennare. He adds that a candidate hoping to join the C-level should be more of a teacher than a student. “If I wanted a CFO who was just good at finance,” quips Vennare, “I would have hired a graduate student with good marks in finance.”
Other sources we spoke with agree: A CFO who is short on basic operational knowledge won’t have enough information to make the best financial decision. Of course, the CFO shouldn’t get bogged down with operational details — or with financial details, for that matter. To some degree, a finance chief must rely on unit managers to direct the appropriate information up to the C-level. (Maintaining a close connection with operations may be more critical than ever due to some of the reporting requirements of Sarbanes-Oxley.)
7. You’re the “Quiet One”
If you can’t step up in front of a large group and speak about your company’s finances and business, you won’t make a good CFO, counsels Clothier of Howe and Associates. Eloquence may not be essential, but you’ve got to be good on your feet. “You rarely see a wallflower become a CFO,” asserts Clothier, especially when you consider how often the finance chief must stand in for the CEO.
That was the case for Jeff Burkel. Almost immediately after being hired as the CFO of Blattner Brunner, an advertising agency, Burkel and executive vice president Scott Morgan were asked to handle some duties for the CEO, who was busy arranging a majority-stake buyout of his partner. Their job was to “be the face of the company,” explains Burkel, who says the duo became agency ambassadors to clients, bankers, and lawyers, as well as industry and community groups.
Burkel’s negotiating dexterity turned out to be as important as his financial skills. Within a month, he was sent to a large pharmaceutical client to make his agency’s case for a major rate hike, in the face of adamant objections by the client. Eventually, Burkel drove home the point that the increased rates reflected a higher level of service. The agency held on to its client — at the new, higher rates.
Regardless of deft negotiating and public speaking skills, a CFO will rarely match the crowd-pleasing persona of a CEO. “I feel for CFOs who have to follow the CEO on stage,” remarks Calgon Carbon’s Cederna. Successful chief executives are great in front of crowds, so when the CFO joins the CEO in a tag-team presentation, the finance chief usually comes off second-best. Nevertheless, the CFO should have the confidence and expertise to weather any crowd.
8. You’ve Got a “Financial Disconnect”
Bringing old and new financial relationships to the table is essential for anyone who’s stepping into the top finance job. So is a thorough understanding of financial “triggers”; during the past year, many companies with poor cash flow or sinking stock prices took a hit when loan covenants were broken due to downgrades in corporate credit ratings.
For public companies, experience with SEC filings is extremely important (all the more, now that CFOs are required, literally, to sign off); so is a solid relationship with corporate lawyers and commercial bankers. Specific expertise — say, with reverse IPOs or with mergers and acquisitions — is more of a case-by-case requirement. (Providing earnings forecasts, on the other hand, may no longer be an issue for the many companies that are getting out of the guidance game.)
And since the finance chief is the point person with bankers and the SEC, adds Cederna, it’s important for CFO candidates to have some treasury and accounting background. As we’ve mentioned, the CFO shouldn’t be bogged down in the details but should be expected to manage the accounting and treasury staffs from a position of experience.
Private-company CFOs need to be well-versed in venture capital portfolios, the motivations of the company’s investors, the expected return on investment, and how long the investors intend to keep their money in the company. Finance chiefs at private companies often go so far as to develop a proprietary database that slices and dices the investor base by dozens of criteria, including narrow special-interest markets.
9. You Pay No Attention to the CIO Behind the Curtain
Information technology — and the IT department — shouldn’t mystify you, let alone intimidate you, says Shull of Resources Connection’s Shull. Given the pressure to deliver more information, more quickly, to the CEO, to the SEC, to analysts, and to business-unit managers, adds Shull, you won’t find too many top CFOs who are in the dark about IT. (In fact, if your IT IQ doesn’t measure up, you might just want to consider another career.)
Several chief executives say that they rely on their CFO to keep abreast of current technology and leverage it to the company’s advantage. Others, like ImmunoSite’s Vennare, say that a tech-savvy CFO is not a big issue, as long as the correct balance of other skills is in place. “You don’t need a software engineer as a CFO,” he reasons, “but the candidate should have played in that market if that’s your core business.”
Nevertheless, ad agency CFO Burkel contends that a finance chief has to be comfortable enough with technology to understand the project requests coming from the IT department. Notes Burkel, you can’t always spend money on a consultant “to tell you whether your CIO is making sense.”
The Sarbanes-Oxley Act has also compelled many CFOs to become more tech-savvy, simply to meet more-robust disclosure regimes. One effect of Sarbanes-Oxley, write Aberdeen Group analysts Alan Yong and Alex Veytsel in their report “Baring the Financials: More Than the Current Financial Systems Can Bear?”, is that public companies must be able to extract granular details about material transactions and events from their financial systems.
Although the act doesn’t explicitly mandate new or updated financial systems as a compliance method, they add, the “spirit of the law will haunt public companies that lack a financial platform that captures, analyzes, and distributes detailed data.” The authors also mention something about handling all these details “in a shrinking timeframe.” Even if CEOs don’t yet demand that their CFOs embrace technology, it seems that lawmakers do.
10. You’re Not a Leader
Without the intangible ability to lead — the mortar that makes the whole greater than the sum of its parts — an aspiring CFO will fall short of the mark.
On a strategic level, leaders excel in the areas you might expect, namely constructive persuasion, talent assessment, leadership development, team building, and organizational design, says Professor Jay Congers of the London Business School. In a new book of essays titled “Leaders Talk Leadership,” Congers also asserts that a good leader knows when to cannibalize strategies, products, and organization and when to strengthen continuity and stability. It’s a delicate balancing act, adds Congers, in which adapting quickly is the hallmark and “years of experience will no longer be enough — and, in some cases, may prove a hindrance.”
Turnaround guru Pfefferle looks for CFO candidates who are results-driven, not process-driven. Finance executives who are too inflexible about their protocols and reporting structures often allow those processes “to turn into an end in themselves.” That inflexibility not only stunts the growth of the finance department and the company, he maintains, but also shuts the door on the manager’s ability to rise to the next level. Adds Pfefferle, “Successful CFOs see beyond the processes to prevent tomorrow’s problems.”
And finally, adds Pfefferle, finance executives need to be able to admit their errors, correct them, and avoid repeating them. Prospective CFOs who don’t see it that way may simply have “The Wrong Stuff.”
Have any “sure signs” of your own? Send them to MarieLeone@cfo.com.