Future pathways to finance leadership
Introduction and about the survey
The future operating environment for tomorrow's companies is complex and competitive. It is also less stable, and inherently risky. Amid this uncertainty, tomorrow's CFO and the finance teams they lead must somehow chart a path to create and sustain value for their businesses.
When we consider what the future of finance will look like, are all bets off? Is there simply too much technological, social, economic and business change taking place to reliably predict how the future role of the CFO will evolve? Or does this turbulence instead set the framework for how the future role of finance leaders will evolve, as well as redefining the skills and experiences that will be most valued in tomorrow’s leaders?
This report shares findings from a global study undertaken jointly by ACCA and IMA on the future careers of CFOs. Combining a global survey and interviews with leading CFOs, the research provides insights from today’s finance leaders on how they see the role of the CFO evolving, and explores the developments shaping finance leadership in the future. The report outlines what all of this means for the career experiences that next generation finance chiefs need to acquire.
Over 750 chief financial officers, finance directors and c-suite finance leaders responded to our global survey, representing one of the largest ever studies of its kind.
For finance professionals with ambitions firmly set on becoming future CFOs, the career trajectory they will need to follow is already being redefined, a reflection of how the role of today’s finance leader is changing, as well as broader technological, social and economic trends impacting business. There is no evidence, however, to suggest the finance leadership rulebook needs to be entirely rewritten for future CFOs: this is really a story of evolution, not revolution.
But how future CFO career paths will evolve is, of course, the essential point. We can expect the traditional linear routes through the finance organisation to CFO to apply less in the future, and there will be new stepping stones to the CFO role. As the CFO role rebalances between the traditional stewardship role to value catalyst, the skills and capabilities that must be brought to bear will naturally evolve and so too will the career experiences that bring about proficiency in those capabilities. It will play out in many ways; the need for future CFOs to develop much broader leadership capabilities beyond traditional finance strengths; the requirement for deeper business and sector specific experience and knowledge; the capacity to lead major transformation and change projects cross-functionally; skills in working effectively across different cultures and international environments; finely honed communication and influencing capabilities which enable finance chiefs to put across the right messages to very different internal and external stakeholders groups, and so on. We should also recognise too that whilst there may be a cohort of core evolving capabilities of particularly value to future finance chiefs, these will be nuanced and prioritised, influenced by the size of the organisation, its sector, its history and culture, its geographic footprint, its future strategy and so on.
These evolving capabilities are not simply needed by chance. They are, of course, a direct response to how the business environment is changing, and as a consequence reflect the changing expectations the business and the wider market has of the CFO and the finance teams they lead; a rebalancing global economy where businesses operate across both mature low-growth western markets and faster growing emerging markets; the changing face of the finance organisation with increasing use of shared services and business service constructs and a more focused retained finance operation wired to ‘add value’ or to provide deep specialist finance advice in an increasingly complex regulated environment; the proliferation of risk, with wider regulatory challenges and greater scrutiny on organisation performance; a more competitive environment, fuelled by the growth of consumer power in an age of increasing brand disloyalty and lower switching costs; and of course the defining influence of our age – the proliferation of information and data, and the advent of social, mobile and cloud technologies that will revolutionise how and where we do business.
In the face of all of these developments, this report simply asks what the implication is for how aspirant CFOs should plan out their own careers to successfully lead the finance function of the future. It reflects the view and perspectives of current CFOs on the skills and capabilities that will be of most value for future finance chiefs. This is their advice:
1. Plan A - know your finance fundamentals
Future CFOs will still need a strong financial understanding and should target career experiences that provide them with that understanding across various points in the finance value chain. Ninety-five percent of current CFOs agreed it was important that future CFOs have experience in the core finance areas of financial and management accounting. Almost half of today’s CFOs have had six or more finance roles during their career, 80% have had a finance role in more than one organisation and almost three-quarters have finance experience in more than one industry.
As the breadth of the role increases, it’s unrealistic to expect future CFOs to deep-dive into every aspect of the finance operation, but critically they must be able to ask the right questions across the organisation. That’s a skill that best comes from experience gained across multiple finance roles. Experience in specialised roles will continue to be beneficial, but experience in mainstream roles in finance remains essential. Plan A should be to build this broad foundation of finance experience through the career.
2. See strategy and business experience as the new baseline
The future CFO role in supporting strategic growth will be increasingly valued. Strategy formulation and execution was identified by current CFOs as the most important area in which to have experience for future CFOs. Over the next decade the business landscape will be reshaped by a combination of market volatility, globalisation and transformational innovation1. In an environment where ‘commercials’ will change quickly, deep business experience will be highly valuable. Whilst most of today’s CFOs (61%) do not have experience outside of the finance team, future CFOs should seek out greater mobility in and out of the finance organisation, building the commercial qualities needed, and of course the internal relationships. Establishing commercial credentials early on in the career journey will be advantageous, but routes to and from the finance organisation must be planned carefully.
For future CFOs - what's the most important skillset you need? It's going to be a diverse set of experiences. Tom Naratil, Group CFO, UBS
3. Career plan for the next big thing in finance: Insight and Analytics
How organisations regress, correlate, and extrapolate data to drive better decision making is the next ‘big opportunity’ for tomorrow’s finance team as data grows and the multiplicity of information presents new challenges to business decision making. The business will be more demanding on the insights needed from the finance organisation because the requisite technology should be in place to provide this. Our survey suggests current CFOs rate financial insight and analysis as the second most important area in which future CFOs need to have gained career experience. Future CFOs should plan experience in the area and actively seek out analytics roles, so they understand its value and application.
4. Get risk experience under the belt
Future CFOs will operate in a business environment that’s high risk. From traditional financial risks to emerging risks such as online reputational risk or cyber risk, the risks business face will grow, change, and in some cases become more difficult to calibrate and manage. The future finance organisation will have a significant role to play in balancing carefully the investments that need to be taken against potential risk impacts, and plan out the different scenarios. Experience in risk management was identified by current CFOs as the third most important area in which future CFOs need to gain experience and risk management challenges were identified as the second most important factor influencing the future role of the CFO. It should be said that this isn’t a play for being risk averse. Rather it’s about being prepared to take calculated decisions having a better understanding of the risk implications. Risk experience is a must-have on the CV of future CFOs.
5. Become a deal maker
With the rebalancing of global economic wealth, more businesses will look south or east to drive growth longer term. Some growth will be organic, but much is likely to be through acquisition and merger and other forms of business tie-ups, tapping into already established businesses to ease market entry and leverage expertise and market knowledge. Merger and acquisition activity was identified as the fourth most important area of experience for future CFOs to obtain. It gives specific technical finance experience in structuring deals, but also can help develop wider skills in change and project management. More broadly, we can expect funding, capital market experience and investor relations to remain core finance capabilities in the future for CFOs of larger businesses too.
6. Get closer to stakeholders, become customer-focused
The range of stakeholders with whom future CFOs will have to engage will be significant. The future finance leader will need to ‘talk the same language’ across a wide range of traditional finance and non-traditional finance relationships. CFO aspirants need to plan for roles that increase their breadth of stakeholder engagement and cultivate strong relationship management skills. But the emerging powerhouse stakeholder that future CFOs need to be mindful of in an age of brand disloyalty is customers of the business. The future finance organisation will need to be attuned to the needs of different consumers and develop a culture which is customer-centric. This will be an important milestone on the transition from back to front office for the finance organisation. The future CFO needs to be customer savvy and taking roles which provide greater customer understanding will be key.
7. Focus on the management skills that matter
While next generation CFOs will need to call into play a wide range of skills to perform the role successfully, there are a number of standout management capabilities that will be needed. The top four skills identified in our survey were leadership skills, communication skills, strategy skills and change management skills. Strong leadership skills will be essential because the success of the future finance organisation is very dependent on a strong united leadership vision and an engaged and skilled finance team, particularly as the finance organisation become more diverse. Businesses will continue to evolve and re-engineer their operations and activities, so experience in transformation and change management for future finance leaders will also be a priority. So too will be effective communication skills as they align messages and provide appropriate context on financial and business performance to different stakeholder groups.
8. Prepare for more regulation and broader reporting
It’s no surprise that future CFOs are likely to face more regulation. Regulation was identified as the third highest factor influencing the future CFO role. Future finance chiefs need to be confident operating in a regulated environment and should be adept at putting in finance structures and processes that manage legislative and increasing tax requirements effectively.
Alongside more regulation, we can expect ongoing changes in reporting requirements – growing interest in the concept of integrated reporting, more involvement of the finance organisation in reporting on different corporate performance measures, increasing use of financial and non-financial data, recalibrating investment assessments to account for environmental or social impacts and so on. Future CFOs need to track carefully developments in these areas and think about how their career plans help develop understanding here.
9. Get connected
Technology transformation in the finance team hasn't quite delivered on its promise to date. But there are developments on the horizon that may well shape the role of the future organisation and role of the CFO. The growing interest in the coming together of social, mobile and cloud technologies may revolutionise day-to-day business practices. Closer to home, there are other developments; possible use of robotic software in parts of the finance team to increase automation and better workflow, plug and play technology, and access to real-time information that provides finance chiefs with the ability to cut data many ways and which offer an immediate, integrated view of business performance. For many future finance chiefs, real-time business information in the palms of their hands on mobile devices will be a reality. Technology and automation was identified as the fourth highest factor influencing the role of future CFOs. Tomorrow’s CFOs need to be technologically adept and understand the significant role technology can play in driving better finance delivery. They should also target roles which develop and utilise their technological understanding.
10. Expand your 'footprint'
The footprint and construct of many future finance teams will continue to change. The future CFO will need to be able to manage carefully the different demands between mature and emerging markets and align their finance strategies accordingly. They will need to be adept at working in the global business environment, leading finance teams which are diverse and virtual across mature and emerging markets. From managing new reporting requirements to driving financial insight into new markets and new consumer sectors, or raising capital, the finance organisation of the future must be entirely aligned to the business’s needs. Future CFOs that can bring cross- cultural, cross-market business and finance experience to the table will be highly valued. Time served in shared service operations may also be of benefit, both in terms of gaining core finance experience, but also understanding the centre – retained relationship dynamics.