CFOs In The Know
CFO.com recently reported that CFO turnover at publicly-traded companies and private equity firms declined this year. Boards have chosen not to replace senior financial officers in the midst of the recession. When a hiring has occured, external candidates were selected just slightly less often than internal candidates, and the CFO role is still primarily being populated by executives who have accounting and control backgrounds.
It is heartening to learn that more great CFOs—those being promoted, transferred and hired—have general management experience. This is a trend that is overdue. Unfortunately it is still not a widely-held practice, perhaps because not many CFOs are given the opportunity to rotate out of the CFO role, or they’re choosing to stay in their comfort zone.
For many years, we have been assessing CFOs and obtaining corroborating performance references. We have found that CFOs who have operational experience are much more effective and grounded than those who have spent most of their careers in a strictly corporate setting. We have a strong bias for CFO candidates who have hands-on knowledge of operations and an intimate feel for their customers and the marketplace. That’s not to say that core financial management skills and experience aren’t important. In fact, as CFO.com pointed out, the recession has put the spot light on CFOs—they have “proven to be the critical factor in corporate survival.”
Corporate survival depends on many factors. Certainly facts and information are high on the list. However, it appears that CFOs may not always get the real information they need to steer their companies through turbulent times. According to Michael Roberto, a professor of management at Bryant University in Rhode Island and the author of “Know What You Don’t Know: How Great Leaders Prevent Problems Before They Happen”, bad news doesn’t always get delivered to CFOs as it should. It can be filtered, abbreviated, interpreted, even distorted, and not necessarily intentionally.
What causes this lack of communication or miscommunication? According to Mr. Roberto, one of the problems is isolation, which can be a result of many things: a corporate culture or environment that separates the executive offices from the front line and the ‘factory floor’ so to speak; over-worked, under-staffed executives who can barely keep on top of their core responsibilities; a management style that doesn’t welcome, recognize, or reward openness, sharing or participation.
These are not insoluble problems, but some changes, such as a shifting from a culture of secretiveness to one of openness, require time, commitment, coaching, and sometimes a change in the players. But before going to that extreme, executives could adopt some of the leadership skills described in the book. The title of the first chapter almost speaks for itself: “From Problem-Solving to Problem-Finding.” It is a worthwhile read.
And if you're ready to start your next executive search, find out how our experienced consultants at GAAP Executive Search can help you recruit top-performing financial executives.