AES International Partner Ronan Colleran outlines the impact of the changing role of the CFO in Ireland, with in-depth guidance on how to ensure your career progression remains on-track.
The Changing Role of the CFO
Over the past 20 years, the role of the Chief Financial Officer (CFO) has changed considerably. Traditionally, the CFO was the right-hand person to the Chief Executive Officer (CEO) and her or his clear number two. This positioned the CFO front and centre for most commercial decisions and for input into the overall company strategy. Globally, however, the role and positioning of the CFO is changing.
This is due in large part to the following:
1) Digital Revolution
Innovation in the areas of big data and customer insights has led to the reinvention of the Chief Marketing Officer (CMO) role. At the same time, the ongoing digital revolution has placed technology at the centre of the organisation and it central to the customer proposition for many companies, thereby increasing in prominence of the Chief Information Officer (CIO). These developments are altering the pecking order within many organisations.
2) Increased Regulation
Following the global financial crisis, regulators and multiple stakeholders have pushed the regulatory environment into extensively detailed reporting. This has moved the role of the CFO towards the fiduciary end of the spectrum, rather than the visionary end.
3) Advances in Technology
Due to advances in technology, companies of all sizes have more tools at their disposal to assess the financial performance of their business without requiring as much human intervention. Prior to the advent of accounting software packages that produce real-time management information and reports, senior management teams relied almost exclusively on historical financial information to support decision-making. This resulted in the CFO being involved in every key decision as the master and controller of the figures. Annual reports in their current formats are becoming less central to routine decision-making within many companies.
4) Career Advancement
“Lean” has become the mantra for a lot of tech start-ups. This has translated to very smart candidates with less career experience being appointed to positions of responsibility at an earlier stage in their career at a lower cost. The changing role of the CFO has resulted in these individuals becoming more a member of the senior management team than a clear number two to the CEO in these tech companies.
A LOCAL VIEW
In a local context, while Ireland’s top PLCs and private companies continue to hold the CFO role in high regard, the nature, level and weighting of the CFO’s responsibilities has also been impacted due to the following:
The significant presence of US multinational corporations in Ireland has been a key contributor in shaping the changing role of the CFO in Ireland. In the US, graduates traditionally join Big 4 firms to become public accountants. In Ireland, many graduates traditionally joined the Big 4 to become commercial businesspeople. The CFO roles being shaped by US multinationals in Ireland are now often more aligned to the public accounting responsibilities with statutory reporting and compliance being central to the role. The required CFO skillset is therefore narrower than a commercial CFO role. In effect, the CFO is being paid to keep the company from breaking any laws by ensuring all statutory filings and administration are completed promptly and correctly.
Less Strategy, More Statutory
Many US companies who have their international headquarters (i.e. their headquarters for all business outside the US) in Ireland have an Ireland-based CFO who reports into the corporate CFO at the organisation’s main headquarters. The US-based CFO will tend to be responsible for more strategic, funding and mergers/acquisitions activity with the Ireland-based CFO having responsibility for statutory and controllership activity.
The Requirement for New Skills
Globalisation has resulted in the advent of global business services centres (otherwise known as shared services centres) where large organisations centralise business and support functions. The finance function of such operations cuts across different cultures, working practices, beliefs, languages and time zones. This requires a different skillset for finance shared service leaders. Ireland has benefited from several organisations choosing to locate such operations here. For these leadership positions, experience in scaling organisations, process transformation and people management is more in demand than traditional “commercial experience”.
So how should the changing role of the CFO influence Chartered Accountants in determining what career path to follow? Chartered Accountants need to be cognisant of the fact that the type of organisation they choose to join today will influence the type of CFO or other C-suite executive they will have the opportunity to become in the future.
For a recently qualified ACA, for example, joining a “wow factor” global online company may be a great brand name to be associated with, but the following questions should be asked:
• What are the exact responsibilities of the role?
• What skills and experience will be developed by working in the role?• Will these skills and experience play to my core strengths?
• Where will I be most effective and happiest – as a small fish in a big pond or a bigger fish in a smaller pond?
• Do I want to ultimately be a CFO, a commercial director, or a general manager and will this company assist me in getting the role and level I desire?
• What potential internal promotion opportunities could exist beyond this role to shape my experience?
• How narrow or broad will my experience be viewed by the market in general in three years’ time?
• Am I open to working abroad at some stage in the future with the company (as future career progression may be dependent on you moving with your employer to company headquarters in the US)?
• How will this opportunity set me up for the future in terms of my goal of where I want to be and the type of work I want to be doing at the pinnacle of my career?
• If the long-term goal is to be a general manager, it is imperative that broad experience in a CFO role overseeing multiple core and support functions is gained.
For employers, careful consideration should be given by both the potential employee and the employer on what type of ACA should be appointed for a specific role. Employers should ask themselves what type of technical and interpersonal fit would work best for each role before commencing the recruitment process; is it a strong technical accountant, a commercial accountant, or a candidate who would be happy in a less dynamic finance role?
For example, in recent years, a well-known and sought after Irish PLC deployed a recruitment policy of hiring the best and brightest commercially-minded Big 4-qualified ACAs. However, the finance roles most of these ACAs worked in were siloed product control-type roles that were and were not in the domain of what could be termed a “commercial finance” role. The result was high staff turnover with a lot of the ACAs moving on to another company within two to three years of working with that PLC. More damaging, potentially, was the fact that the quality of experience these ACAs gained did not contribute to their career development in the areas that matched their skillsets and career aspirations.
For experienced CFOs, the further you go up the corporate pyramid, the more specific sector experience becomes a prerequisite for CFO-level appointments. For CFO roles where strategic input is required, sectoral experience is a necessity. In addition, different sectors require application of different accounting standards. In a typical career, how many sectors can someone truly become an expert in? Two sectors, or three at most. It is therefore rare that CFO-level candidates can move seamlessly between sectors. The following questions should be addressed when considering career positioning:
• Is the sector I am currently in where I want to be in the future?
• Could I be pigeon-holed in my current sector or organisation type if I stay longer in it?
• How marketable will I be if I choose to look at a new career challenge?
• What is the five-year business plan at my current employer and will it satisfy my ambition?
• What skills and experience do I have that are directly transferrable to my desired sector?
• What are the gaps in my experience, and what can I do today to address those gaps?