3 Essential Skills CFO's Need for Success

Monday, December 14, 2020

One of the best ways to attract the attention of board members and CEOs is to communicate well and bring a strategic mindset. A background in operational finance is also helpful in rising throughout the ranks.

Potential employers are usually more likely to hire you for the job if you have prior experience with public consulting or accounting. This type of background demonstrates to employers that you have already excelled at the technical aspects of accounting, which is always a highly valuable skill.

 

Many Paths to Leadership

One of the newest paths to becoming a CFO is through investment banking, which was nearly unheard of in the past. Almost a quarter of CFOs today began their careers as investment bankers, and this percentage is even higher for anyone working in the tech field.

Eventbrite CFO Lanny Baker is an excellent example, as he began his career in the late 1980s, working with companies such as Donaldson, Lufkin & Jenrette, Morgan Stanley, and the Saloman Brothers before eventually becoming the finance leader for high-profile internet companies, such as Monster, ZipRealty, and Yelp.

Maynard Webb is a Silicon Valley veteran who was once the COO of eBay and was chair of Yahoo! but now sits on the boards of Visa and Salesforce. Webb believes that CFO candidates with a strong background in investment banking can be an attractive option even if they are weak in operation management and accounting. Always being upfront about these weaknesses is important during the interview process, as others will need to make up for these skill gaps.

 

Public Accounting Remains the Widest Path

Investment banking remains a rare path to reaching CFO unless you are in the tech sector. By far, the easiest path is through public accounting and consulting.

For example, Ken Stillwell is the CFO of Pegasystems, as he began his career at PricewaterhouseCoopers by providing audit advisory services and mergers and acquisitions (M&A) advice to corporate clients, as many of them were outside of the United States. Working with companies of different sizes and international cultures gave him the much-needed experience to prepare him for future work as a CFO.

While the traditional pathway through corporate finance departments continues to decline, always developing your finance skills remains a critical benchmark for the vast majority of CEOs and their board members. Operating finance skills remain a key measurement, especially among Fortune 500 companies.

A deputy finance or divisional finance role is one of the most common routes for becoming a CFO for a public company. Nearly 80% of externally hired CFOs followed that route, while treasury, accounting, and control are the much less popular ways to become a CFO for a public company. Ultimately, this a significant shift, as financial planning and analysis (FP&A), accounting, treasury, and control used to be the primary way to eventually becoming a CFO for a public company.

 

Outward-Facing Experience Remains Important

One of the most important skills after operational finance is to develop a strategic vision. Working in FP&A is especially beneficial in providing experience in learning how a company operates with partners, customers, and vendors. Understanding the strategic aspects of running a business provides a significant advantage in helping to prepare for a CFO role.

Communication skills are another important factor in becoming a successful CEO. However, communication may not always be a strong point for someone that's primarily focused on making calculations and improving the finances of a company.

Marsha Smith is the CFO of Siemens USA and Siemens Mobility, as she initially struggled with communicating with a client on asking them to accept an expensive change order. However, she enlisted the help of her colleagues from the legal and technical team to assist her in writing a letter that eventually resulted in the client agreeing to the change order.

This valuable experience played a key role in future exchanges, as it gave her the confidence to work directly with clients in coordinating monthly payments and other financial duties that involved external-facing experience.

Smith is now a finance chief, as she understands the importance of giving team members the same valuable experience to become more effective communicators while also better meeting the needs of each client.

Focusing on improving communication has become a rewarding effort for everyone involved. One of Smith's team members was able to gain a new client by negotiating better terms for a three-party deal. Looking at ways to improve communication played a big role in the success of such a deal, as her team member was able to easily communicate with the client to ensure everyone was satisfied with the transaction.

Allowing finance people to learn more about risk management, contract terms, and how to talk to each client gives her firm a significant advantage over other companies that fail to invest in improving communication. Consistently finding ways to improve communication for each team member is a major key to her success, as she has worked with Siemens for the past 24 years.

 

Final Thoughts

Ultimately, the three skills that employers need are operational finance, strategic vision, and communication skills. All of these skills are key to becoming a successful CFO, as today's work environment is highly competitive. Dealing with an ongoing pandemic is also a significant challenge.

Many people believe that we will see a lot of surprise retirements in the near future, as companies will need to have a successor ready to take the reigns during this transition process. Cultivating talent from within is a great way to find a new CFO, as it allows you to spend more time training an existing employee without the need for hiring someone on the outside.

Hiring from within is especially beneficial if you have strong team members with a background in finance, as you will not have to worry about outside recruiting. In-house employees are also much more well-known compared to hiring someone outside of the organization.

Alfred Lin is a partner at venture fund Sequoia Capital, as he believes that it's important for businesses to take a risk on hiring a first-time CFO if the candidate offers the best set of skills to successfully navigate the corporate environment. However, Lin believes that it's better to hire a second or third-time CFO if your current one isn't inspiring confidence with the investor base. Other than that, Lin feels that first-time and second-time CFOs aren't much different from each other.

Becoming a successful CFO at a major company is a long-term process that doesn't happen overnight. Reaching success as a CFO is the result of years of hard work and dedication. Understanding operating finance, developing a strategic vision for the future, and strong communication skills are all critical aspects of becoming a valuable CFO.

Now is the perfect time to begin work on improving these skills for anyone with a desire to become a CFO. Learning from others is also important in avoiding common errors and separating yourself from the crowd.

You can follow many leadership paths in becoming a CFO, but public accounting, corporate finance, and investment banking remain the most popular options. All of these experiences play a key role in preparing you for the CFO role while also helping you attract the attention of CFOs and board members.

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