CFOs Shift Away From The Stereotype

Canada’s financial services market is counting itself among the ranks of the transformative ones of the world. The nation is embracing faster payments and FinTech innovation, while the market is being shaped by everything from the payments Modernization initiative of Payments Canada to the legalization of marijuana.

There’s no doubt that businesses must keep up with the pace of financial innovation, and it’s driving an evolution in the role of chief financial officer (CFO) as well, according to the latest analysis from the Rotman School of Management at the University of Toronto and Odgers Berndtson.

Together, they released their “Developing the CFO of the Future” report to assess how Canadian CFOs are reacting to market shifts.

“The study confirms that in today’s dynamic business environment, much is expected of the CFO, going far beyond traditional accounting skills,” wrote Tiff Macklem, dean of the Rotman School of Management, for the report’s introduction. “Increasingly, the CFO is seen as an invaluable business partner for the chief executive officer and an influential member of the leadership team — as concerned with facilitating the company’s growth and capacity for innovation as with protecting its financial integrity.”

Shifting Backgrounds

Interestingly, the report found, fewer CFOs are entering the market with MBA degrees: In 2004, nearly a third of CFOs had a master’s degree. That dropped to just 24 percent in 2014. Similarly, fewer CFOs have both a master’s degree in addition to either an accounting or finance designation.

Instead, analysts found, CFOs turn to the designation of Certified Personal Accountant, CA, with a 10 percent increase between 2004 and now in the percentage of CFOs that are CPA, CAs.

“Some point to Enron and other corporate scandals as the catalyst for this trend,” the report said, “as companies have become more cautious around financial governance and controls.”

Ties with the CEO

Not only are CFOs becoming an increasingly important partner to the CEO, as Macklem noted, more CFOs are actually becoming chief executive officers at their firm. Researchers found more than a fifth of CFOs had taken up the post of CEO in 2014, compared with just 14 percent who did the same in 2004.

While the role of CFO and CEO can be vastly different, this trend suggests greater demand for leadership skills while in the CFO position. According to the report, top-performing finance executives demonstrate “high achievement orientation,” are “resilient, hard-working and self-accepting” and are often “strong relationship builders and aren’t afraid to step into the limelight.”

Interestingly, researchers found a stronger correlation between the role of CFO and characteristics of business development executives, rather than of budget-oriented individuals. CFOs also scored high in terms of inquisitiveness and a desire to continue learning, analysts noted.

Optimism Up

Amid the changing role of the CFO in Canada are rising hopes for the economy. Nearly three-quarters of CFOs across North America surveyed by Deloitte in a recent report consider current economic conditions in the market to be good, and more than half expect those conditions to improve within a year. Fifty-two percent of CFOs surveyed said their optimism rose for the quarter of 2017, up from 45 percent in Q3.

According to Odgers Berndtson and the Rotman School of Management, CFOs have to be able to multitask in order to make their optimistic visions a reality.

“Given the breadth and complexity of the CFO portfolio, finance executives must be exposed to as many parts of the business as possible,” researchers noted. “Today, the CFO must relate to a large and diverse group of stakeholders, each with their own unique set of expectations.

“Through the course of our research, it became clear that until now, CFOs have had little preparation interfacing with key external audiences, such as investors, analysts and the media,” the report concluded. “As a result, they find themselves learning through a ‘baptism by fire’ rather than through thoughtful and deliberate development. Companies need to expose their future finance leaders to these external stakeholders, giving them the opportunity to hone their communication and political skills.”