Why being a PE CFO is now tougher than ever?
Boards, chairs, and funds must reconsider their assumptions about the experience they expect from new C-suite hires. CFOs must be functional specialists and upper quartile CFOs in private equity (PE)-backed businesses should have more situational than domain or sector experience. Strong CFOs are often more capable of transitioning across multiple sectors and from outside private equity, given the rich situational experience they bring.
In the United States, the percentage of certified accountants among CFOs in top public companies dropped from 46% to 36% in the five years to 2019, while MBAs are now the more common qualification. Nine out of ten European countries surveyed for a study show that the overwhelming majority of CFOs in major firms lacked accounting qualifications. However, in the UK, 83% of FTSE 100 CFOs in 2019 were accountants, though anecdotal evidence suggests that this is changing. New CFOs, typically in their 40s, are likely to have qualified under the old UK General Accepted Accountancy Practice standards, rather than the International Financial Reporting Standards now in common use.
Large US company boards have appointed CFOs with far broader and richer career paths, including from divisional CEO roles, corporate finance, investor relations, and general counsels in addition to the trend for chief operating officers (COOs) to also have responsibility for finance functions. The wider career journeys make for well-rounded CFOs who can think strategically, understand operational complexity, and deliver the numbers. CEOs today are seeking a partner in a CFO who does more than just the numbers.
The shift from listed company to private equity is not a “massive leap”, given the depth of experience in governance and leverage offered in the former. The key is understanding the different focus, more in-depth business knowledge, and time horizons that a PE investor on a Board will have compared to a typical listed company non-executive director.
CFOs must also have the right leadership skills, including the ability to energize teams and build a narrative. This is especially important given the way that technology is currently transforming finance operations. CFOs must invest the time to listen to the team, address their concerns, and explain the benefits of the changes to them as individuals. The ability to create a clear and engaging narrative is key to building trust, which reassures employees and helps to secure their buy-in for digital transformation.
According to a report by The Wall Street Journal, CFOs have to do more than just look after a company’s finances. They also need to build relationships, think strategically, and be a “partner” to the CEO. The report states that the role of the CFO is becoming more strategic and is often seen as a stepping stone to the CEO role.
There is a growing trend among CFOs to develop better communication and storytelling skills. The ability to communicate financial information in a clear and concise manner is essential for a CFO. They must be able to convey complex financial data to both financial and non-financial stakeholders. A CFO who can communicate well can help build trust and confidence in the company’s financial position.
The CFO’s role has evolved beyond just looking after the numbers. CFOs must also be strategic partners to the CEO, and must possess leadership skills that enable them to energize teams and build a narrative that inspires confidence in the company’s financial position. CFOs must be able to communicate complex financial data to both financial and non-financial stakeholders in a clear and concise manner, building trust and confidence in the company’s financial position.
The key to being a successful CFO is to possess a diverse range of skills, including situational experience, leadership skills, and the ability to communicate complex financial data in a clear, easy-to-digest, manner.
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