The Office of Finance is evolving. Now seen as a “front office” partner to the business, able to provide data and analysis from across the organization, the finance team is beginning to look less like accountants and more like a technology team.
The skills required to be successful in finance today surpass those from the past to now include data analysts, technical procurement, innovation, data management and applications development. So, if the finance team is changing shape, does that mean the role of the CFO has changed as well?
Some argue that a broader set of experience makes for a better, modern CFO. What skills are now key for a finance leader to have? And is there any proof to support the belief that lateral experience in an organization can lead to greater success for a CFO?
Why A Skill Shift May be Needed
As the role of the finance team becomes more of a partnership with the rest of the business, the position of CFO is changing to become more collaborative with the rest of the C-suite and the board.
It makes sense, then, that a CFO with experience in other areas of the business would have a better understanding of what their executive counterparts need. With a broader understanding of the business, CFOs can help pinpoint potential issues uncovered with data analysis and anticipate the needs of other leaders.
Finance is also taking a decidedly technical turn. This move means finance leaders must have a greater understanding of the roles and solutions technologies like machine learning, advanced analytics, and even blockchain can have on the business. And CFOs are holding themselves responsible for the success of technology investments. According to a Grant Thornton survey of senior finance executives, 91% hold CFOs responsible for realizing the financial benefits of technology purchases.
Does Shifting Laterally Really Help?
Finance leaders – and those looking to move into leadership – may wonder if lateral moves would truly be beneficial to their career. KPMG wondered the same thing.
Using publicly available profile information, KPMG analyzed the backgrounds of CFOs at 100 technology and communications companies. The study looked at their experience prior to taking their current role, and also evaluated their success rate as a finance leader.
What they found supported the idea that successful CFOs tend to have experience outside of the finance department. Their research found that 79% of the CFOs reviewed were external hires. More importantly, 40% of those reviewed had “strategic experience” prior to taking the role, and 36% had prior operating experience.
The study also looked at finance leaders that KPMG classified as “outperformers.” These were defined as CFOs whose company outperformed the NASDAQ composite index during the leader’s time in the role and either remained in that role for at least five years or was promoted to a new, higher-level role.
Finance leaders with prior experience with operations shined in this comparison. The outperformance rate of those reviewed was 41%, but for those with operations experience, 50% fell into the outperforming category.
The expectations of the Office of Finance is evolving. With greater technical needs and a more strategic position in the organization, the finance team must gain a greater understanding of the business as a whole. That is especially true for the CFO. By gaining experience outside of finance – and especially in operations – finance leaders set themselves up for continued success, both for themselves and for the companies they are helping to lead.
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