The Right Stuff: Leadership in Finance

The Right StuffLeadership in Finance

A report prepared by CFO Research Services in collaboration with Tatum

The Right StuffLeadership in Finance

A report prepared by CFO Research Services in collaboration with Tatum

The Right Stuff: Leadership in Finance is published by CFO Publishing Corp., 253 Summer Street, Boston, MA 02210. Pleasedirect inquiries to Jane Coulter at 617-345-9700, ext. 211 or [email protected].

CFO Research Services and Tatum developed the hypotheses for this research jointly. Tatum funded the research andpublication of our findings. We would like to acknowledge Cindie Jamison and Mark Rosenman for their contributionsand support.

At CFO Research Services, Celina Rogers directed the research and wrote the report.

CFO Research Services is the sponsored research group within CFO Publishing Corporation, which produces CFO magazine in the United States, Europe, Asia, and China. CFO Publishing is part of The Economist Group.

March 2008

Copyright © 2008 CFO Publishing Corp., which is solely responsible for its content. All rights reserved. No part of this reportmay be reproduced, stored in a retrieval system, or transmitted in any form, by any means, without written permission.

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Contents

Finance leadership— 2Meeting the demands of an expanded role

About this report 3

Critical leadership skills 4

Qualities of a finance leader 8

Becoming a leader 12

An exceptional position, an exceptional opportunity 16

Sponsor’s perspective 17

The Right Stuff: Leadership in Finance

Finance leadership—Meeting the demands of anexpanded role

In early 2007, CFO Research Services conducted aresearch program to examine the state of the financeprofession from the perspective of senior finance execu-tives. The result of that work—Finance Chiefs Reveal theDownside of Their Expanded Role—found that U.S. financeexecutives are acutely pressured by increased responsi-bility and heightened accountability. We found thatfinance departments are not only under pressure tomanage financial compliance, processes, and controls inan environment of intense regulatory scrutiny, but alsoincreasingly accountable for business performance.Finance executives responding to last year’s survey toldus their companies were demanding more of finance’stime and attention for strategy development, decisionmaking, and planning and analysis than they have in thepast. These demands were compounded, according tofinance executives, by inadequate resources.*

One year later, as a weakening economy and tight credit markets threaten to stifle growth—and as the reg-ulatory climate demands that companies conduct busi-ness more and more transparently—it seems clear thatthe resource gap in finance will only grow larger in themonths ahead. The cost of the finance function hasalready resumed its downward trend after a brief spike when Sarbanes-Oxley took effect in 2004-05—suggesting the trend toward doing more with less infinance probably will continue for the foreseeable future.

Our findings in Finance Chiefs Reveal the Downside of TheirExpanded Role led us to wonder: How are finance execu-tives navigating this challenging environment of highdemand and relatively scarce resources? What distin-guishes the most successful finance leaders from theirpeers? And what about the upside of finance’s expandedrole? Now more than ever, finance executives have theopportunity to guide and influence not just the financefunction, but also the business at large. What are theskills and qualities they need to do so?

Top-notch technical skills in finance and accounting areindisputably important for finance leadership. Certainlyintense regulatory pressure has placed a spotlight ontechnical finance and accounting skills in recent years—perhaps at the expense of non-technical managementskills. In Preparing Finance Staff for the Future, a recentstudy on finance training, we found that companies trainintensively on technical finance and accounting matters.But the finance executives who participated in that studyalso told us that they’re eager for broad managementtraining that will help them manage and support thebusiness. Finance executives seek training on industryand competitive dynamics, business management, andthe skills often labeled as “soft skills”—collaboration,negotiation, and communication.†

The results of our research on finance training suggestthat finance executives recognize the value of broadmanagement skills—but they also suggest that theseskills may be lacking at times among senior finance per-sonnel. And—although it would be a mistake to under-estimate the importance of technical skills—FinanceExecutives Reveal the Downside of Their Expanded Role doc-uments a complex set of challenges for finance lead-ers—and those who aspire to leadership—that noamount of technical skill could address. These studiessuggest that management skills and leadership qualitiesare becoming increasingly important as finance execu-tives pursue their broad, organizational mandate—andwork to attract the resources they need to execute thatmandate.

In the current research program, we sought to uncoverthe combination of non-technical business managementand leadership skills that finance executives will need tocarry out this expanded business mandate. What busi-ness and leadership skills do the most successful CFOspossess? What are the qualities and characteristics of theideal finance leader? How can leadership be learned? Wefound that the most successful finance leaders tend toexhibit clarity of thought and of action—and that theybring a level of adaptability and judgment to their workthat is often the result of experience.

MARCH 2008 © 2008 CFO PUBLISHING CORP.

The Right Stuff: Leadership in Finance2

* See Finance Chiefs Reveal the Downside of Their Expanded Role, CFO Research Services, March 2007 (available for download at www.cfo-research.com). †

See Preparing Finance Staff for the Future, CFO Research Services, November 2007 (available for download at www.cfo-research.com).

© 2008 CFO PUBLISHING CORP. MARCH 2008

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About this report

In early 2008, CFO Research Services (a unit of CFOPublishing Corp.) launched a research program on leader-ship in finance. This study, based on a survey of seniorfinance executives at large and midsize North Americancompanies, explores executives’ views on the non-technicalskills and personal qualities of the most successful leadersin finance.

Respondent Demographics

CFO Research Services surveyed 250 senior finance executives to prepare this report.

Survey respondents hold positions

with the following titles:

CFO 35%VP of finance 20%Controller 16%Director of finance 16%EVP or SVP of finance 4%CEO, president, or managing director 1%Other 8%

Respondents represent a broad

cross-section of industries, including:

Auto/Industrial/Manufacturing 24%Business/Professional Services 6%Chemicals/Energy/Utilities 6%Financial Services/Real Estate/Insurance 17%Food/Beverages/Consumer Packaged Goods 5%Hardware/Software/Networking 4%Health Care 9%Media/Entertainment/Travel/Leisure 4%Pharmaceuticals/Biotechnology/Life Sciences 3%Public Sector/Nonprofit 4%Telecommunications 2%Transportation/Warehousing 4%Wholesale/Retail Trade 8%Other 2%

Note: Percentages may not total 100 percent, due torounding.

In the current research program, wesought to uncover the combination ofnon-technical business management andleadership skills that finance executiveswill need to carry out their expanded business mandate.

Critical leadership skillsOne of the questions we sought to answer was this:Which management skills do finance executives believeto be critical for success? We asked finance executives toevaluate a variety of non-technical management skills,including communication, collaboration, foresight, andeven time management. An overwhelming majority ofrespondents recognize that all of these non-technicalskills, across the board, are important. But respondentsmost often say that skills associated with decision mak-ing, communication, and collaboration are critical—notjust important—for success. (See Figure 1.)

A solid majority of respondents (63 percent), for example,say that the ability to follow through on decisions is crit-ical for success, while 59 percent of respondents say thatthe ability to foresee the future consequences of currentactions—an important skill for solid decision making—is critically important. Sixty percent of respondents saythat the ability to communicate clearly and effectively iscritical. Collaborative skills—working well with C-levelpeers, and persuading others to follow a course ofaction—were also rated very highly by respondents.



Figure 1. Finance executives most often say that decision making and communication skills are critical for success as a finance leader.

In your opinion, how important is it for the most successful CFOs to have mastered each of the following non-technical professional skills?

The ability to. . .

Percentage of respondentsNote: Percentages may not total 100 percent, due to rounding.

24%

26%

38%

41%

44%

49%

49%

59%

60%

63%

53%

57%

54%

52%

45%

40%

47%

39%

36%

34%

20%

16%

8%

4%

11%

10%

4%

2%

4%

2%

2%

1%

2%

1%

1%

1%

1%

1%

1%

0% 20% 40% 60% 80% 100%

Manage personal time effectively

Handle constructive criticism and professional conflictseffectively

Manage projects effectively (i.e., organize others todeliver on time and within budget)

Negotiate with others, inside and outside the business

Understand organizational and internal politicalrelationships

Work well with C-level peers

Persuade others to follow a course of action

Foresee the future consequences of current actions

Communicate clearly and effectively in writing, orally,and through visual media

Follow through on decisions

Critical for success Important for success Nice to have Usually outweighed by other factors

The skills that respondents most often say are critical forsuccess mirror a familiar paradigm for organizationaleffectiveness: To be effective, a manager should knowwhat to do (foresee the consequences of actions), saywhat needs to be done (communicate clearly and effec-tively), and then see that it is done (work with others tofollow through on decisions). The most successful CFOs,survey results suggest, not only know how to make gooddecisions—they know how to make those decisionshappen.

The most successful CFOs, survey resultssuggest, not only know how to makegood decisions—they know how to makethose decisions happen.

It is informative, however, to view the core managementskills cited most often as “critical” in light of some of theskills respondents report as critical least often—the ability to navigate organizational politics, negotiationskills, project management skills, and the ability to handle criticism and conflict. Finance is perhaps the mostanalytical and information-based of all the businessfunctions, so it’s easy to understand the appeal of clearthought, clear communication, and measurable follow-through to finance executives. It seems that financeexecutives perceive other types of skills—those thatinvolve complex and, at times, even sensitive interactions with professional peers and colleagues—as secondary. But as demands on finance from otherfunctional areas in the business continue to increase—and as finance assumes a broader role in the enterpriseas a consequence—finance executives may find themselves calling on these nuanced interpersonal skillsmore often in the years ahead.

Survey respondents observe, for example, that a financeleader’s success depends in part on his or her ability toact as an effective advocate for the finance function.“Finance serves all the organization’s stakeholders,”writes the CFO of a midsize cable networking company

in an open-ended survey response. “To a large extent, its success depends on its ability to persuade each category of stakeholder of the value of the services it provides,” he continues. Other respondents identifyopportunities to add value to the business throughfinance’s expanded role. The CFO of a midsize financialservices company writes, “The CFO has the opportunityto look across the organization and solve problems anywhere in the firm. Tremendous value can be added ifyou view ‘everything’ as your job—if you see yourself asfree to add value in driving strategy and performanceimprovement in all areas of the firm.”

That level of contribution often requires finance leadersto move flexibly between finance’s modes of thought,analysis, and argument and those of their peers in otherareas of the business. Many respondents point out, forexample, that making a convincing argument tocolleagues working outside of finance involves not justcommunicating a clear message, but also tailoring themessage to fit the audience. Arguments that may be persuasive to colleagues in finance might need to be castin more general management terms for colleagues inother areas of the business. “It’s important to be persua-sive as a colleague by putting things in terms that mostpeople can understand and relate to—which oftenmeans non-technical terms,” writes the controller of alife sciences company. “People often want to do the rightthing once it’s pointed out, but they frequently get noth-ing from finance but technical terms that are difficult tounderstand.”

How well have finance executives mastered these non-technical leadership skills? We asked survey respondentsto assess their own performance across the full range ofthese skills—a skill set that they nearly uniformly agreeis important for success. Not surprisingly, we found thatfinance executives tend to say they’re doing best at theskills they believe to be most critical—50 percent ofrespondents, for example, say their performance at communicating clearly and effectively is “excellent,” and47 percent say their ability to follow through on decisionsis excellent. (See Figure 2, next page.)


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Although most finance executives say that their perform-ance in all of these professional skills is at least adequate, it’s interesting to note that relatively fewrespondents say their performance in more political, personal, or sensitive areas is excellent. Only 31 percentof respondents, for example, say their performance at persuading others to follow a course of action is excellent. Persuading others is, of course, a much moreinteractive skill than simply communicating clearly. But persuading others to pursue a course of actionis also necessary if the organization, not just theindividual, is to follow through on decisions.

The same could be said for navigating company politics,negotiation, and even conflict management: Managingdifficult situations involving other people is an importantpart of getting things done, but it’s also the area whererespondents tend to rate their performance as lessstrong. In some cases, finance executives may find thatimproved interpersonal skills may lead to even betterperformance in the leadership areas that are mostimportant to them.



Figure 2. In general, finance executives say they’re performing best at the leadership skills they say are most critical.

In the spirit of self-assessment, to what extent have you mastered the following skills?


19%

22%

28%

31%

34%

39%

44%

47%

47%

50%

51%

63%

58%

55%

50%

52%

48%

44%

47%

44%

30%

15%

14%

13%

16%

8%

9%

9%

6%

6%

0% 20% 40% 60% 80% 100%

Manage personal time effectively

Handle constructive criticism and professional conflictseffectively

Negotiate with others, inside and outside the business

Persuade others to follow a course of action

Understand organizational and internal politicalrelationships

Foresee the future consequences of current actions

Manage projects effectively (i.e., organize others to deliveron time and within budget)

Follow through on decisions

Work well with C-level peers

Communicate clearly and effectively in writing, orally, andthrough visual media

Excellent performance Adequate performance Room for improvement

Exploring self-assessments:

The role of job function in developing skills

To better understand the basis for finance executives’ self-assessments—which tend to be very positive across theentire respondent pool—we compared survey responsesprovided by three respondent segments:

� Those who say they focus mostly on business partnershipin their roles (optimizing capital structure, enterprise strategy, M&A, etc.) (37 respondents);

� Those who focus mostly on business support (planning, financial analysis, decision support, etc.) (128 respondents); and

� Those who focus mostly on core finance activities(controllership, transaction processing, and reporting) (64 respondents)

We uncovered substantial differences in each group’sassessment of their own performance across the full rangeof management and leadership skills. Respondents whofocus on core finance activities were much less likely,nearly across the board, than those focused on businesssupport or business partnership to report “excellent performance” in any of these skills. Business partnerswere much more likely to rank their performance as“excellent” in nearly every category. For example:

� 76 percent of business partners say their ability to communicate clearly is excellent, compared with only 46 percent of business supporters and 45 percent of core finance-focused executives.

� 61 percent of business partners say their performance at working well with C-level peers is excellent, compared with 50 percent of business supporters and 40 percent of those focused on core finance.

Both business partners and business supporters are muchmore likely to say their performance at “foreseeing thefuture consequences of current actions” is excellent thancore-finance respondents. (Forty-five percent of businesssupporters and 43 percent of business partners say theirperformance at foreseeing future consequences is excel-lent, compared with only 27 percent of those focused oncore finance.)

Do we find these correlations in the data because those who are more skilled at leadership are simply more likely to act as business partners (and hence as business leaders)? Or have those who focused on businesspartnership worked to strengthen a different skill set?Because other survey results strongly affirm that on-the-job practice, observation, and mentorship are theprimary paths to leadership improvement, this skillsanalysis suggests that core finance-focused respondentslag behind in their self-assessments not because of anyshortfall in native ability, but because their work offers fewopportunities to hone leadership and management skills.The results of the segmentation itself tend to support this view, since many respondents focused on business support—the group most likely to have honed the ability to predict consequences through day-to-day practice at decision support and analysis—report excellentperformance at foreseeing consequences, alongside thosefocused on business partnership.


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Relatively few respondents say their performance in more political, personal, or sensitive areas is “excellent.”

Qualities of a finance leaderExploring leadership skills—competencies that can bedeveloped and deployed in professional situations—reveals one aspect of finance leadership. But what arethe qualities of the best finance leaders? What approachdoes the ideal CFO take to management and leadership?Conventional wisdom breaks down leadership styles intotwo main categories: the hard-charging, competitivestyle, and a more relaxed, collaborative style. Whichstyle—or combination of styles—would the idealfinance leader adopt?

Survey responses show no absolute preference for either the hard-chargingstyle or the more collaborative style ofleadership.

We asked survey respondents to consider a number ofpairs of personal qualities and attributes, and to choosethe balance they believe the ideal CFO should strikebetween them. We found that survey responses show no absolute preference for either the hard-charging style or the more collaborative style of leadership. But we also found that the qualities and attributes of the ideal CFO break down into two main categories:qualities that operate in almost every business context,and qualities that strongly depend on context. In the former category, survey results indicate a pronouncedpreference for one end of the scale over the other. In thelatter category, survey results tend to cluster around thecenter of the scale, indicating that respondents’ preferences depend on context. This latter categorydefines a group of complex, highly context-dependent,adaptive behaviors that may well distinguish some of thebest finance leaders from their peers.

Respondents tend to show a clear preference for one endof the scale in the following areas (See Figure 3, next page):

Assertiveness: Preference for outspokenness, ratherthan reserve

Results vs. process: Preference for results orientation(“emphasizes what gets done”) over process orientation(“emphasizes how things get done”)

Approachability: Preference for open-door policy (“Mydoor is always open”) over formality (“Let’s schedulesome time”)

Focus: Preference for the big picture, rather than details

Delegation: Preference for delegation, rather thanhands-on attention

Decision-making style: Preference for a collaborativestyle over a command-and-control style

Flexibility vs. consistency: Preference for flexibility(“makes mid-course changes”) over consistency (“staysthe course”)

So, for example, survey responses suggest that the idealCFO tends to be more approachable than formal—thatis, the ideal CFO would tend to have an open-door policy, rather than formally scheduling appointments.Finance executives tend to view this informal, open-doorapproach as a more desirable quality in the ideal financeleader, regardless of circumstances.




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Figure 3. The qualities of the ideal CFO fall into two categories: those that operate in every business context, and those that depend on context.

Respondents tend to show a clear preference in the following areas:

Survey responses demonstrate that the following traits often depend on context:

Percentage of respondents indicating a preference using a 1-5 scale

1

22%

13%

10%

12%

4%

38%

13%

5%

35%

29%

30%

28%

28%

31%

35%

40%

53%

48%

45%

10%

40%

57%

9%

8%

10%

23%

14%

3%

3%

1%

2%

“Stays the course”

Command-and-control style (“I'll decide”)

Prefers to be hands-on

Detail-oriented

“My door is always open”

Emphasizes how things get done

Reserved

“Makes mid-course changes”

Collaborative style(“We’ll decide”)

Prefers to delegate

Big-picture thinker

“Let's schedule some time”

Emphasizes what gets done

Outspoken

2%

1%

3%

2%

20%

15%

29%

22%

43%

42%

44%

53%

31%

33%

22%

20%

4%

9%

2%

3%

Dramatic change

“Drives a hard bargain”

Bases decisions only on demonstrated facts

High tolerance for business risk

Incremental change

“Gets to yes”

Bases decisions on “informed intuition”

Low tolerance for business risk

2 3 54

But survey responses also suggest that, in some areas,the ideal finance leader should be flexible, changing hisor her approach according to circumstances. Surveyresponses indicate no pronounced preferences among several characteristics, indicating that the ideal CFOwould adapt his or her approach according to context (See Figure 3, previous page):

Risk tolerance: Low tolerance for business risk versushigh tolerance for business risk

Basis for decision making: Basing decisions on informedintuition versus basing decisions only on demonstratedfacts

Negotiation: Only a slight preference for a mutual gainor win/win approach (“Gets to yes”) versus an advocacyapproach (“Drives a hard bargain”)

Approach to change: Only a slight preference for seek-ing incremental change versus pursuing dramatic change

In these areas, survey respondents tend to show a pref-erence for a thoughtful, flexible approach to problemsolving that takes specific circumstances into account.For example, several respondents note in open-endedresponses that a low or a high tolerance for business riskdepends on the company’s particular circumstances andobjectives. Other open-ended responses say the sameabout seeking dramatic versus incremental change.

In some areas, of course, finance’s responsibility to safe-guard the company from a compliance standpoint ren-ders the question of which approach to take moot. “Thepairing ‘drives a hard bargain’ versus ‘gets to yes’ worksfor most business situations, but it doesn’t apply to situations that are squarely in the accounting camp,”one respondent points out. “Recent business failures demonstrate that a ‘customer-is-always-right’ approachcan’t apply to accounting.”

But open-ended survey responses most often emphasizethe need to adapt approaches to changing circum-stances in all areas. “The ideal CFO should never be con-tinually at one end of the spectrum or the other,” writes

one respondent. “Although I’ve given some answers thatlean away from the middle of the spectrum, in reality, the ideal CFO is any, or even all, of these things at theappropriate time.”

Other respondents discussed the factors that wouldaffect their choices, including company size, industry,business conditions, the personalities and needs ofcoworkers, and the specifics of the situation or questionat hand (such as the time available to make a decision).“Some of these traits will depend on the organization,”writes the controller of a biotech firm. “For example, in asmall organization, it can be critical for a CFO to be morehands-on, while in a larger organization, it can be just ascritical for the CFO to prefer to delegate.” A VP of financeat a manufacturing company writes, “CFOs need to bein charge, but they must be adaptive, based on the situ-ations and the people they’re dealing with.” Observesthe CFO of a large nonprofit institution, “Collaborativedecisions take time (for meetings, communications, andso on). If there isn’t sufficient time to process a collabo-rative decision, a command-and-control decision mustbe made.”

Being able to adopt different approaches is one part ofleadership, say survey respondents. Having the judg-ment to know which approach to adopt, and when, isanother. “I think the most important factor is to useappropriate judgment for the given situation. A CFOmust understand when it’s appropriate to exercise, forexample, a command-and-control style of leadership,versus a collaborative style. This ability to make quickassessments and to understand the context of the mat-ter is critical to successful performance,” writes the con-troller of a health care company.

In these areas, then, the most successful CFOs not onlyhave the ability to adopt either approach when neces-sary, but also have the judgment to know which onewould be best in the given circumstances. How dofinance leaders develop that judgment? Other surveyresults suggest that this level of adaptability and judg-ment comes primarily with experience.



Professional flaws that hold finance leaders back

Nobody’s perfect. That said, some flaws can make it par-ticularly difficult to be successful in certain roles. Weasked finance executives to tell us which professionaltraits would be most likely to limit a CFO’s ability to lead.

Survey respondents most often cite traits that interferewith decision making and organizational effectiveness—indecisiveness and a lack of follow-through (“all talk andno action”)—as the attributes most likely to limit a CFO’ssuccess. They cite personality traits that tend to disruptrelationships on a personal level—rudeness, insensitivity,and hypersensitivity—much less often. (See Figure 4.)

These results mirror respondents’ broad affirmation ofskills related to decision making—such as foresight andfollow-through—as the skills most critical for leadershipsuccess. In general, survey responses indicate that beingrude and insensitive (or, indeed, being passive, hypersen-sitive, or lacking perspective) might hold an aspiringleader back less than conventional wisdom might suggest.

But as finance takes on an increasingly prominent role inthe business, it seems likely that many finance executiveswould agree that finance leaders who set aside more abra-sive personality tendencies will find more allies in theirpursuit of a new and broader mandate. It is hardly surpris-ing that, in a professional context, finance executivesgravitate toward skills that will help them accomplishorganizational objectives, and away from traits thatwould interfere most directly with their ability to see thoseobjectives accomplished. It would be a mistake, however,to underestimate the importance of personal effective-ness, since a finance executive’s ability to get things doneat the enterprise level also depends on his or her ability toenlist the support of immediate colleagues, superiors, andpeers across the business.

Clarity of purpose and decisive action—not simple conge-niality—are the traits most likely to inspire affirmativeloyalty and respect within finance. But, as one respondentwrites, “Treating employees with respect, as people, iscritical to achieving true leadership.”


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Figure 4. Professional flaws that interfere with organizational effectiveness are most likely to limit a CFO’s success, according to survey respondents.

Which of the following traits would most limit a CFO’s ability to lead the finance function?

Percentage of respondentsNote: Respondents were asked to select their top two answer choices.

3%

6%

6%

16%

17%

22%

30%

41%

51%

0% 10% 20% 30% 40% 50% 60%

Other

Hypersensitive

Insensitive

Rude

Blows things out of proportion

Passive/Overly deferent

Controlling/Micromanaging

All talk and no action

Indecisive

Becoming a leaderFinance executives in this study tell us that the idealfinance leader exhibits a high level of flexibility, adapt-ability, and judgment. Many respondents also say thaton-the-job experience and relationships with profession-al mentors have contributed most to their mastery of thenon-technical, interpersonal skills they use every day.Together, these results suggest that experience—andthe maturity that comes with it—is a primary avenuetoward developing the flexibility, adaptability, and judg-ment that characterize the best leaders in finance. Butwhat kinds of experience contribute most to leadershipdevelopment? Survey respondents tell us that they’vedrawn on a wide range of experiences to become better managers and better leaders—and they saythey’ve gained much of that experience on the job.

Respondents most frequently say thaton-the-job observation and practice hasmade a very substantial contribution totheir current mastery of non-technicalskills.

By a large margin, respondents most frequently say thaton-the-job observation and practice has made a verysubstantial contribution to their current mastery of non-technical skills; 40 percent of respondents say thaton-the-job observation and practice “taught them every-thing they know,” while another 54 percent say that theywouldn’t be the same person without the lessons they’velearned on the job. (See Figure 5.)



Figure 5. On-the-job observation and practice contributes most to mastery of non-technical skills, say respondents.

To what extent have the following institutions, activities, or experiences contributed to your mastery of the non-technical, interpersonal skills that you often draw upon in your current role?


1%

2%

2%

7%

10%

12%

40%

15%

14%

32%

41%

59%

41%

54%

52%

56%

48%

45%

25%

40%

6%

32%

29%

17%

7%

7%

8%

0% 20% 40% 60% 80% 100%

Company-sponsored seminar,workshop, or teambuilding exercise

External seminar, book, or other media

Activities outside of work(volunteer work, hobbies)

College/Graduate school

Family upbringing/Early life

Formative teacher, guide, or mentor

On-the-job observation and practice

Very substantial contribution—“taught me everything I know” Substantial contribution—“I wouldn’t be the same person without it”

Some contribution—“informs my leadership and management style” Little or no contribution—“has little bearing on my leadership and management style”

Although only 10 percent of respondents say that familyupbringing and early life made a very substantial contribu-tion to their mastery of non-technical skills, 69 percent ofrespondents say that family upbringing made at least asubstantial (“I wouldn’t be the same person without it”)contribution to their mastery of these skills. Many respon-dents also mention the importance of family influence,parental role models, and formative life experiences suchas time in the military in open-ended responses. In gener-al, respondents exhibit a strong preference for real-lifeexperience over vicarious experience. While many respon-dents note that classroom experience made at least somecontribution to their mastery of non-technical skills, they’releast likely to say that vicarious experience gained throughseminars, books, and workshops made substantial contri-butions to their mastery of these skills.

Indeed, when it comes to improving their leadership andmanagement skills in the future, most respondents, by awide margin, say they expect work experiences—on-the-job observation and practice and candid feedbackfrom a professional mentor—to be most helpful. (See Figure 6.) (In a separate question, 88 percent ofrespondents say that, among those they’ve worked with, their supervisors taught them the most about lead-ership and management.) On-the-job practice and mentoring relationships far outstripped other potentialsources of improvement, including outside activities,external seminars and books, and company-sponsoredworkshops and teambuilding exercises.


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Figure 6. Work experience—including on-the-job practice and relationships with mentors—is the path to leadership improvement, say finance executives.

Looking forward over the next five years, which of the following do you think will be most helpful to you in acquiring the management and leadership skills that you aspire to improve?

Percentage of respondentsNote: Respondents were asked to select their top two answer choices.

3%

8%

8%

13%

13%

66%

76%

0% 20% 40% 60% 80%

Other

Company-sponsored seminar, workshop, or teambuilding exercise

Formal education (advanced degrees,certifications)

External seminar, book, or other media

Activities outside of work (volunteer work, hobbies)

Candid feedback from a professional mentor

On-the-job observation and practice

We asked respondents to tell us, in their own words, aboutthe efforts they’ve undertaken to improve their leadershipand management skills in the last year. We received an over-whelming response, documenting a wide range of efforts.(See sidebar: “Taking steps to become better leaders,” nextpage.) Finance executives often write that they’re workingto improve their leadership skills by taking risks and stretch-ing themselves on the job—taking on new projects, newroles, and new responsibilities. Many finance executives alsowrite that they’re working to improve their own leadershipskills by taking the time to mentor others.

Many finance executives write that they’reworking to improve their own leadershipskills by taking the time to mentor others.

Open-ended responses demonstrate the deep commitmentthat many finance executives have to training and mentoring others. Perhaps they derive this commitmentfrom an acute awareness of the scarcity of mentors for the most senior executives in finance: When we askedrespondents to identify the greatest barriers to leadershipimprovement, 48 percent cited “few mentors available forsenior finance executives.” Respondents named only the“scarcity of time, attention, and other resources” as a bar-rier more often (52 percent). “It’s unfortunate, in this worldof 24/7 activity and early retirements, that we’ve lost manyof the best people to help the rest of us ‘learn’ leadership,”writes one respondent. “Some people are born leaders forwhatever reason, and the rest of us could really use the sup-port of mentors to understand how to be effective.”

While survey respondents clearly recognize the growthto be gained through mentoring subordinates, it seemslikely that available mentors for a finance executive onlybecome more scarce as his or her career advances. Who,in the organization, can reasonably serve as a mentor forthe CFO? In many cases, the CEO is the only availablecandidate. “Fortunately, I’m currently working with oneof the finest CEOs one could work for. It’s a genuinepleasure to work with him,” writes the CFO of a financial services company. But the CFO goes on to point out that

often managers provide a negative example of what notto do, rather than positive modeling of excellent leader-ship. “Much of what I’ve learned about leadership andmanagement actually came from bitter experiences asso-ciated with really bad managers,” he writes. “I learned alot about what not to do from those bad examples—andI suspect a good many others in your survey have had sim-ilar experiences.”

A lack of effective mentoring is by no means the only bar-rier to improvement that respondents mention in open-ended responses. Several respondents mention a lack oflong-term perspective among senior management. “Istrongly believe that a renewed focus on a long-term per-spective is needed,” one respondent writes. “I feel thatfinance managers have become so risk averse and ‘penny-minded’ that reliance on derivatives and on outsourcinghas become too great. Ultimate success is always meas-ured over a long period of time.” The respondent goes onto advocate for a broader approach to financial manage-ment: “We see now that risk management and financialmanagement are not simply quantitative exercises. Thebiggest and brightest financial firms are suffering, becausethey either missed their problems by a long shot, or theysimply ignored the risks and were lured by the short-termreported gains their decisions produced.”

Other open-ended responses echo the concern that a deluge of data and analyses are obstructing CFOs’ abilityto lead. “I have found too many of my group CFOs boggeddown in analysis and unable to focus on key drivers of thebusiness,” writes a VP of finance at a large financial serv-ices firm. “This turns finance activities into rock fetchingexercises that have no correlation to effective decisionmaking that will move the business forward.” Financeexecutives faced with scarce resources and little supportfrom other business functions also express frustration.“In a privately held company where finance is viewed as‘overhead,’ getting approval to add staff is difficult. As aresult, I’m personally too focused on details and notenough on strategy,” writes one CFO. “I don’t know howto overcome this, but I wish someone could help me figureit out before I lose my mind!”



“A finance leader needs to be a businessleader who uses his financial technicalexpertise to help reach business objectives.He or she should be clear that technicalexcellence, in itself, is not an end-gameobjective,” writes one respondent.

Many respondents advise other senior finance execu-tives to put their impressive technical skills to work in theservice of broad enterprise objectives. “A finance leaderneeds to be a business leader who uses his financial tech-nical expertise to help reach business objectives. He orshe should be clear that technical excellence, in itself, isnot an end-game objective,” writes one respondent.

Becoming a true business leader often means pressingbeyond finance and into other critical areas, say respon-dents. “It’s important that finance leaders and their staffunderstand the business they serve. There is value inspending time on shadowing people in key functions(sales, operations, etc.). This allows for meaningfulanalysis and partnering with the executives you’re sup-porting—which results in better decision making,” anexecutive writes. Experience in leading an operating unitcan be extremely valuable to a finance leader, writesanother: “To be of maximum value to the organization,the ideal CFO will have run a business, with P&L respon-sibility, in addition to possessing technical knowledge.From that experience, the CFO will know the integratedfunctioning of a global business well.”


15

Taking steps to become better leaders

Finance executives report a wide range of leadershipimprovement efforts. Here, in their own words, are just a fewof the steps respondents say they took in the last year tobecome better leaders:

Getting and giving feedback:

“I listened more, talked less.”

“I actively solicited feedback from superiors, peers, and sub-ordinates alike.”

Seeking new work experiences:

“I joined a corporate board to gain broader perspective.”

“I’ve been spending time in new areas—taking on projectsthat I’m slightly uncomfortable handling.”

“I’ve taken more risks and challenged the status quo.”

Mentoring and training others:

“I’ve made a concerted effort to mentor a level below mydirect reports.”

“I’ve been trying to spend a significant amount of time withmy controller to help mentor her.”

“I made changes in the organization to cross-train staff andinstitute a ‘training’ attitude toward staff development.”

Taking classes, courses, and seminars:

“I completed graduate-level coursework.”

“I’ve attended several leadership classes/seminars. I try toput into practice the new ideas presented.”

“I undertook an 18-month leadership training course throughthe Boy Scouts.”

Making connections:

“I’ve made a conscious effort to connect with others at the C-level by forcing more communication and sharing of ideas.”

“I’ve focused on being more collaborative in my decisionmaking, while making sure we don’t revert to managementby committee.”

“I’ve built new relationships—it’s as much who you know aswhat you know, if you want to get the information necessaryto make informed decisions.”

“I’ve become involved in two different small groups in thepast few years. One is a cross-section of people, the other isonly senior executives in large corporations. These groupsprovide a ‘safe’ environment to discuss ideas and issues.”

Personal reflection:

“I’ve been working to slow down before rushing to a conclusion.”

“I’ve focused personally on what I should and should not domyself, and on what I must build in people so that they’ll besuccessful when I move on.”



An exceptional position, anexceptional opportunityThe finance function’s broad organizational scope andanalytical expertise place finance leaders in an excep-tional position not only to safeguard a business fromimproper conduct and regulatory pitfalls, but also toguide it and contribute to its success. The finance exec-utives who participated in this study recognize the priv-ilege of this position—and they recognize the personalresponsibility that comes with that privilege. “Leadersin finance have a unique opportunity to guide organiza-tional success within the framework of control andreporting. It all depends on how much responsibility andeffort the individual wants to invest,” one respondentwrites.

Adopting this broad, organizational perspective oftenrequires a willingness to connect with others. “A leadermust be open to all points of view and encourageemployees to participate,” writes a respondent. Anoth-er writes, “Leadership in finance includes supporting andpartnering with decision-making managers to help themunderstand how their actions are costing the company,saving it money, or putting the organization at risk. Intel-ligently empower them.”

Many finance executives are putting their leadershipskills to work—and, at the same time, developingthem—by teaching others. Survey respondents pointout that developing finance staff creates better man-agers and more productive, loyal employees—which, inturn, can help ease the burden of resource scarcity. “Thebest CFOs coach and train to strengthen their team. Notonly do they increase their capacity for immediate work,but in the long run workers are more fulfilled, and the firm at large has lower turnover and smoother transitions as valued staff members retire,” writes onerespondent.

“Leaders in finance have a unique opportunity to guide organizational success within the framework of controland reporting. It all depends on howmuch responsibility and effort the individual wants to invest,” one respondent writes.

Senior finance executives recommend respectful,thoughtful guidance when mentoring and coachingemployees. “Finance leadership, as in any other area, isbest when individuals are guided to perform, not direct-ed, and allowed to succeed. Latitude to learn, make mis-takes, and contribute is extremely important—whenbalanced with accountability,” a respondent writes.

This study shows that the judgment that emerges fromexperience is the hallmark of finance leadership. Know-ing not only how but when to deploy a wide array of skillsand approaches sets the very best finance leaders apartfrom their peers. “The CFO needs wisdom and maturityto lead for long-term results,” one respondent writes,and the finance executives in this study recognize thatthe best teacher is experience.


Sponsor’s Perspective 17

Meeting the demands of an expanded roleIn 2007, CFO Research Services, in collaboration withTatum, found that CFOs feel extreme pressure due toescalating demands from multiple constituents, fewerresources, and compromised lifestyle issues. With termination levels at a historical high and average tenurein role dropping to less than 30 months, it seemed to usthat a clear crisis existed within the financial function.

At the same time, the reliance upon and importancegiven to a highly functional finance department wasextreme in 2007, and has continued to escalate to even higher levels as we enter 2008. Finance has become the new corporate “functional imperative,” asmanufacturing was during the eighties and sales andmarketing were in the nineties. The finance function simply has to meet its mandate to perform or businessperformance—even existence—is put at risk.

Obviously, the downside risk for all—C-level executives,board members, and shareholders alike—of a poorlyfunctioning, over-stretched, under-performing financefunction is sky-high. In attempting to address this, manyCEOs and boards find a convenient (if costly) approach tothe corporate functional imperative by turning to moreof the same: new (but not different) leadership in the finance function. And so we find termination statistics that continue to climb, and tenures that continue to decline in early 2008.

In reality, the role of the CFO has changed so dramatically that an entirely different approach isrequired. We continue to believe emphatically that the winners in this increasingly fluid environment are those who adapt to the ebb and flow of business lifecycles with a flexible approach to assembling, deploying and re-deploying finance teams. Bringing theright skills to the table at the right time is a never-endingchallenge, but it is the only way to stay successful intoday’s exceptionally demanding markets. This includes:use of flexible high-level resources to meet ever-changing business challenges through executive services; an investment in systems to better supportincreasing service levels expected of the finance department; and a framework for staff augmentation sothat SG&A investment can expand and contract withtrue business needs. We call this solution—thisapproach to leading finance—“The CFO Suite.”

Embarking on an effective “CFO Suite” implementationinvolves three elements: strong and deep technical skills,effective and shrewd use of “soft skills,” and a clear setof priorities, tools and approaches to “get the job done.” Proper resource levels and a focused project management approach can transform a failing financedepartment to meet its functional imperative goals inabout 100 days.

Embedded within “The CFO Suite” concept is the needfor CFOs to moderate “typical” behavior—trying to domore with less, burying themselves in work as opposedto delegating effectively, and mistakenly thinking thatothers within the corporate structure “get it.” In fact,becoming an effective advocate for attention andresources in competition with other corporate functionsrequires a certain sophistication of leadership style: clearand compelling communication, persuasive businesscase presentation, effective negotiation, and corporatepolitical savvy.


Sponsor’s Perspective18

Since the ability to provide relief is so closely tied with CFOs’ personal comfort level with interpersonalskills and effectiveness, we thought that it would beinteresting to research how CFOs perceive their own ability to do just that. Hence we joined with CFOResearch Services to explore this topic, and to sharethese findings with a broader audience.

We were impressed that an overwhelming majority ofrespondents recognize that non-technical skills areimportant. Their recognition of the importance of gooddecision making, communication, and collaboration further strengthens our belief that CFOs understand the need to work with others within the organizationalhierarchy. A linkage between clarity of thought combinedwith active follow-through demonstrates CFOs’ biastoward a practical approach. The characteristics that survey respondents least often cite as critical for successwere equally revealing: the ability to navigate organiza-tional politics, negotiation, project management, and the ability to handle criticism and conflict. Clearly, CFOs areless comfortable with complex, potentially emotionalinteractions that arise in the course of carrying out theirduties.

Interestingly, in rating themselves on an array of interpersonal skills an overwhelming majority ratedthemselves “adequate” to “excellent” across all charac-teristics. If this were, in fact, the reality, then why don’twe see more successful CFO Suite implementations?Why are turnover statistics remaining at all-time highsand why do CFOs continue to report such high levels ofpersonal stress?

Our hunch is that CFOs are not as effective at these skillsas they would like to think. In fact, in Tatum’s recentinformal survey of audit committee members, respon-dents say CFOs do not demonstrate their interpersonaleffectiveness very well. Audit committee members in thisinformal survey rated CFOs’ performance lower thanCFOs scored themselves on virtually every measure—the largest differential being on effective communication.The barriers to CFO success most often cited by thedirectors we spoke with were often personality issues.

This research would seem to provide a clear roadmap forCFOs to learn from and embrace this feedback. Drivingthe creation of a new kind of finance organization that meets the new functional imperative starts with recognizing that we need to improve our ability to navigate rough waters interpersonally. CFOs correctlyidentify and strive for behavior that will enable them toaugment technical skills with resources and tools; ifthere is a mandate for 2008, though, it has to do withholding themselves to higher standards and ensuringthat their “actions” fully match their “words.”

To continue this conversation, pleasecontact Cindie Jamison [email protected].

Documents

The Right Stuff: Leadership in Finance