The qualifications and qualities that CFOs and FDs must possess to get to the top
Here, Chrissy Chiu analyses the path to FD and CFO, specifically the qualifications and exceptional qualities that these high-level individuals possess.
Here, Chrissy Chiu analyses the path to FD and CFO, specifically the qualifications and exceptional qualities that these high-level individuals possess.
Finance directors and chief financial directors must first master the basics before they can assume their positions as financial leaders within their respective companies. Getting the quantitative skills and training help finance professionals launch their careers, but extraordinary abilities push exceptional candidates into regional and multinational roles.
Control over a company’s cash position, finances, and compliance only covers the basics of the role. Now, more than ever, the CFO’s job includes handling investors, making public announcements, and devising the company’s strategic direction.
CFO roles tend to be very visible as they are the public face for cash and control, the CFO may be expected to make announcements on financial performance, explain business strategy, and have an excellent grasp of the changes in financial position. For large regional and multinational companies, CFOs also engage media and must have more charismatic qualities – communication, energy, and likeability help to soften facts and performance data.
No longer the silent controlling partner of the CEO, the CFO’s position and elevation have also demanded more from applicants in terms of education, seniority and compensation expectations. The careers of CFOs and FDs may zigzag across the size and scale of business, but the trajectory upward is steep – only the nimblest and most well-trained reach multinational CFO offices.
The financial health of a company, irrespective of size, is deeply intertwined with cash management, cost control and budgeting. Of no surprise, building the right set of quantitative skills around cash flows, forecasting, and an understanding of financial modelling is essential. Hard skills can be gained through formal education, including Masters of Business Administration, Bachelor of Science/ Engineering, or any quantitative based degree.
Outside of formal education, accounting and finance qualifications are also highly regarded, including Association of Chartered Certified Accountants, Chartered Financial Analyst, and Certified Public Accountant holders. In fact, skills in accountancy and finance are a near requisite for regional and FTSE companies – two thirds of FTSE 100 CFOs come from the Big Four auditors KPMG, Deloitte, EY and PwC.
Adrian O’Connor, Founding Partner of Global Accounting Network observed that: “With UK firms coming out of the back of a recession, it stands to reason that boards and shareholders are increasingly realising the value of strong financial expertise at the highest levels. CFOs have had a much greater say in the strategic direction of firms of late, with their input being widely recognised as integral to the company’s success. Considering this, the fact that accountants are disproportionately represented at the top of FTSE 100 firms is unsurprising.”[1]
While degree qualifications and training are the norm, business courses also offer training for FDs looking for further development. Respectable courses by providers BPP, Kaplan, Association for Corporate Treasurers, and the Chartered Institute for Securities & Investment (CISI) offer diplomas in financial competency.
BPP’s courses include training from management accountancy to FD level. The course focuses on improving management and communication skills, enabling candidates to enhance their leadership skills. Kaplan offers similar courses aimed at assisting learners achieve accountancy qualifications. Many investment banks send employees on courses which are examined by CISI standards, to help qualify for FCA authorised customer-facing positions. While not as common as degree and professional qualifications, courses do provide participants with certification of skills.
The qualifications, training and education of multinational CFOs enter an elite category. Exceptional individuals occupying the CFO’s office in multi-national companies have extraordinary credentials and experience. Firms such as Goldman Sachs hold Ivy League education in the highest regard. R Martin Chavez, Goldman Sachs CFO since 2017, graduated from both Harvard and Stanford Universities. Where he gained superior skills. Mr Chavez earned a Bachelor’s degree in biochemistry and a Master’s degree in computer science at Harvard, and later, finished a PhD in medical information sciences from Stanford University. Extensive industry experience has also benefited Mr Chavez, having been in the finance industry almost since the start of his career, joining Goldman Sachs in 1993.
The qualities that launched many CFOs to the top are not always easy to define. Marianne Lake the current CFO and 18-year veteran at JPMorgan Chase Bank, is tipped to succeed Jamie Dimon as the new CEO of the bank. Like many other CFOs, she has solid quantitative skills. Ms Lake studied physics at the University of Reading before heading to PwC in London and Sydney to earn her CA. Her career at JPMorgan has been extraordinary, serving as the investment bank’s Global Controller, then CFO of the communities bank, and now, global CFO. Last year, she presided over the bank’s most profitable year. To add to her accolades and exceptionalism, she is a single mum of three, dual US and UK citizen, and female – all unusual in her peer group and industry. Of herself, she simply says: “I want to do the best I can do at everything, to try to put 150 per cent into everything.”
As expected, large multinational companies not only hire outstanding financial experts as CFOs, they also offer extraordinary packages. Last year, total compensation including options and pensions totalled almost £9m for Ms Lake. Her pay, tied to bank performance, is expected to increase this year. In 2017, Mr Chavez of Goldman Sachs was paid a salary of $1.85m – however his total compensation after benefits totalled just over $16.6m. It appears that stratospheric pay packets, are the norm for large multinational companies and their CFOs.
Regional companies such as Thames Water, tend to look for talent locally. Last year, Brandon Rennet ascended to CFO of Thames Water, after more than 15 years in the energy sector. Like many CFOs, he is a trained accountant, having earned his chartered accountant designation in Scotland with Arthur Andersen. He also has demonstrable corporate finance skills, which he used at HSBC. Despite working for a public utility, Mr Rennet’s value from his roles at SSE and British Energy put his compensation package at £851,000, including performance bonuses.
Earlier this year, Humphrey Singer began his role at Marks & Spencer. Joining the Board of Directors and as CFO, Humphrey was brought in from Dixon Carphones on an annual salary of £600,000 with non-disclosed benefits based on performance. Not unusual, pay packets for CFOs of regional companies average around £500,000 in finance and other prominent industries. Prior to the appointment, Mr Singer was FD for 3 years, and has nearly 25 years of experience in a finance role. His formal education in Economics from the University of Warwick, coupled with his extensive experience no doubt served him to the top of regional companies.
While not as visible or accountable for company finances as high-flying CFOs, FDs typically still have important functions of management and may sit on, or report to the board of directors. As such, their qualifications and competencies must match expectations of the role.
Financial directors typically have at a minimum level a Bachelor’s degree, with many companies also requiring a professional qualification. Beyond qualifications and numerical training, FDs typically do not require as much experience as CFOs, with many FDs being hired with 2-5 years of experience post-professional qualification. Solid skills in budget preparation are also needed – profit and loss, balance sheet, and cash flow statement analysis are must-haves.
On the job FDs also work in close contact with top finance personnel, enabling them to flex quantitative muscles, build management experience, and gain exposure to board-level discussions. While some companies have FDs reporting to the CEO and act as CFOs, FDs may also be the most senior ranking finance professional in a company, enabling them to launch into larger companies with roles covering strategy and corporate transformation. Grant Thornton’s survey of FDs noted that part of training for commercial success includes challenging CFOs and CEOs, as the “one who will stand up to and challenge the CEO, while at the same time supporting him and the board.”
FDs and CFOs typically start with the maths, and gradually move their way up the ranks of corporate ladders. Senior FDs and finance professionals then build on their knowledge gained from schooling and add to their cache of skills. Regional and sector training can help launch careers into the CFO office of regional companies like M&S, Thames Water and many others, commanding pay packets of several hundred thousand pounds. Beyond regional companies, the sky’s the limit for multinational CFOs and FDs. Extraordinary candidates hold the CFO offices of large, well-known companies. Many of these CFOs are industry veterans, that have served their respective companies for decades.
Ultimately the trajectory to achieving senior level positions as FD or CFO is intimately linked to training and experience. Beyond qualifications and on-the-job knowledge, extraordinary candidates pull themselves out of the crowd, propelling their careers into regional or multinational CFO roles.
[1] https://www.thecsuite.co.uk/ceo/finance-ceo/cfos-are-taking-over-the-ftse-100/