Building a Bench of Financial Talent
Jan 24, 2019
Increasingly, companies are aligning their talent strategies with their business strategies, ensuring that there are people in the talent pipeline with the right skills, aptitudes, and experiences to advance the organization. This holds true across the organization, in every department and function. And, in the wake of the financial crisis and in the midst of a new normal of challenging economics and increased oversight by government and external stakeholders, developing financial talent is a must.
In addition, senior financial leaders and, in particular, the chief financial officer (CFO) as a member of the executive team, are expected to contribute to broader discussions around growth drivers, whether market conditions are favorable or constrained. The financial staff in development, therefore, should be exposed to and, to some degree, expected to contribute to these discussions, from analyses on a potential acquisition to the impact of currency fluctuations on a new market opportunity.
Whether an up-and-coming leader is in finance or another department or function, all are expected to mirror and model the tenets of corporate culture and the highest standards of professional ethics. Deepening awareness of personal and corporate ethics and values is crucial for all managers and leaders in development, and even more so for financial talent for whom compliance and regulatory oversight (e.g., Sarbanes-Oxley ) is a daily demand.
Moreover, the development of financial talent is part of broader corporate mandates around talent acquisition and training. Leadership development in general is an essential component of succession strategies. Further, talent development is a powerful incentive for retention; it takes more than compensation and benefits to keep high potential employees. Engaging these individuals will not only build a talent pipeline but also avoid a potential “brain drain” from the organization.
In this article, we will address developing a financial team with specific skills in the context of broader leadership development. The objectives are to make sure the right talent is in place to meet current needs and that well-rounded and seasoned leaders will emerge to serve the organization in the future.
Master Skills in Finance
In order to navigate any course, one must first know the destination. In the case of developing financial talent, the end goal is having candidates for CFO and other senior financial leadership positions. To identify these skill development needs, it is insightful to look at the abilities and attributes that are considered crucial to success at the CFO level. Insights from long-time CFOs who have enjoyed longevity in their careers and who have proved their ability to weather the storms that arise cyclically (as well as during the “great recession”) point to the importance of leading with clarity and confidence. It is only with experience built over time that financial executives become able to maneuver through all economic conditions.
Korn/Ferry research into the skills that are most valued by long-tenured CFOs reveal five essential traits:
1. Cultivating deep and trusting relationships among the CFO, CEO, senior executives, the board, Wall Street, and extended stakeholders. The financial crisis was an unforgiving testing ground for many a corporate leader, especially in the C-suite. CFOs are trusted partners, working closely with the CEO to address challenges as they arise and to get out in front of problems. Key factors for developing talent who may one day be in the CFO role or in other senior leadership positions are the ability to align objectives and establish trust.
2. Demonstrating broad business perspective and understanding. Prospective leaders cannot limit their development to finance. They need a perspective of overall business fundamentals. Among successful CFOs, career paths have often taken them through diverse and sometimes challenging routes, including taking risks to gain a wider business view—across operations, international positions, and divisional management. These experiences enable them to develop a multi-faceted perspective from which to operate and contribute.
3. Serving as a strategic business partner with credibility beyond finance. Successful CFOs share a common characteristic of being able to rise above and beyond the traditional role of the finance executive. Extending the traditionally narrow focus of financial governance, they operate as strategic business partners, particularly to the CEO. (In fact, CFOs are often groomed to become CEO one day.) For promising financial leadership talent, developing a strategic-partner capability requires a holistic view of the company and the ability to build a platform that transcends finance. Financial leaders of tomorrow will be expected to have an interest in the whole business—not just the pure numbers. Finance does not operate in a silo.
4. Being a “steady hand on the wheel” during turbulent economic times. During times of uncertainty, all stakeholders (employees, customers, and shareholders) become challenged and financial leadership is tested. Experience is the best teacher and the most valuable preparation. Lessons to be learned include the inevitability of change and the importance of maintaining credibility, internally and externally, and to view crises as opportunities to improve performance in areas such as productivity and efficiency. A healthy balance sheet and fiscal discipline support the business and position the organization for economic recovery.
5. Showcase mastery of the details. Financial executives must develop multilayered, detailed knowledge of the organization. Theirs is a unique perspective across operations. In fact, the CFO may be viewed as co-owning the results along with the operating team. Developing mastery in this area requires a variety of experiences, from opportunities to learn from wise mentors to taking international assignments. Learning to lead others and enhancing their contributions are essential.
Other valued skills and competencies include a high level of technical expertise, including taxation, treasury, accounting standards, and transfer pricing. Financial talent must be deeply schooled in compliance and regulatory oversight (e.g., Sarbanes-Oxley).
A solid foundation in these areas is crucial for any financial executive, but development does not end there. Financial leaders are expected to demonstrate mental agility—able to learn quickly, handle complexity, and adapt rapidly as situations and circumstances change. Financial executives are also expected to be leaders, particularly as they move up the rungs of the organization. Just like any corporate leader, financial executives, including the CFO, are expected to motivate, align, and empower their teams, bringing together leadership ability and the right leadership style.
Leadership Skills for the Financial Executives
In addition to financecentric competencies, there are certain leadership skills that apply broadly and have specific applicability to finance executives. Leadership development programs that create lasting value resonate with the person’s internal motivation, talents, and beliefs, and forge a connection with the external needs of the organization and the marketplace. Executives emerge as effective and inspiring leaders when they understand what they believe in and care about, as well as how they make decisions, influence others, and communicate in different circumstances. The best leaders are those who can articulate their mission and values and are transparent with those whom they lead.
Leadership competencies related to performance and potential vary by level (what matters most for an executive is often different from what matters for an individual contributor). Research into competencies that are highly valued and linked to success reveals the importance of being a “master problem solver,” particularly in challenging times. These individuals recognize the importance of creating alignment and cohesion as they lead others through tough situations in a determined and courageous way.
Another leadership skill is communication, which is certainly central to an executive in any area or discipline. For financial executives, communication skills encompass managing the flow of information internally and externally, particularly around goals, targets, and results. For senior financial leadership, stakeholder management is a major responsibility and time commitment, balancing demands from investors to the media. Financial leaders must know what to communicate and how to communicate—skills that require patience and judgment.
A key component in communication is clarity, the ability to convey a clear picture for internal and external audiences. When dealing with the board, in particular, financial leaders must be able to articulate complex issues in a way that is easy to understand, without resorting to unnecessary financial jargon. Talent development around communication includes the ability to be good “on one’s feet,” projecting confidence and, at times, providing comfort.
Problem-solving is another valued skill, and it enhances decision quality. Financial leaders need to “own” the troublespots in the company and are expected to possess the aptitude to dig deep into certain areas. This competency highlights the need to develop the ability to work with colleagues throughout the organization to gain a fuller understanding of the dynamics of the business. Complementary strengths in this area include dealing with ambiguity and developing perspective. This involves taking the broad view of an issue and projecting it into the future (even though the future may be uncertain). Those who can achieve balance in decision making so that it is both expedient and sound are highly valued.
Leaders are also differentiated by their ability to motivate and inspire others, especially in an environment in which people are doing more with less and dealing with uncertainty. Managers need to develop the ability to inspire others in their current roles; at the executive level, the importance of this skill increases. Such “people skills” are regarded by senior financial leaders as being highly important; this can be an area in which some seasoned financial executives wished they had more development earlier in their careers.
In summary, top financial leaders are expected to have a broad business brain. Although technical skill development is very important to having a highly competent bench of financial talent in place, attention must also be paid to the breadth of experience and skills. This foundation will ensure that the financial talent today can be developed into the financial leaders of tomorrow, who not only provide the right information, but also are future-focused. These future leaders must be prepared to one day step into bigger roles from which they will help lead change and champion innovation across the organization.
Tips for Developing Financial Talent
• Provide opportunities and experiences to learn how the business operates. Promising financial talent today will be the financial leaders tomorrow, who will be accountable for part of the business—not just for the accounting.
• Develop a good analytical brain combined with excellent communication skills. These are key ingredients for a successful financial leader.
• Concentrate on the technical skills. For example, a treasury role is very important for understanding capital markets. But do not emphasize technical skills at the exclusion of all else.
• Learn to work with and engage a variety of stakeholders toward outcomes. Bringing strategy to fruition is essential to the financial leader’s role.
• Become knowledgeable about external relationships and how to manage them. As financial leaders one day, this up-and-coming talent will deal closely with financiers, investors, regulators and others. The CFO, in fact, is often viewed as an ambassador for the organization.
• Value team building and people skills. As managers today and leaders tomorrow, financial talent must be able to build and inspire strong teams that can deliver for the organization.
• Uphold one’s personal values and integrity. Be a role model for the highest of ethical standards.