CFO: What is the profile for todayâs successful public-company CFO, and how has it changed over the last five to 10 years?
Thomas R. Kolder: I think youâre actually seeing a return to a CFO model that had emerged prior to the Sarbanes-Oxley wave, which is a CFO that is a very strong, business-oriented, operationally focused kind of business leader, who has a thorough understanding and appreciation for the control and accounting side of the equation, while not necessarily a CPA who spent 15 years in public accounting. There was a time right in the midst of SarbOx where the pendulum of the market swung to the side of a public accounting expert and partner-type individual who could bring that expertise to the CFO chair. As companies have been successful establishing the processes, the systems and the infrastructure necessary to ensure that the controls are in place, I think theyâre understanding and realizing that you donât necessarily need to have that resident accounting expert in the CFO chair; you can bring a broad, business-focused finance person into that role and benefit the company greatly. And you can build up underneath that person a controller and chief accounting officer function that is world-class from a technical perspective.
CFO: With that in mind, what are the top things on the agenda for todayâs CFO? What does he or she worry about the most?
TRK: Well, I think itâs one of the most difficult jobs because they have to worry about so many different things. I mean, the fact that Iâve talked about not needing to be a hardcore accounting expert doesnât release them from the worry of having to ensure that the controls are in place globally for the business. So that still weighs greatly on their mind, no question about it. And while that is important, you donât get away from the reality that, on a quarterly basis, youâve got to deliver a set of numbers to shareholders and to the Street, and you have to answer to those numbers. So that continues to be at the top of the CFO agenda. And then third, I would say that the demands on the CFO from a strategic perspective are as great as they have ever been. The counselor to that CEO, the sounding board, the partnering element has increased even more recently, and adds to the kinds of things that the CFO has to be thinking about and has to be contributing.
CFO: In addition to those skills you outlined, what else can a finance executive do to get in position to become a sitting CFO?
TRK: I think itâs important to make sure that the individual gets a broad-based perspective. If you consider the control and the treasury and the operating finance skill sets as the three legs of that stool, you certainly need to have at least two of those and preferably all three. And when I talk about treasury, I include all the external elements, like investor relations, for example. So thereâs the internal look at the business that the operating finance skill set requires; thereâs the external piece like treasury and investor relations; and then thereâs the control and accounting side that continues to be important. Having only one of those skill sets doesnât allow you to have the kind of perspective that todayâs boards and CEOs require. And oftentimes two of them may not even be sufficient. So making sure that you get the rotations through both the corporate and the operating unit chairs is critical for those who want to become a CFO.
CFO: Do you think that a public company CFO needs a CPA nowadays? How do your clients feel about the CPA in regard to CFO searches?
TRK: At the height of SarbOx, it would have been on 80 percent of our specifications. Today itâs on 40 percent, and even in those cases where itâs listed as a criterion, if somebody can come in and demonstrate that they understand that area effectively and can lead a team of experts, the right person will be able to convince the board and CEO that the CPA isnât necessarily a âmust have.â
CFO: So what are the common requests youâre seeing as far as launching a public-company CFO search?
TRK: The first request is always, we want somebody whoâs been a CFO before. Thereâs no substitute for the experience, I guess. But you obviously have to take into account the fact that supply is nowhere near demand these days, so clients are having to recognize that the sitting CFO requirement is oftentimes limiting in terms of the quality of the individual youâre seeing or the kinds of things that they might be involved in. Instead, companies are opening themselves up to scenarios where they get big âNumber Twos.â These are individuals who are either in big CFO roles running $10 billion to $12 billion pieces of the business, or theyâre sitting in the treasurer/controller roles at the corporate offices, where theyâre ready and theyâre chomping at the bit for their chance in the CFO chair. And clients are recognizing that these candidates are energized, enthusiastic and want a chance to go to bat, and also that the training ground that theyâve been in has prepared them pretty well.
CFO: How does the changing nature of the CEO role impact the CFO?
TRK: The CFO continues to be used as a âMr. or Ms. Inside.â It is increasingly common to see the CFO and COO lines blur. The CFO becomes a much stronger internal change agent, along with the CEO. But where the CEO may be looking at managing external constituents and looking at high-level strategic issues, the CFO needs to be ingrained in the business, day in and day out, and make sure that the business is healthy and strong from an operating perspective.
CFO: Are there things that youâre doing for CFO searches that you didnât do five or 10 years ago?
TRK: More and more clients are valuing time that was spent outside the CFO space. So if a person has done a tour of duty in another area, maybe even in a general management capacity at the division level, itâs still the exception rather than the rule, but in those instances, where somebody has done that and then elevated themselves back up through the finance organization â thatâs viewed as unique and highly valuable. The only other thing would be that thereâs increasingly an interest and a need to find talent that has spent time overseas. The CFO chair is no longer viewed as one that remains at the corporate headquarters and minds the bank, so to speak. The CFO is increasingly being asked to get out in the field, visit customers, help the operating leaders understand how the finance function can help them, even in those ways that historically have been very centralized, like treasury. Ten years ago, treasury was viewed as sort of a black box, and nobody in the operating community really understood what all of those financings and risk management techniques were doing for them as a business leader out in the field. Now the CFO, the treasurer, theyâre expected to get out there and help educate and add to the bottom line.
CFO: What is fueling the ever-increasing volatility at the top of the pyramids of public companies?
TRK: Well, there are several factors at play. One is the increasingly demanding environment that public companies find themselves in from a shareholder and an external perspective. The need for more growth and greater efficiency and increased profitability requires that new and fresh ideas and perspectives be brought to bear sometimes. That affects the CEO chair, of course, significantly, but as the key partner to the CEO, it obviously then affects the CFO chair as well.
I think we are seeing private equity play a huge part in the volatility that exists in the market today, even more so than during the dot-com boom. It used to be, when I started in this business 15 years ago, private equity offered a couple hundred, maybe $500 million revenue stream. As is well-documented, thatâs no longer the case. An individual who is today in corporate America will find themselves inundated with opportunities from the private equity community on large multibillion-dollar global plays. Cerberus taking on Chrysler is a great example. Anybody who used to back away from private equity because it didnât offer the kind of intellectual stimulation that they might get working in a big global enterprise can get that in spades now. And they donât necessarily have to deal with the external elements that arenât everybodyâs cup of tea. Some people are drawn to the visibility and the spotlight that is required of a public company CFO today. Others are drawn to the business operations and would get much greater pleasure from working in the field than on the street. And now they have an outlet for that.
CFO: Any final thoughts to add?
TRK: Again, I think the CFOâs role is the key first lieutenant in the organization. I would expand that to say itâs one of the three keys in the triumvirate of todayâs business environment. The CEO, the CFO and the HR leader â who is driving human capital strategies and initiatives â are really joined at the hip to make business go. And the skill set thatâs being required of the CFO is getting broader and broader. Theyâre being asked to do more and more. It will continue to offer tremendous opportunity for those that want to embrace it, but it will also continue to restrict the supply, because with that expanded scope and responsibility, fewer and fewer will truly be able to deliver at that high level of expectation.