Boris Groysberg, associate professor at Harvard Business School, collaborated with search firm Heidrick & Struggles to produce the March cover story for Harvard Business Review, “The New Path To the C-Suite.” Recently, Groysberg and Jeremy Hanson, who manages the North American Financial Officers Practice for Heidrick& Struggles, spoke with CFOworld.com about the evolution of the CFO career.
What was the most surprising finding in your research?
Boris Groysberg: First, we have evidence that soft skills are so much more important than ever. The other surprise is the interdependence of all the different [C-level] jobs. One example is how important it is for the CFO to understand what’s going on in, say, the HR organization. So you basically are looking for managers who have a significant breadth of knowledge.
I think the time when you don’t have to be knowledgeable about what your [C-level] colleagues are doing is over. For example, you don’t have to know as much about technology as the chief information officer, but you do have to know enough about technology in order to be a true business partner. Strategic and leadership integration is very important. Nowadays you have a lot more executives making collaborative decisions. To be collaborative, you have to have a broader base of knowledge of what your colleagues are working on, what their priorities are.
Jeremy Hanson: Over time you want to get experience in the business; for example, as a business unit CFO/division vice president of finance — roles that are connected to the operations of the business. This is important experience – sitting on a business-unit management team, helping to make decisions about where we’re going to take the business, and how we’re going to get from here to there. Not only do you pick up strong business skills in those roles, but you develop relationships across the business. Those are the real skills that prepare you to be a CFO in the future. A CFO not only influences those in the finance organization but also have to communicate effectively with his or her peers, the board of directors, and outside constituents such as Wall Street analysts and investors.
So should CFOs have more in common with other C-level executives than with finance staff?
Groysberg: You can think of people in those jobs as having a certain level human-capital skills and over time technical skills are less important and leadership skills are becoming more important. We find that that’s not exactly the case. You still have to maintain technical knowledge of all the things that are going on in your function or you will be irrelevant as CFO. You won’t be able to make good decisions in a fast-changing environment. But additionally, you have to acquire talent-management skills. So if you think of the skill set as a pie, it’s not that leadership skills are a bigger piece of the pie, but that the pie is bigger; people in C-level jobs do a lot more.
Hanson: Having the technical training and experience is a prerequisite in most cases. At several points in history, in response to broader concerns about financial fraud and the need for stronger governance — and for some companies today, a strong underpinning in technical accounting has been or is paramount. However, there is a gentle evolution that has moved in favor of people who have this broad business experience. We do see a notable trend in the past several years of CFOs taking on P&L responsibility beyond their finance responsibility; for example, CFOs who might also run a business unit, or a CFO who was involved in acquiring a company during the integration period, or who would be capable of the CEO role. We have a number of examples now of people who have come up through finance and ultimately become chief executive.
You could be describing Pepsico CEO Indra Nooyi, the former CFO, and a product of one of those “academy companies” known for developing great management talent. If you’re not at such an academy company, is it up to the individual to seek broader experience?
Groysberg: Just as companies have to be looking for new markets and new products, you have to be looking for the same thing with respect to your career. The reality is no one’s going to do this for you. You have to make sure you stay relevant. What’s the percentage of people who work for academy companies? And even if you work for such a company, it’s still on you–unlike in the 1970s, when you followed a career path with one employer.
Hanson: I think it’s circular. In order to be drawn into roles of increasing responsibility, with the hope that at some point you’ll become the CFO, you have to demonstrate at an early stage in your career that you have strong communication and influencing skills. If you can influence in a fast-moving, dynamic, complex company, then you’re going to get pulled into that conversation anyway. Taking an active role in your development, asking for business-driven assignments, and creating room in your life for assignments that may require relocation will help. But, the path to the CFO role requires strong leadership, communication skills and instincts.
Which is your business as a headhunter.
Hanson: It’s my business, and it’s the business of well-run companies to develop talent in a thoughtful way. Increasingly, because of social networking, the most talented people are becoming more visible. It used to be that you could hide and protect and covet your most talented people. Employers who want to hold onto their most talented people need to be very thoughtful about retention and building a strong employment brand.
Is it more important than ever now to have had an overseas stint
Groysberg: It used to be that people would say, “Well, why would finance professionals go on international assignments?” Now you see more companies that say, “You know what, I think it’s important for my CFO, or for my controller, to have experience in China, or India, or Brazil; it will make them better managers.” To become better managers, they need to see more and get a sense of a global enterprise. They need to see other countries and the different customers there.
Hanson: If you’re working in a global company, it’s nearly a must. Our generation now operates in a truly global environment. You have to be effective at influencing in very different cultures. In many respects that has to do with your ability to build relationships throughout any domestic or global organization–to be a good listener, to build organizational support, understand the needs of others in the organization. Beyond that, there are unique business practices in other regions globally that are best learned through experience.
Incidentally, that’s a great way to get that business-unit experience–by going to run finance in another part of the world. Those roles tend to be less technically-driven and more business-oriented.