3 ways to build tomorrow's CFOs

There is no place like home when it comes to developing staff to step into the chief financial officer (CFO) role, with promoting from within often the best way to prime someone for the top finance job. Preparing a candidate for this position should be a routine aspect of running a finance team, unless there is a reason to recruit externally for a specific skill set.

Yet the data shows that there is plenty of room for improvement across corporate Australia when it comes to succession planning in finance teams. Research indicates that 97 per cent of Australia and New Zealand organisations report difficulties finding candidates for senior roles. Of these, more than half (56 per cent) link it to a lack of clear succession planning.

Infrastructure services firm Ventia’s approach is to promote from within. “To do that, you need a really good pipeline of up-and-coming, high-potential and well-developed finance professionals,” says Ventia’s CFO, Mark Fleming CPA.

“In the two years I have been here, I have not employed anyone from outside into a senior role — it has all been through internal succession planning.”

Ventia case study

Ventia’s general manager of treasury, Jake Stawiski, is an example of a senior team member who has risen through the ranks. Stawiski joined Ventia as a graduate more than a decade ago, coming up through its business units into senior finance manager roles.

Katrina Hamilton Lang, group manager of financial planning and analysis at Ventia, is another example. She joined the company three years ago from Real Pet Food Company as group financial controller, before being promoted into a senior operational finance role.

Then there is group finance controller, Victoria Maru, who has been with the company for four years after being the head of finance for Savills Australia and New Zealand. Hamilton Lang, Maru and Stawiski are all in contention for the CFO role in the future.

 

"To be a good CFO, you need to be very broad. You need to have an understanding of treasury, tax, financial control, accounting and strategy. For a listed entity, you need investor relations experience and the ability to speak to the market. Increasingly, you need operational experience as well, because the CFO has become the second-in-charge and the adviser to the CEO."

 

Fleming says all three team members have the potential to be company CFOs one day.

With risk top of mind, it is no surprise his preference is to develop potential CFO talent internally. “It is always a safer bet to have someone from inside. They understand the business — and our business is quite complicated. You know that they are a cultural fit and it is almost like an extended interview.

“There is no better endorsement if someone has worked for the company for five or ten years with various managers and they are well regarded.”

While promoting from within makes sense for many businesses, there are reasons to recruit from outside, for instance if the business needs a specific skill set or a “fresh pair of eyes”.

The skills businesses look for when recruiting into the CFO role include intelligence, application and the ability to think laterally. Candidates also need a breadth of experience.

“To be a good CFO, you need to be very broad,” Fleming says. “You need to have an understanding of treasury, tax, financial control, accounting and strategy. For a listed entity, you need investor relations experience and the ability to speak to the market.

Increasingly, you need operational experience as well, because the CFO has become the second-in-charge and the adviser to the CEO.”

Crucially, CFOs need a strong understanding of how the business runs.

“It is no longer just about analysing numbers,” says Hamish Smith, a director at Robert Walters. “Effective finance leaders understand how the organisation generates revenue, how products or services go to market and where efficiencies can be created. That commercial insight allows them to play a far more active role in shaping strategy.”

Successful CFOs need strong commercial acumen, clear communication skills and the ability to influence stakeholders.

The finance function is changing rapidly, and technology and AI are also part of the CFO’s day-to-day remit.

“Boards expect finance leaders to be comfortable using AI to improve forecasting and analytics and to understand how emerging technologies impact the wider business,” he says.

Succession planning is also a factor in accounting firms’ valuations.

Think long-term

Given the complexity of the CFO position, setting up a company for long-term success means establishing talent pipelines.

“Then, it is not a big drama if someone leaves, because for every role in the finance team three levels under the CFO, there are three or four high-potential employees who have been flagged as potential candidates,” says Fleming.

Having identified potential CFOs and discussed the pathway with them, it is then up to the business to deliver on this ambition, providing the candidate’s performance continues. Otherwise, there is a risk that the potential candidate may look elsewhere. Throughout the process, a succession timeline is essential. The way this looks varies depending on the nature of the business.

“Over that timeline, you build up the skills and experience the successor needs and gradually transfer the role of the incumbent over to the successor,” says Sue Prestney, principal at Sue Prestney & Associates. “Start with the end in mind. You need to have some basis for knowing when the final transition will take place and you need to understand what the incumbent wants.

“The incumbent CFO may be happy to reduce the number of days worked and then the successor can gradually build up their days in the role as their skills grow, but have that difficult conversation with the incumbent,” she continues. “This also assumes everybody is happy with the incumbent — if they are not, this transition is going to happen a lot faster.”

Dubai-based Ralph Khoury FCPA, CFO of the MENA region at WPP Media, points out how vital it is for CFOs to have a competent second-in-command.

“Not only a strong 2IC, but many others too, because you are only as good as your whole finance team,” says Khoury, who is a proponent of mentoring for developing junior staff members.

“Give them a taste of responsible authority, even a baptism of fire, just so they can see how they stack up when the pressure is on, and offer support where appropriate. Then everyone wins, because they get the experience and you can see where they need development.”

Protect continuity

With CFOs and CEOs working alongside each other, senior finance appointments are increasingly a board concern. The CFO plays a critical role in the financial health and long-term direction of a business, so any leadership transition in this position can have immediate ripple effects.

“If a departure happens unexpectedly, it can disrupt financial reporting, shake investor confidence and slow key strategic decisions at a time when stability is essential,” says Smith. “For boards, succession planning is really about protecting that continuity.

Experienced finance leaders are in high demand, and organisations that have not planned ahead often find themselves making rushed hiring decisions under pressure. Having a clear pipeline of future CFO talent allows businesses to manage transitions smoothly and maintain confidence among investors.”

Long-term planning is also the way Yvonne Chan, Singapore Management University CFO, handles succession management.

 

"Over [a] timeline, you build up the skills and experience the successor needs and gradually transfer the role of the incumbent over to the successor. Start with the end in mind. You need to have some basis for knowing when the final transition will take place and you need to understand what the incumbent wants."

 

“Talent is normally scouted at a young age based on attitude, competency and ability. After that, time is required to build their institutional knowledge, groom their leadership skills and provide them with opportunities to test their resilience and tenacity,” she says.

The preference is also to promote from within at Singapore Management University, although it is important to appropriately develop candidates.

“If they have been in a role too long, internally-developed candidates may lack exposure to different contexts,” explains Chan. “They are often blindsided by department or company culture and tend to be resistant to change.

To groom such candidates, it may be worth rotating them out of finance to operational units or even other companies of varying sizes. Whereas external candidates start fresh and may drive transformational change.”

It is also worth considering recruiting senior finance executives with experience broader than just finance. Fleming, for example, did a law degree first. “These days, as the role becomes broader, being a career accountant is not the only pathway to CFO role,” he says.

Make a plan

Overall, a business’s level of maturity often determines the approach to succession planning.

“If the business is in a high-growth stage, with a three- or five-year plan, supporting a CFO, financial controller and a couple of accountants, but in two years it is going to be a $500 million revenue company, you need to think through the roles you will need over this journey,” says former Adore Beauty CFO, Stephanie Carroll CPA, who led the company’s finance team through massive expansion.

“With Adore, I started with a team of four people. I developed them and brought them up, but there were not enough people to really seed the pipeline. However, if you are in a finance team of 150, then it is around how you make sure there are career pathways for all those people.”

Figure out the skills and attributes the business needs and if the current team has the capability to grow into bigger roles, Carroll says. Then, put in place systems to develop top talent on an ongoing basis.