Career opportunities for chief financial officers have never been more plentiful. As companies grapple with the aftermath of the financial crisis and a two-speed global economy, they want leaders who can provide comfort and confidence in an uncertain world. CFOs' unique combination of analytical, technical and strategic capabilities means that they are arguably best placed to provide this.
The calls from shareholders and corporate directors for CFOs to serve on corporate boards are becoming louder. Regulatory pressure has also increased the demand for their financial expertise. In some countries, it is mandatory for boards to have this financial knowledge.
Seventy-nine percent of the 800 CFOs who Ernst & Young LLP surveyed for a new report, "CFO and beyond – the possibilities and pathways outside finance," agree that their financial expertise means that they are more in demand than ever for board-level roles. Analysis of how board composition has changed in the world's major economies over the past decade supports this view. In 2002, 36% of CFOs from the world's largest companies held non-executive directorships. A decade later, this proportion has increased to 46%.
A Way Station, not a Destination
A previous Ernst & Young study, "The DNA of the CFO," found that the majority of CFOs either intend to remain in their current role or move to another CFO role. Our findings for the new report are consistent with this. We found that, after a decade, 62% of those who were large-company group CFOs in 2002 are either still CFOs or left the role as their last executive post. Interestingly, 15% have transitioned to the role of CEO or CEO/chairman, 4% to chairman and 3% to COO.
But this may be changing. In the new study, 82% of the CFOs we surveyed expressed an interest in some kind of role after serving as CFO, which either means that more will pursue executive options outside of the CFO domain in the future, or, more likely, explore non-executive roles – as corporate directors, perhaps. What is evident is that for most, the skills they hone as CFO will be used in some capacity.
In fact, representation of both current and former CFOs on boards has increased significantly over the past decade. In 2002, just 8% of board members at the 347 companies studied were either current or former CFOs. A decade later, the percentage of the 800 CFOs studied climbed to 14%. The difference is even more striking for specific board positions: In 2002, just 19% of audit committee chairmen were either current or former CFOs; by 2012, the proportion had risen to 41%.
Drivers of Demand
Three developments have caused demand for CFO skills to skyrocket:
1. Changing regulatory requirements make finance experience desirable, and often mandatory. In many countries, changes to the regulatory environment -- enacted since the corporate governance scandals at the beginning of the century -- have increased the demand for finance expertise on boards.
2. The volatile macroeconomic environment brings the CFO's traditional skills to the fore. Economic and market challenges require companies to focus on cost, risk and cash-flow management -- three areas that fall squarely within the CFO's skill set.
3. The increasing breadth of the CFO role has made him or her more valuable to boards. The modern finance leader has a broad and complex role, encompassing strategic contributions, business partnering, internal and external stakeholder management, as well as operational responsibilities -- far beyond the core technical and financial capabilities that once characterized the role.
Finding the Time
Despite the demands of the top finance role, many CFOs still choose to allocate some of their time to non-executive or voluntary roles alongside their core job. More than a quarter of CFOs surveyed have already taken on an additional job and 40% would consider it in the future.
There is a great deal of personal and professional benefit to the CFO taking on supplementary positions, including exposure to different organizations and perspectives on the challenges dealt with by management and non-executives. Experience in a different sector is seen by many of those we spoke to as particularly valuable, with the opportunity to gain new knowledge and transfer best practices across sectors. For those CFOs who are fortunate enough to serve on the board of a large, well-respected company other than their own, there is also a "halo effect," whereby his or her full-time employer also benefits.
Unfortunately, time is often a constraint for CFOs. More than 40% of CFOs think that it is inappropriate for them to take on part-time roles. For many, the demands of their core responsibilities are simply too great. As corporate governance legislation becomes more stringent, the time required to be an effective non-executive director is increasing.
Despite CFOs' appetites to take on non-executive roles, there is a growing mismatch between the amount of time they feel able to dedicate to such a role -- on average around four hours a week -- and the time required. The UK Walker Report, for example, recommends between 30 and 36 days per year.
Taking the Long View
Among our respondents, those who identified themselves as long-term planners were significantly more likely to have taken on supplementary roles than those who are more career "opportunistic." The guidance from recruiters and current and former CFOs who have successfully secured board roles is to begin planning early. To start positioning oneself for such a role at the time you want it may be too late, especially when boards are looking for an increasingly specific skill set.
CFOs have started to secure non-executive directorships at a younger age. When comparing CFOs of some of the largest companies in 2002 with those in 2012, we notice that the likelihood of the latter group to hold non-executive roles is much greater -- across all age groups. But the difference is most marked with those under 50 years old.
Part of planning is anticipating future change. Over the next decade, boards will increasingly value knowledge of rapid-growth markets, analytics and social media, as structural shifts in the global economy and ever greater use of technology impact business models. And, as boards become more diverse in terms of gender, ethnicity, background and experience, opportunities will open for some, while for the 55- to 60-year old males who typically dominate boards today, gaining access to the boardroom may become more competitive.
A Direction to Director
Our research suggests that there are eight key ways for CFOs and future finance leaders to make better career decisions and maximize their attractiveness for executive and non-executive positions:
1. Develop a coherent CV. Recruiters are now often looking for particular experience, such as M&A, capital markets or rapid-growth markets. If you have deep experience in a particular domain, such as M&A, then this will give you a good chance of being matched with certain positions on certain boards.
2. Take on roles outside finance -- and even business. Board roles on charitable trusts, government taskforces or cultural institutions can help CFOs to develop important skills to take them toward their next career goal, as well as providing rich and fulfilling experiences in their own right.
3. Build networks. In recent years, boards have taken a more transparent and independent approach to recruiting directors. Nevertheless, to be considered for directorship roles, it still helps to have the right contacts among senior business leaders.
4. Develop a personal profile. A CFO seeking a directorship or onward executive step should still work on building a public profile of expertise and accomplishments that extends beyond his or her core role.
5. Gain international experience. Companies increasingly expect board directors and senior executives to have spent time in different countries. Experience in rapid-growth markets is particularly desirable.
6. Build relationships across the business. CFOs who enjoy a wider range of potential career opportunities and are most in demand for executive positions are those who can demonstrate breadth by having moved beyond the traditional finance role to assume wider business and commercial responsibilities.
7. Don't get stuck at headquarters. Spending time in an overseas role will give finance professionals greater exposure to the commercial aspects of the business, and the ability to deal with a broader range of issues that will provide valuable experience for future executive or non-executive roles.
8. Start planning early. It is never too early to start planning the next step. CFOs who spend their entire careers in the finance function will be at a disadvantage to those who have taken a more structured approach to career planning.
While some challenges remain for CFOs seeking to join a board, the confluence of increasing demand and their unique skills makes them a compelling fit. The future of the finance leader has never been so full of possibility.
Thomas P. McGrath is Americas senior vice chair, markets, with Ernst & Young LLP.