Ep. 132: James Stark - CFO Skills and Competencies
James Stark, Egon Zehnder’s Financial Officers, Industrial and Board practices, joins Count Me In to talk about the necessary skills and competencies of CFOs today. James is a seasoned finance leader and was kind enough to share his insights and views on the challenging global landscape, as well as the must-haves for finance leaders. He addresses what CFOs need to evolve and optimize in order to drive value to their careers and respective organizations. Download and listen now!
Welcome back to Count Me In, IMA's podcast about all things affecting the accounting and finance world. I'm your host, Adam Larson and today I will be previewing a conversation between my co-host Rouba and her special guest, James Stark. In this episode, James shares his insight and views on the challenging global landscape and the must have skills for CFOs. He is active in Egon Zehnder's financial officer's industrial board practices and is well-versed in the financial leaders need to evolve and optimize their careers and their organizations. Keep listening to hear more from James and Rouba now.
So I want to ask you a little bit about your career in the finance and accounting industry for so many years, I mean, throughout your career you've facilitated a lot of peer to peer learning within the finance and accounting profession itself, and you're a huge advocate for creating lasting value. Can you tell us a little bit more about what it means to drive that kind of level of value in today's very volatile globalized marketplace?
Yeah, of course. So look, I tie this to the rise of the strategic CFO, which is something that's been written about quite a bit over the last decade or so. What that means, I think in practice is that CFO, senior finance leaders are becoming much more forward looking to help drive business decisions and not just kind of the backward looking scorekeeper that they might've been 20, 30 plus years ago. I think elements of that would also include scenario analysis and how you translate corporate strategy down to business unit or functional or even product strategy. So there's much more of a focus on commercial outcomes and driving the business forward. I also think finance leaders are really well equipped to help drive this value, given their position in the organization. Especially if they can broaden their skills beyond just kind of whatever that core part of finances they kind of came in or came up through. So, you know, rotations can help with that as you think about moving around between controllership to FP&A or treasury or investor relations or strategy and corporate development, et cetera. I've had CFOs tell me over the last, maybe five plus years that, you know, technical skills now are really just more like table stakes and what truly differentiates finance talent and helping to drive value creation, is having greater impact via, you know, better strategic thinking, being both deeply analytical, but also pairing that with a willingness to embrace new technologies and then also strong leadership and interpersonal skills can really help motivate and organize and energize the broader organization and I think specifically to that peer to peer learning piece, and I think part of that is also, you know, if you're a lifelong learner, you're going to be kind of more adaptable and you're constantly being incorporating best practices that you learn from others outside your organization, or even outside your industry.
Yeah, I'm all for the life learning approach, that's really a big value, at IMA. So when you look at, when your focus in recent years has been a lot on innovation and organic growth, but let's look into this new era, this new normal that we're in, the COVID-19 pandemic pre, during, and post, and as organizations are crumbling, some are succeeding, some have completely remodeled their entire business model and they're struggling to survive. What role does innovation play, I mean, and organic growth play at this time, if at all?
Yeah, great question. It's certainly very timely, right. So I've been talking to senior finance leaders for almost two decades now and when I asked them about their top priorities, innovation and organic growth is always at, or near the top. And that's both for the company, but also even within the finance function, right? How can you improve your operations and processes within finance? So I think there's always a role for innovation, but it's important as well of course, ebb and flow, depending on what's happening both within the company, as well as the broader macro conditions. You know, in times of crisis it's well-known that R&D spending is typically one of the first line items that gets cut or at least drastically reduced, right. Cash is king and so, yeah, totally get that, that's going to happen in a downturn. But you know, but once that storm is weathered and you start seeing a return to normalcy, I think then it becomes time to quickly pivot and identify new opportunities for growth again. And I think the earlier you can make the pivot, you know, the better the odds that you can beat your competition at it. I'd also, you know, even use Egon Zehnder as an example in terms of what we did during the pandemic. You know, as the pandemic was ramping up, we didn't lay off anyone globally. You know, it was, we did stop, we did stop hiring, but we didn't lay anyone off and, you know, given our values, we didn't think layoffs were the right thing to do at the time, but also strategically, we didn't think layoffs made sense, and I think, you know, some of our competitors actually did lay off staff and, you know, as a result now that we're seeing this strong rebound in some markets, we feel like we're in a great position.
Yeah I don't think many anticipated the pent up demand and how it's going to see them scramble to get their business back to normal. So if we look at automation, machine learning, artificial intelligence, they've already begun taking serious inroads into the professional realm and not just in the finance and accounting sector, but every single industry. So digital transformation is now the conversation at every boardroom, every discussion and it was extremely accelerated by COVID. I mean, whatever was in the works a few months ago just became a priority all of a sudden. So when you think of this post pandemic, new normal per se, what are the skills that the finance and accounting professionals are going to require in order to maneuver with this new normal?
Yeah, you know, I think some of these kind of core skills will get amplified given what we've seen over the last 16 months or so, right. And so that's around adaptability, resilience in being able to lead through ambiguity. I think we'll see likely an acceleration of some of these pre COVID trends as we move to the new normal. I think many have already, as you said, many have already been focusing on advanced analytics, bots, robotic process automation to improve performance within the finance function. As we, move to the post pandemic normal, I think those areas are going to remain robust. I'd also expect to see many people turning to artificial intelligence, machine learning, advanced data visualization technologies, and of course, digitalization to do things better, smarter and faster and who knows at some point maybe blockchain may eventually even live up to it's hype.
Hopefully. I mean, it's the biggest conversation right now, blockchain and cryptocurrency taking over the world. So we've seen companies around the world undergo major digital transformation efforts in the region. Some of the most notable are, Emirates NBD. I mean, these guys spent 1 billion dirhams, on, their own transformation. You're talking about roughly a quarter of million dollars, and just to enhance their performance, Coca-Cola says that they were able to reallocate 40% of their finance team's resources, at their time. I mean, allocated their time, thanks to automation. How does a company go about this process in the first place and what is the role that finance and accounting professionals can play to kind of facilitate, or maybe even drive and lead that change?
Yeah, I think this one can be a little bit tricky to answer, because I think the term digital transformation can mean different things to different people. I do, as we mentioned before, I, you know, many finance executives have been turning to bots and RPA to automate what are typically known as kind of rote or repetitive tasks and they do that in order to free up talent, to focus on some of the more higher value add or judgment intensive activities, but you know, it's not just a magical switch that you turn on. There's a lot of effort and blocking and tackling that's required to make that happen and notably that's really focusing on fixing your existing processes first. But it's also part of a mind shift, a change as well, right. You know, you need to kind of change your mindset and be open to trying new things and not just say, "Hey, you know, this is how we've always done it". And that transition is not always easy for finance professionals. I think those who are unwilling to make that pivot do risk being left behind.
And by the way, I mean, I think COVID really has given nobody choice. I mean, it's now a mandatory process.
It's imperative. Absolutely.
What's great about it is that we've seen CFOs step up and the whole strategic direction of companies and they've, they've really taken on more of a leadership role from a finance perspective. And they're being looked at for governance, risk management, business change, business resilience and technology advancements. I mean, these are way more advanced than we've ever been in the finance sector. Are the inherited skills of finance and accounting professionals, I mean, the ones that they've been trained to the way we've done this, as you noted, are these sufficient to make such big decisions based on data and all of this reliance on RPA and all of digital transformation and what are the crucial skills that they must evolve?
Great question. And I think, you know, what we typically see in the market place, focuses on core competencies as well as elements of potential and I'll tell you a little bit about both. I think we might be a little bit unique in that regard and that we don't just look at past performances and experience to assess a candidate's ability to succeed in a role or a particular mandate. So, you know, depending on the role, we typically see a desire for finance executives who have several, strengths in these various competencies. So one is around results orientation, you know, how well can they drive performance, make improvements using fact-based analysis. A second one's around strategic orientation, which we already discussed a little bit, but you know, how well can you articulate evolving priorities over the next three to five years? And it also, how well do you consider scenarios? A third competence is around team leadership. So do you encourage new ideas from the team and do you embrace the differences across the organization? And then you use a range of management styles to really help enforce productive behaviors within the team. And then a final one is around collaboration and influencing. So how well do you seek out input from other stakeholders, do you share best practices and you invest in building strong relationships throughout the organization. And so when we look at, candidates and assess finance leaders, you know, we have a detailed scale and kind of how we rank them across these competencies. You know, those are on the lower end are really more reactive. But then those who are very proactive and influence beyond just even the finance function are the ones that will score, kind of the strongest. So that's the competence part. Another other piece that we look at is what we consider kind of the four key elements of potentials, what are kind of the big predictors of future success and growth over the course of a career. And we have four of those that we narrow in on. One is around insights, so how well does someone gather data and connect dots to discover new ideas or new thinking for the organization? A second one is around engagement. So it's really building that connection and winning the hearts and minds of others. Third one's around determination, very straightforward, right? How well can you overcome obstacles to drive results? Do you have tenacity and grit to fight through challenging times. And the final ones around curiosity? And we don't just view it as intellectual curiosity, you know, how much are you curious about the rest of the world around you, but it's also, you know, how much does someone actively seek feedback to improve upon their self? And so that also goes back to that lifelong learning piece we talked about earlier. And I like to think that that framework would really help prepare finance leaders to thrive in kind of the ever-changing macro environment.
No, these are amazing skills I think, and kind of pandemic proof as they sound so far.
And one hopes that, but this brings me really perfectly into my next question because there's, and I don't know if this is a global issue, but in the region we're seeing less and less interest, in the finance and accounting industry today as a profession. So according to this study that EY conducted, 74% of CFOs surveyed, and it's called The Changing Role of the CFO, finance organizations are really facing a talent crisis. So even though there's so much encouragement towards bringing in driving the numbers, only 25% of people in the profession say they will stay. Why do you think this is happening and what can organizations do to drive the situation in an opposite direction and keep and retain people in the profession, make it more appealing?
Yeah, it's a very interesting question. I think we all know that the war for talent is real and that's kind of across industries and functions. I think the follow-up question I'd ask in that EY survey is if only 25% plan to stay in finance, where are the other 75% expecting to go? And is there anything about the evolving role of the finance leader that can be used to help counter that? And so, you know, I may be biased, but I believe, you know, as the role of finance leaders continue to evolve, so will the attractiveness of the function, as a potential career path. And I'd also add that the opportunities are really increasing. Even though the CFO role is becoming more challenging as CFOs are being required to kind of take on more and more capabilities and functions. But you know, with greater demand for strategic CFOs, the path to the seat has evolved quite a bit, right? This is a pretty well-publicized that now that only, you know, less than a third of Fortune 500 CFOs have a CPA, right? That number was much larger 10, 20 years ago. I'd also add the average tenure of the CFO role is actually decreasing. It's now just under five years, at least within the Fortune 500. At the same time, CFOs are getting hired later in their careers. If you've got the average age of a first-time CFO, it's much older than it was just 10, 15 years ago. And then finally they are retiring earlier. So the average retirement age for a CFO is coming at a younger age. And so, you know, I think to sum up what we've covered, that the finance function remains an exciting and an evolving place to be. One where you can have even greater impact on the success of the company and from my perspective, that makes it much more attractive.
Well hopefully, we need CFOs. I mean, if the pandemic taught us anything, is that we need them to maneuver.
Absolutely. You know, it's a big driver of value creation for organizations. So at least from a hiring perspective, you wanna make sure you hire the right one.
This has been Count Me In. IMA's podcast providing you with the latest perspectives of thought leaders from the accounting and finance profession. If you like what you heard and you'd like to be counted in for more relevant accounting and finance education, visit IMAs website at www.imanet.org.