CFO Pulse Survey 2018

Transcription

1 CFO Pulse Survey 2018

2 Korn Ferry s Financial Officers Practice surveyed over 700 Chief Financial Officers (CFOs) globally to understand their perspective on the role and the major trends impacting the finance function. This report is separated into three sections based on the themes that emerged from the findings: the need to focus on succession planning, continued transformation in finance, and the rise of analytics and business intelligence in finance. The need to focus on succession planning The 2018 CFO Pulse Survey found that when it comes to planning for their successor, only 34 percent of CFOs agreed there is a succession plan in place for their role. Further, when asked if there is an internal, ready now successor, 81 percent of CFOs reported there is none. This number is surprising when compared to our recent market data that found 51 percent** of CFO appointments were filled internally. Indicating that while many companies may not have a formal succession plan in place, they are still relying heavily on their internal options versus external. A formal succession plan can bring great value as it enables strategic development of potential successors and instills confidence in the CEO and Board of their succession options, said Bryan Proctor, senior client partner and Global Financial Officers practice lead at Korn Ferry. To what extent do you agree there is a succession plan in place for the CFO? Is there an internal ready now successor for the CFO? 24% 12% 30% 2 8% Somewhat agree Strongly agree Somewhat disagree Strongly disagree Neutral 19% 81% Yes No 2

3 The survey also found that the longer a CFO has been at their company, the more likely they are to agree a succession plan is in place. Fifty-three percent of CFOs who have been at their company for more than 10 years agree they have a succession plan. This is double the amount who agreed for those who have been in their role for 1-5 years. Naturally, CFOs who have been with their company longer, feel they have more of a succession plan in place, said Proctor. Succession planning is typically a cycle, if a CFO was groomed and promoted internally, it is likely they will do the same once they are the CFO. This can change when there are disruptors in the market such as activist investors. In this situation, the board can heavily influence the decision, even when the ultimate decision is that of the CEO. When comparing responses by revenue, CFOs from companies with revenue greater than 1.5B reported having the most succession planning in place for the role with 51 percent agreeing there is a succession plan. Additionally, when comparing private versus public companies, public company CFOs reported their company is more likely to have a succession plan in place (46 percent compared to 28 percent) and that there is an internal, ready now, successor (26 percent compared to 15 percent). This is expected as private companies and smaller businesses do not have the same external expectations and pressures compared to public and larger companies. Yet, smaller and private companies can still benefit from succession planning. Identifying potential successors to develop their skills is a great first step, added Proctor. Succession planning comparison by company demographics 100% 80% 60% 40% 20% 0 Overall Public Private PE Backed Rev<1.5B Rev>1.5B Yes, internal ready now successor Agree succession plan No, internal ready now successor Disagree succession plan 3

4 4 When asked, what is the number one capability CFOs are focused on developing in their direct reports, 31 percent reported leadership skills and executive presence, followed by 21 percent reporting strategic thinking. Making the step-up to CFO requires candidates to not only possess strong financial acumen, but general management experience and leadership skills. Based on these responses, CFOs are clearly committed to developing a pipeline of successors for their position, said John Petzold, Korn Ferry senior client partner and CXO Optimization lead. Previous Korn Ferry research has shown the most sought-after CFOs are more likely to possess competencies that make up an effective leader such as the ability to drive results, credibility, trust and a global perspective*. To learn more about what competencies and other qualities comprise best in class Finance leaders, click here.

5 Continued transformation in finance When asked what part of the finance function most needs a talent transformation, 22 percent of respondents reported Operational Finance, followed by FP&A (19 percent) and Strategic Planning / M&A (16 percent). It s interesting since these sub-functions are the areas that require the highest level of business acumen, while the functions with the lowest responses are the more technical roles such as Tax and Audit. Strong Operational Finance, FP&A and Strategic Planning can help the CFO take the Finance function to the next level and deliver superior value to the business, said Petzold. What area in your function is in the most need of a talent transformation? Treasury 3% Other 2% Operational Finance 22% FP&A 19% Strategic Planning/ M&A 1 Financial Reporting Risk/ Control Compliance None 5% Tax 4% IR 2% 0% 20% 30% 40% 50% 60% 70% 80% 90% Audit 100% 3% The survey also found shifts in how CFOs are structuring the Finance/Accounting function with 55 percent of CFOs reporting they combined roles in the function within the past year. When asked why the roles were combined, the most common reason was related to talent (41 percent) with half (50 percent) stating it was due to lack of resources or skills and half (50 percent) for career development opportunities. It s interesting to note that half the CFOs are focused on career development while the other half are resource constrained. Combining roles under a CFO successor is a great approach to talent development and management. We intend to pay particular attention to this trend and continue to monitor, said Chuck Eldridge, Korn Ferry senior client partner. When it came to which functions were being combined, respondents reported FP&A was the most common function, followed by Financial Reporting and Operational Finance. FP&A is the one role that has received significant attention post-financial downturn to this day. Finance teams have been striving to enhance FP&A s ability to look forward and predict accurately, observed Eldridge. 5

6 Reasons reported why roles were combined 50% 50% Lack of resources or skills/ Headcount reduction Talent development/ Career opportunities 41% 9% 28% 21% Efficiency/Automation/ Process improvement Savings/Budget/Cost Other Talent FP&A was most commonly combined with Strategic Planning/M&A, suggesting that CFOs are leveraging the combined role to take the function to the next level by focusing on growth initiatives. However, only 19 percent of CFOs reported that FP&A needs a talent transformation. As FP&A continues to undergo a significant progression, having the right skills in the right roles is critical. This may mean developing those skills in house, combining roles or bringing in new talent, added Eldridge. Number of times reported a function in finance was combined with another finance function role FP&A, 188 Financial Reporting, 175 Operational Finance, 161 Treasury, 142 Controller / CAO, 141 Strategy / M&A, 104 Risk / Compliance, 93 Tax, 77 Audit, 72 IR, 51 6

7 Number of times reported specific functions were combined Treasury, Operational Finance Controller/CAO, Tax Treasury, IR Treasury, Tax Controller/CAO, FP&A Controller/CAO, Financial Reporting FP&A, Financial Reporting Operational Finance, Financial Reporting Risk/Compliance, Audit FP&A, Operational Finance Strategic Planning/M&A, FP&A FP&A was most commonly combined with Strategic Planning/M&A, suggesting that CFOs are leveraging the combined role to take the function to the next level by focusing on growth initiatives. However, only 19 percent of CFOs reported that FP&A needs a talent transformation. As FP&A continues to undergo a significant progression, having the right skills in the right roles is critical. This may mean developing those skills in house, combining roles or bringing in new talent, added Eldridge. 7

8 Eighteen percent of CFOs reported lack of organizational alignment as the number one thing that keeps them up at night, followed by their company s resistance to changes (16 percent) and aligning finance with the overall business strategy (15 percent). The top three reported issues closely relate to a big picture perspective on how finance operates within the organization. It is important for CFOs to not only work with the CEO but reach across the organization to ensure the company is working as a cohesive unit and keep this top of mind while they make changes within the function, said Proctor. What is the #1 thing that keeps you up at night? My board s resistance to changes Pressure from investors Threat of cyber security breach Compliance and regulatory requirements My CEO s resistance to changes Other Recruiting and retaining top talent Aligning finance with the overall business strategy My company s resistance to changes Lack of organizational alignment 3% 4% 12% 15% 1 18% 0 5% 15% 20% 8

9 When asked about diversity on their teams, 59 percent of CFOs agreed that their team is diversified enough to reflect their customer base. This contradicts what we generally see in the market considering 16 percent** of CFOs in the KF1000 are diverse, said Stephanie Buckles, Korn Ferry senior client partner. Yet, CFOs still might not consider their teams diverse enough. We are consistently hearing the market request to see diversity, which may be in thought, education or background. To what extent do you agree your team is diversified enough to reflect your customer base? Strongly disagree 3% Somewhat disagree Strongly agree 14% 1 Somewhat agree 42% Neither agree nor disagree 23% 0 20% 30% 40% 9

10 The rise of analytics and business intelligence in finance Another common theme in the results is the importance of analytics and business intelligence (BI) within Finance. When it comes to execution and leveraging data, an overwhelming majority of CFOs (84 percent) reported they are leveraging data. The most common use of BI reported is to optimize operations to improve the bottom line (64 percent), followed by evaluate risk to advise on appropriate actions (36 percent), analyze customer behavior to drive decisions (26 percent) and understand the future of the market to provide a strategic vision (21 percent). In this age of information and the ability to be more predictive, CFOs have the opportunity to drive key business decisions if they have the tools, data and team to interpret. Data and BI can be a huge differentiator in edging out the competition, says Proctor. My team is leveraging data and business intelligence to: Respondents were able to select more than one response, thus responses will not add up to 100% 70% 60% 50% 40% 30% 64% 20% % We are not leveraging our data yet Understand the future of the market to provide a strategic vision 2 Analyze customer behavior to drive decisions 3 Evaluate risks to advise on appropriate actions Optimize operations to improve the bottom line 10

11 Further showing CFOs recognize the power of business intelligence, it was the number one strategic priority reported for the year (31 percent). Additionally, when it comes to what CFOs wish they could spend more time on, 23 percent of CFOs said Data and BI, the second most common response only after strategy. As CFOs look to instill analytics into the day-to-day operations within Finance, different skillsets on their team may be needed to make this transition. CFOs reported Data and BI as one of the three most important capabilities that they are focused on developing in their direct reports. What is your biggest strategic priority this year? Cultural awareness Cyber security Market disruptors Other Improving relationships with ivestors Customer-centricity Globalization/new markets Innovation Digital agenda Improving cost for SG&A Transformation (please specify) Data and analytics 1% 2% 3% 4% 4% 13% 1 31% 0 5% 15% 20% 25% 30% What is the most important capability you are focusing on developing within your direct reports? IT/Digital literacy Other Commercial experience Technical accounting/finance skills Operational experience Relationship building Communication skills Data and business intelligence skills Strategic thinking Leadership skills and executive presence 0% 1% 3% 9% 1 21% 31% 0 5% 15% 20% 25% 30% 11

12 When respondents were asked who they wished they worked with more, 27 percent wished they worked closer with the CIO/CTOs or the Chief Digital Officer. Technology is constantly evolving and plays a huge role on how work is performed. If leveraged well, technology provides efficiency and can streamline processes within an organization. A strong relationship between the CFO and CIO is key. Technology can often be an enabler and part of the infrastructure of day-to-day business. However, when technology becomes a driver of top and bottom line value, then we would likely see the interest from CFOs increase. This begs the question of how CFOs currently view the roles of their CIO/CTOs and if that is cause for this response, says Proctor. What activity do you spend the most time on and what activity do you wish you could spend more time on? 40% 3 35% 30% Spend the most time on Wish they could spend more time on 25% 20% 22% 19% 23% 15% 5% 14% 1% 11% 9% 2% 8% 1% 3% 4% 11% 0% 5% 0 Budgeting and financial planning Strategy Internal reporting Data and business intelligence Other External reporting and compliance M&A activities Investor relations Talent Technology Besides the CEO, which executive do you work with most closely and which executive do you wish you worked with more closely? 45% 40% 35% 41% Work with most closely Wish they worked with more closely 30% 25% 20% 15% 5% 1 22% 21% 15% 9% 18% 5% 1 4% 8% 3% 5% 0% 9% 0 COO Other: e.g. Head of Business, Head of Sales, etc. General Counsel CIO/CTO CMO CHRO Chief Supply Chain Officer Chief Digital Officer 12

13 About this study Korn Ferry surveyed more than 700 Chief Financial Officers from major corporations across the globe. Please note, percentages do not always equal 100 percent due to rounding. About Korn Ferry s Financial Officer Practice Korn Ferry s Financial Officer Center of Expertise assists companies in attracting, developing, and optimizing exemplary Chief Financial Officers and senior finance executives who possess best-in-class leadership, finance, and operational skills. We offer a full range of solutions designed specifically to address CFO talent needs from strategic search services, competency-based assessments, and engaging, interactive high-potential leadership development programs to one-on-one coaching, strategic talent design, and succession planning. Coverage and Functions: n Chief Financial Officer n Controllership n Tax and Treasury n Internal Audit, Risk and Compliance n Leadership roles in strategic planning, corporate development, investor relations and divisional finance *KF4D Data: This is a first-look at differentiators using KF4D Executive Search, KF4D Enterprise, and KFALP Assessment data. Results depict those scales that differentiate between the Most Highly Sought-After Executives (top 84th percentile) and the Least-Sought Execs (16th percentile) based on individual success, such as compensation, work engagement, organizational commitment, and company-level success, such as peer and/or media recognition. **KF1000: a proprietary database of the largest 1,000 U.S. companies and their Chief Financial Officers. Figures as of January 1,