KEY POINTS:
As some of the biggest names in the banking world wobbled last year, the chances are that some voters chose John Key partly because they thought his finance background would come in handy in the hot seat. Mind you, George W. Bush's MBA didn't seem to help much
during last year's stockmarket jitters.
Economist.com columnist Lucy Kellaway argued recently that this would be the year of the chief financial officer. She predicted they would be in the ascendant while those working in HR or marketing would see their power shrink. A shift would occur in the boardroom, she predicted. And more CFOs would make it to CEO status.
Hay Group NZ managing director Ian MacRae does not agree. He prefers to say that rather than the CFO gathering strength, the entire management team will be focusing more on the financials than before. In this, and any, climate the key personnel are the CEO or business unit leader and their team.
Now is not the time for finance directors to be getting too big for their boots. Yes, a good finance director will be extremely useful in this climate, just as a bad one will be pretty damaging, argues MacRae.
A good CFO will have excellent trusting relationships with all line management, and will be able to present the CEO with the latest financial information.
Business unit leaders or CEOs should be doing the sums on several scenarios at the moment, says the Hay Group MD. The first is that this is a downturn which is not going to be too bad; the second is that this is a recession which will last longer; the third that this is a full-blown depression.
MacRae says: "You have to be able to plan for that.
The lifeblood of decision-making is information, good-quality information; not just financial information, but all kinds of information."
He disagrees with Kellaway's assumption that HR is on the wane.
The Hay Group recently surveyed 3000 companies in 91 countries. Almost half said they were cutting costs by 8-10 per cent. In New Zealand, companies are expected to cut their workforces by 3-4 per cent. "Business is over-resourced, but you have to be making sure that you are cutting surplus. HR is there to help cut back the true surplus," says MacRae.
As for going direct from CFO to CEO, MacRae says CFOs should acquire some operational experience before they volunteer for the top job. They should apply for general manager roles and be truly tested in how to run a business.
Running a business means you are balancing different demands for resources, having to weigh up pros and cons, he says. "There's a big difference between generating sales and revenue and counting sales and revenue."
While the position of CFO as the strongest on the management team is up for debate, there is little doubt that the role of the CFO has changed in the past five to 10 years and that these financially adept executives have more to contribute than before.
The position of CFO is evolving into a "portfolio role", says Megan Alexander, senior manager at Robert Half NZ, which specialises in finance and IT recruitment. These numerate executives now have a wide range of functions, from corporate affairs, strategic alignment and mergers to acquisition.
A new-look CFO should be strong on strategy, leadership ethics, soft skills and business skills. Recession probably means the CFO holds a bit more sway, but they can't do things on their own, says Alexander.
"If they think that, they will fail.
In recessionary times, it is critical that CFOs are working with the people around them.
"They need to have their fingers on every pulse."
They need to be getting the true information. "When people are being threatened, people over-inflate their results to look good," says Alexander.
The management team needs a portfolio of balanced views and everyone on the team will have diverse management skills. The leader brings all these together.
"It's got to be a roundtable of ideas. The CFO has to put the business case around the ideas. They have to quantify and qualify," says Alexander.
Robert Walters managing director Richard Manthel says the CFO needs to be contributing a strategic view. They will be saying 'how you are going to get out of this crisis?', and 'how can the company create opportunities out of this?', rather than saying things like: 'Our revenues are down 25 per cent.'
A good CFO should be able to analyse the market and recommend a strategy, and should also pick up warning indicators, possibly from monitoring cash flow or future revenue orders.
Seasoned CFOs are highly valued in today's job market, says Frazer Wilson, head of Heidrick & Struggles' financial services practice. Last year the top level headhunter did more CFO searches than for any other function.
Around 40 per cent of CFOs globally go to CEO roles, according to the consultancy's figures.
Nigel Morrison, SkyCity Entertainment CEO, is a former CFO who went on to the top role. He was previously Group CFO of Galaxy Entertainment Group in Macau. He had also already been a chief executive of the Federal Group in Australia. Morrison brings much more financial, strategic and operational discipline to the role, says Wilson.
Companies are looking for CFOs who have been through recessions, says Wilson.
"A lot of CFOs have just been through the good times. A good CFO has leadership, strategic and commercial abilities.
"They are handling issues of global funding, liquidity issues and cases where organisations are breaching banking covenants.
"At the moment, the CFO has to have a very strong relationship with their bankers," says Wilson.
If a CFO wants to transition to CEO, they have still got to have a visionary part as well as the leadership credentials, he says. "You have got to motivate, to corral the troops."
Gill South is a freelance business writer based in Auckland.
