RSM Resources

When it comes to hiring a top-notch chief financial officer (CFO),accounting and financial skills have always been high on the priority list. But in today’s highly scrutinized business world, experts say midsized companies should also look for big-picture thinkers with an uncanny sense of balance.

"The main roles of today’s CFO are a little bit at odds," says Raj Aggarwal, dean of the College of Business Administration at the University of Akron (Ohio). "On one hand, the CFO must be the financial cop, ensuring the accuracy of information reported to regulators, shareholders and others. On the other hand, the CFO must also be a strategic business partner, stepping up to develop ideas to help the company make more money. Those two areas often require walking a fine line."

Increasingly, walking that line has come with a cost. Executive search firm Spencer Stuart reports more than 10 percent of Fortune 500 CFOs left their positions in each of the past two years. And, in a 2004 CFO magazine poll, 68 percent of lead finance officers said they felt under more pressure than ever. In fact, 63 percent of respondents said the increased stress in CFO roles was affecting their health.

Those numbers illustrate the human side of a job that has undergone sharp shifts in the past decade. In the 1990s, for example, the focus for many CFOs was on the finance side, with internal audit and compliance often taking a back seat. While the post-Enron environment has clearly elevated the importance of sound accounting principles, experts say CFOs also increasingly assume a bigger share of leadership responsibilities for risk management, business development,communication and overall company direction.

But financial scandals are just one force driving changes to the CFO’s job. According to a recent study by the National Bureau of Economic Research, 20 percent of public companies polled said they had eliminated the chief operating officer (COO) position and reassigned much of those duties to the CFO. One significant outcome from that shift is the CFO taking on ownership of risk management. A 2006 Oversight Systems survey found that 44 percent of respondents believe the CFO is most accountable for enterprise risk — well above the 20 percent for chief executive officers (CEOs) or even the 8 percent for chief risk officers.

Another cause of increased stress for CFOs stems from the pressure corporate board members feel from strict governance terms imposed by the Sarbanes-Oxley Act of 2002. A key provision in that law holds public company board members responsible for accurate financial reporting.That means today’s CFOs have a much higher profile with corporate directors, and candidates for such jobs receive an unprecedented amount of board-level attention.

"The bottom line is that CFOs now have much more responsibility to develop and maintain direct relationships with the board, rather than just going through the CEO,"says Aggarwal, who serves as a director for a pair of midsized companies. "That’s a big change."

Is your company preparing to hire a new chief financial officer? If so, experts advise looking for the following qualities:

A history of ethical behavior.More than ever, company directors and CEOs are looking for CFO candidates with unquestioned ethical track records. In addition to exercising the regular due diligence of background and reference checks, company leaders use interviews to ask probing questions about how candidates handled sensitive business or financial situations, or managed conflicts between good financial practices and the needs of business growth.

"You need to look for a very highly developed sense of integrity," Aggarwal says. "Without that, it really doesn’t make any difference what other qualities they may have."

An ability to learn and adapt.While keeping an eye on compliance and cost issues is important, so is being skillful in helping design, drive and modify company business plans. Today’s senior finance officers face a staggering array of marketplace challenges in areas such as pricing, material sourcing and capital markets. Top CFOs need to constantly frame such issues in a financial context and respond with fresh ideas and thinking that help the company meet its planned objectives.

"Every business has some fundamental notions about how it makes money, but those drivers can and do change," Aggarwal says. "The person you hire as CFO needs to understand your company’s unique drivers of profitability and growth and be prepared to adapt them when necessary."

Broad management expertise.A high percentage of CFOs came up through the accounting and finance side of the business. However, as the position continues its evolution toward a more "big picture" strategic role, experience in other business segments will become increasingly valuable. A CFO with an operations background, for example, can bring valuable insights that go well beyond the numbers.

"The main difference between a CFO and a controller is that the CFO needs to consider the overall strategy,"Aggarwal says. "When you’re part of senior management, most of your time is spent thinking broadly about how to grow the business in more profitable ways in addition to making sure your financial information is clean and credible."

Good communication skills. It is no longer acceptable for a CFO to be the invisible hand behind a balance sheet. Under the new model that calls for greater strategic involvement, today’s CFO can succeed only by building networks with company directors, peer executives and line managers, and other stakeholders in the organization’s success.

Professional involvement.As another nod to the decline of COO jobs, lead finance officers are being asked to design and implement non financial metrics to track company performance against strategy. Under those circumstances, CFOs with strong peer networks, demonstrated commitment to ongoing training and a history of involvement with professional organizations stand the best chance of tapping into the latest thinking and success stories.

"These relationships allow a CFO to benchmark key issues of firms that do aspecific function very well," Aggarwal says. "Connections are importantto get access to quality best practices."