The early 2000s saw a new role for the CFO in many companies. Gone were the technicians, proficient in accounting but not having to worry about operations, sales, human resources, and technology. They made way for the well-rounded CFO, ready to attack Sarbanes-Oxley. Internal controls became the top subject as CFOs rallied to become their companies’ top fraud officers, holding everyone and every internal process accountable.
No sooner had the SOX dust settled when our economic environment began to crumble. CFOs were challenged like never before. The heightened economic conditions made way for CFOs to roll up their sleeves and protect the company franchise. In many companies, the CFO became solely responsible for keeping everyone on track of the corporate mission of “survive, advance, manage cash and make profits.”
The CFO role was focused upon survival, teaching all employees how to control corporate cost and managing working capital. The CFO naturally became much more visible to the organization. In larger companies, CFOs were forced to “think outside the box,” becoming technology gurus in educating their large employee base. CFOs were seen navigating ideas on Twitter and coordinating webinars. These tactics were essential as the economic credit crisis mandated that the CFO educate the entire management team and employee base on economic concepts such as return on capital and the critical nature of cash, as opposed simply to earnings.
How did the new normal affect CFO turnover?
It is truly amazing that even though the CFO became so essential to a company’s survival, CFO turnover dropped over the past year. This is mainly because many risk-adverse CFOs decided to stay at their current company. Many CEOs and business owners were very afraid to replace their top finance executive and resort to hiring an unknown.
What does lack of CFO turnover mean moving forward?
First, by staying put and focusing on the task at hand, many CFOs with be in a much better position for their next opportunity. They know what it takes to survive the “hot seat.” In many cases, they have become their organization’s savior. They understand what it means to be flexible and supportive. They know firsthand how important it is to be a leader-by-doing.
In addition, if the CFO helped the company through the economic crisis, more than likely he or she built a strong finance team to help achieve the CFO’s goals. Accordingly, when you combine these learned traits with the fact that the CFO built, led, and managed a top team, the next company to hire that CFO will benefit tremendously.
According to an informal survey of a large number of corporate CFOs over the past few months, 50 percent have stated that they are currently cautiously pursuing growth and another 25 percent state that they are aggressively pursuing growth. In addition, CFOs are most concerned about the following areas for the next year: maintaining profit margins, managing working capital, forecasting solid results, enhancing company morale, and managing health care costs. The result: CFOs are becoming the top operational tacticians and strategists in the company!
According to the CFO Magazine, 25 percent of CFOs will look elsewhere when the market turns. What can you do to retain them?
This is a scary proposition, especially when you consider that companies are not in a hurry to restore bonus levels or compensation levels, or contribute more to health care plans.
Companies must think of creative ways to incentivize their CFOs if they want to retain them. It is essential to fully understand what motivates your CFO. If it
is compensation, think about a better bonus for 2010 or phantom stock or earn-out potential if the company is ultimately sold. Owners and CEOs are strongly encouraged to research and determine what the average compensation is for a CFO in a similar company and industry. If you determine that your current compensation is below the average, you should seriously contemplate giving your current CFO a raise.
Think creatively! Give your CFO a vacation or consider contributing more to medical benefits. On the non-benefit side, think about engaging your CFO much more deeply in the company’s long-term strategic planning.
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