The Next Generation of Financial Officers: Insights from a European CFO Roundtable

Russell Reynolds Associates’ Global Financial Officers practice members, Suzzane Wood & Romain Clio, were recently invited to share RRA insights and analysis at a European CFO round table discussion. With the aim of supporting the development of future CFOs, we summarized insights and advice from C-suite executives, board members and industry leaders on the skills and capabilities required to succeed as a CFO, both today and in the future.

The broadening role of the CFO in Europe/UK

When considering future CFO talent, boards must now consider an increasing list of market factors, including:

• Evolving business models and transformation agendas
• Political & economic volatility
• Capital markets
• Globalisation
• The exponential rise of technology, robotics, and AI
• Social purpose, ESG, and DE&I
• Increased regulation
• Activism

The list above highlights that boards are interested in CFO candidates with the capabilities, skills, and experience to maximize their leadership impact beyond the numbers. The CFO of the future’s mandate includes:

1. External stakeholder management – As a key board member, the CFO is required to manage a diverse set of stakeholders, both externally and internally, which involves increased collaboration across the business.
2. Flexible operating style - The CFO must be able to engage with individuals at all levels of the business, rather than functioning from an elevated position of authority.
3. Broader responsibilities - With the right infrastructure and technology tools in place, a CFO can effectively co-pilot a business and, with the right talent, take on additional areas such as IT/digital, procurement, legal, sustainability/ESG initiatives or even running an operating business unit.

CFOs who bring a broad set of capabilities and leadership experiences—as well as flexible personal attributes—can have an impact on the business that goes beyond the job title.

A competitive CFO market led organizations to focus on succession planning

Turnover is increasing across the current European CFO market, reaching a three year high of 17% in 2021 across eight key indices and markets in Europe and the UK (n = 330). Succession planning is paying off for internal CFO promotions, and consequentially, those recruiting externally are open to hiring for potential. Organizations are becoming more open to CFOs without traditional requirements such as accounting certifications, sector experience or previous CFO experience. 

What does this mean for those looking to get promoted into a CFO role, either through external appointment or via internal promotion?

The same CFO market analysis across the eight key indices in Europe (n = 330) indicates that companies in certain markets are more inclined to appoint externally than those in other markets like Spain and France (Figure 1.) Looking closer, larger FTSE 100 groups are more likely to appoint internally, partly because they have the scale and scope to provide broader experiences, but also because these boards are actively assessing and investing in CFO succession plans, including adding external talent to strengthen the pipeline.

Figure 1. External versus internal CFO appointments

^{Source: RRA analysis of following indices: UK (FTSE 100), Germany (DAX), Italy (FTSE MIB), France (CAC 40), Spain (IBEX 35), Scandinavia (OMX Helsinki and OMX Stockholm), Switzerland (SMI), and Belgium (BEL 20); N= 330, April 2022}

Finally, for listed groups (n = 330), experienced CFOs continue to remain the most popular external hires (Figure 2.) For first-time CFO promotions, divisional/operational CFO experience (ideally coupled with prior experience in corporate centre), is slightly preferred to group centric controllership experience, when looking at both internal and external candidates. This is likely due to focus on P&L responsibility and commercial impact. Business leadership roles are often perceived to require broader leadership skills than their controller counterparts, whose interactions with the business can slant more towards custodian/governance duties.

Figure 2. Role prior to promotion into group CFO role, internal versus external

^{Source: RRA analysis of following indices: UK (FTSE 100), Germany (DAX), Italy (FTSE MIB), France (CAC 40), Spain (IBEX 35), Scandinavia (OMX Helsinki and OMX Stockholm), Switzerland (SMI), and Belgium (BEL 20); n= 330, April 2022 NB. In this chart, the internal CFO role was effectively a number two to the Group CFO and was titled Deputy CFO or CFO. The CEOs were in general management roles titled President, CEO or Managing Director.}

Ideally, CFO successors would have developed capabilities and leadership experiences across a variety of roles in and outside finance, including:

• A role at corporate centre
• P&L business partnering role
• Delivered on a transformation/significant project requiring cross functional collaboration
• M&A transaction
• Capital markets experience
• Any role that deepens knowledge of the business/sector

Boards are evaluating the whole person—not just the seat they are in—when looking for their next CFO.

Advice to next-generation CFO talent looking to move into the ever-evolving top role

1. The time to be agile and broaden your skillset is now. The CFO role continues to expand and is universally acknowledged as a key leadership role.
2. Build a diverse portfolio of business experiences/capabilities and track record of impact.
3. Understand the value of networking and building relationships. Stakeholder management and managing expectations internally and externally is key to your success.
4. Develop others while also working on your own development plan. Partner with mentors as you work towards your personal career goals.
5. Allow lessons you have learned to shape your leadership style. Do not rely on having a perfect resume; boards are looking for someone with strong personal character and cultural company alignment.

Authors

• Romain Clio co-leads the EMEA Financial Officers Practice at Russell Reynolds Associates. He is based in Brussels.
• Catherine Schroeder is a member of the Financial Officers Practice knowledge team at Russell Reynolds Associates. She is based in Toronto.
• Suzzane Wood is a member of the EMEA Financial Officers Practice at Russell Reynolds Associates. She is based in London.