Chief Financial Officers operate in a fast-evolving and demanding environment. Furthermore, their scope of responsibilities is constantly changing and expanding. To meet their corporate demands and to start playing a more strategic role, CFOs are even more dependent on the quality of their people. This topic was mentioned by several speakers at the recent EBCG CFO Executive Summit in Prague, 29-30 April 2015.
To move forward, the CFO needs the right team as an inadequate staff would waste CFOs’ most valuable resource – time. However, it is not the only asset at stake. “It can also cost CFO’s credibility as a leader among peers and even staff if the CFO is viewed as carrying and not attending to non-performers in a timely way”, adds Ajit Kambil, research director for the Deloitte CFO program and the creator of Deloitte’s Executive Transition Labs in his latest publication “Getting the right people in the right seats“.
No war for talent in CE region?
The good news for CFOs from the Central Europe is that according to the majority of CFOs in the region who participated in the recent edition of Deloitte CE CFO Survey 2015 there are no expected talent shortages in financial roles in 14 Central European countries. Of course, those predictions vary between the countries. Looking at the entire Central Europe, Lithuania had the highest proportion of CFOs expecting talent shortages, while expectation levels in Serbia, Slovakia and Latvia came close. Since last edition of the survey, Serbia replaced Latvia in a group of the most prospective markets for middle and senior-level finance executives in region. On the other hand, Polish CFOs observe that it is now easier to recruit skilled employees, we observe an improvement (41% of last years’ responses said that it is difficult to recruit skilled talent to only 26% at present). This shortage is most acute among mid-level (39%) and high-level (19%) positions in Poland.
Which skills are most in demand in Central European finance functions?
“When considering the types of skills which are most in demand in Central European finance functions, they may vary depending on the company’s characteristics, however it is important to pay attention to both the “hard” or technical skills necessary to perform effectively in the modern finance function and also the “soft” skills which make the difference when dealing with the widening role of the CFO and his/her team in their overall organization”, comments Gavin Flook, leader of Deloitte CE CFO Program.
In terms of the technical skills, IFRS is becoming the common accounting language in Central Europe and is a complex body of standards which not only changes regularly, but is founded on principles, the application of which requires analysis of the business substance of transactions and judgement where alternatives exist or estimates are made, for example revenue recognition, impairment or contingent liabilities. Another subject which finance professionals increasingly need to understand is technology and the processes by which the financial transactions pass through the business and ultimately into the financial statements. Given the huge volume of transactions and complexity of IT systems, effective internal controls at the level of individual applications and in the overall IT environment are essential to generate reliable reports and finance must understand these well enough to gain confidence in the quality of the outputs.
“In addition to the judgement needed to translate the business into financial reports, finance team members need a high level of communication skills in order to interact with various other parts of the organization, including individuals in other departments of the business whose decisions and actions they need to understand and from whom they need vital information and explanations, IT, HR, Internal Audit and so on. In corporate groups, effective communication between parent and subsidiary is often tricky and those relationships need care and attention, and maybe cross-cultural understanding”, adds Gavin Flook.
How and where to start?
When executives are asked about the single biggest regret after their first year of transition to the new role as a CFO, what can be heard most often is that they should have acted sooner on the talent performance issues in their organizations. “Realistically, it usually takes between six months and a year in most companies to assess the team and upgrade key staff; according to our labs, the talent agenda can consume up to a day of an incoming executive’s time for this period. For example, given the average tenure of CFOs or CIOs—around five years—the opportunity cost of low-performing staff can be significant drag on the progress toward your agenda during the first year”, comments Ajit Kambil, research director for the Deloitte CFO program.
What does it take to accomplish the task? Gauging the capabilities of direct reports and other critical staff is a good starting point. Deloitte experts have listed 7 key questions which can provide CFOs with a quick snapshot of their teams’ condition:
- Are your direct reports and their teams technically competent and capable of exercising judgment and implement?
- Who gives the team energy and who takes that energy away?
- Who would you take with you if you were about to leave tomorrow?
- Who is a good brand ambassador to other organizations for you?
- Who are the team players and who are not?
- Who is a flight or retirement risk?
- Who can manage and those who cannot?
What actions to take and how to do it effectively?
There are some challenges to be taken into account. In a financial department money always comes first, so once the books are in order, the CFO should take a careful look at the people he works with. Analyzing the dynamics within the organizations financial team may be a development opportunity for newly appointed leaders. To succeed, we suggest the following factors to take into account: what support do you need from the stakeholders, how much time can you spend on working on the HR, what should be the role of HR department, what is at risk?
As quick changes can backfire, thus we highly recommend consideration of various risks and their possible consequences. We observe CFOs taking the lead in HR matters can increase productivity and focus on value of their employees, not to mention that this is often an enjoyable activity which will extend the CFO’s skills and experience.
You can find more case studies and research pieces related to the CFO’s challenges in the most recent Deloitte CE CFO newsletter at www2.deloitte.com/cecfonewsletter
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