FP&A roles paving the route to CFO

Finance chiefs often possess analytical and strategic skills, research shows.
FP&A roles paving the route to CFO

Elliott Routly has worked on his relatives’ farm in the Canadian province of Manitoba. He helped design hydroelectric projects and a light-rail transit station as an engineer with the city of Calgary. Today, Routly, 37, is in his third year as CFO of a construction company in Vancouver.

His prior roles outside the finance function don’t make him unusual at all amongst CFOs.

According to Deloitte’s second-quarter 2018 CFO Signals report, the career journey to CFO doesn’t necessarily start with back-office finance and accounting. Overall, CFOs in North America were most likely to have previous experience in financial planning and analysis (FP&A) roles, as 47% of the 172 survey respondents held such positions.

Three in five CFOs in the 41–50 age group reported having FP&A backgrounds, while a considerable portion of CFOs aged 45 and under (45%) have prior investor relations experience.

Aside from FP&A, the other most frequently cited previous jobs for CFOs were business unit CFO, controller, and corporate finance roles. Among CFOs 40 and under, the most popular former positions were in investor relations roles followed by strategic roles.

CFOs recommend that their successors have backgrounds that enable them to play strong roles in strategy formulation and specifically prioritise corporate strategy, according to the Deloitte report.

Routly said he spends more than half his time on corporate strategy. He makes the firm’s final investment decisions in conjunction with one of its managing partners. On any construction-related investment, the managing partner makes the final decision. For anything else, Routly makes the call.

“Even some stuff with the building comes to me, in the sense of: What order do we want to do it in? And, how does it affect our cash flow and our debt covenants and our bonding?” Routly said.

He predicts that CFOs will be more involved in setting corporate strategy in the future.

“If I was running a business, I would want as many people that were competent in strategy as possible,” Routly said.

However, the prospective CFO’s accounting skills would still need to be “quite good”.

“But if one guy is an A student in accounting and one’s an A-plus, but the A student in accounting sees the bigger picture [better], I’ll take that any day,” Routly said. “I think that’s probably the way it’s going. I see way more people now on the finance side or the accounting side that have to make corporate decisions and be active in fundraising. And to have a CFO that can fundraise and has the versatile nature to do that is another big piece of the puzzle.”

Pete Shimer, CPA, the CFO of Deloitte US, said strategy development is “becoming an increasing part” of his job.

“It’s probably, at this point, less than 20% of my total job,” said Shimer. “But that’s probably an increase from where it used to be, and our CEO has asked me to be personally involved in a number of our strategic ventures — in helping not only to set the strategy, but also to execute against that strategy.”

However, Blair Vago, CPA, a Los Angeles-based finance executive who has more than two decades of experience and previously served as the acting CFO with Ivanhoe Energy, does not believe that CFOs are any more involved with strategy than they used to be.

“I believe the CFO’s role in strategy has not increased nor decreased,” said Vago, who is now financial reporting manager for Berry Petroleum Corporation. “[CFOs] are still primarily responsible for financing the strategy of the business.”

In his current role, Vago is less involved with strategy than he was earlier in his career. He became a CPA after obtaining a Master of Professional Studies from Cornell University in New York and a Bachelor of Arts from State University of New York at Binghamton.

He does not anticipate that CFOs will get even more involved with strategy in the future but said additional emphasis may be placed on information technology, understanding cryptocurrency, and experience in markets such as China.

Despite facing changes to their focus and, possibly, an increasing emphasis on strategy, finance chiefs may need to remain well versed in drafting and evaluating financial statements. Routly and Shimer still spend considerable time with spreadsheets.

Shimer, who has been with Deloitte for about 35 years, said he spends less time with financial documents now than when he was in more junior positions. However, he still spends about an hour “every day, 100% of the days” looking at spreadsheets. Success in any executive position, he added, depends on being able to understand details and summarise them effectively.

“Right now, I have lots of information coming into me, [which is] very technical … and I need to be able to communicate that to a variety of audiences,” Shimer said.

— Monte Stewart is a freelance writer based in Canada. To comment on this article or to suggest an idea for another article, contact Neil Amato, an FM magazine senior editor, at Neil.Amato@aicpa-cima.com.