Today's CFO: coping with change.

Someone who retired 10 or 20 years ago from a CFO post might be flabbergasted to see the changes the years have wrought. In most companies today, the CFO is a true multitasker; no longer is he or she just the chief accounting or numbers maven--or, as David Doll, a partner with Tatum CFO Partners, puts it, "the highest-class bean-counter"--but a risk manager, strategist and a strong right hand to the CEO.

The articles that follow look at different aspects of this evolution. The first piece examines the proliferation of experienced people taking a nontraditional path that includes "interim CFO." Working in mostly small companies, sometimes for more than one at a time, they have abandoned the presumed stability of a single corporate job for transitory assignments. Their reward: a key seat at the management table, and the ability to help shape corporate strategy for organizations that may sorely need expert help.

The second piece examines the changing CFO role from the perspective of executive recruiters, several of whom talk about evolving skills sets, the ability (or lack thereof) to easily change industries--and the growing emphasis on finding specialists for the CFO seat.

The third article examines what may be a dream for many CFOs, though certainly not all: elevation to COO or even CEO. Gary Kelly of Southwest Airlines is one CFO who recently made it to the top spot, but it's relatively rare for a direct promotion without service in some kind of operating role. For those dreamers, though, rest assured, it can happen.--Jeffrey Marshall

Bring on the CFO Specialist

More companies have become laser-like in selecting CFOs to fill specific needs. Also, as CFO tenure dips, more and more highly-qualified individuals are choosing the interim path--working in small and mid-sized companies--as a way to take charge of their own careers.

Mark G. Harrison didn't originally set his career sights on a top finance seat. But with extensive healthcare finance experience, 15 months ago he was named executive vice president of Finance and Treasury and CFO of Minneapolis-based Allina Hospitals & Clinics--with about 1,000 of the $2 billion nonprofit's 23,000 employees reporting to him. With his entire 20-year career in the healthcare field, he views his position as a professional change, not an industry change.

Harrison came to healthcare with a science background and pre-med training, aiming to become a physician. Somewhere along the way in his experiences in the healthcare system--in schools, clinics and hospitals, both in the U.S. and during a college semester in Nairobi, Kenya--his interests changed: from influencing the system from one patient at a time, to influencing the entire system.

What's new about his first CFO position, he says, is that he is applying his skills in a different way. Indeed, he's now he's applying his MBA (Master of Business Administration) and MPH (Master of Public Health) and extensive background in healthcare and nonprofit financing--both on Wall Street and in a West Coast boutique firm he helped to co-found--to influence the healthcare system from the inside.

Previously, Harrison's clients were both the healthcare-organization CEOs and CFOs. "The approach of my company was to create long-term relationships with large healthcare organizations that had a lot of activity in financing, mergers and acquisitions and divestures," he explained. And, in many cases, he'd served as a kind of "ex-officio member of the management team" for many clients. When the spot opened up at Allina, Harrison already knew the CEO, based on the relationship he had with the firm.

The road to the top finance spot is often not a clear path, and many factors in today's environment have contributed to changing dramatically the role, the nature of the job and its responsibilities, as well as its tenure and the experience necessary for getting the job done. All this is impacting the people in that role, the choices they make and career steps they take.

Since the 1980s, rightsizing, reengineering and the compression of business cycles--down from 15 years to 5 years--employee turnover, even at the most senior levels, is an accepted fixture in today's workplace. In addition, says Tatum CFO Partners cofounder Mike McCracken, the shift to offshoring has impacted the need for CFO talent. In his view, this has driven more individuals to take charge of their own careers with the concept, "If I'm going to deal in this kind of environment, I am going to have to become competitive."

Traditionally, CFOs came from the senior management level at public accounting firms. "They already earned their stripes, having worked three to five years in public accounting, and decided they wanted to be in industry," says McCracken, who serves as vice chairman and managing partner of Tatum's Financial Leadership Services, noting that that is his story, too. And, while today's workplace is attracting CFOs with non-traditional experience, McCracken says the numbers are proportionately small, noting that maybe five resumes out of 100 he views have gone that route.

The traditional path to the CFO chair is from three areas: public accounting (get in through the controllership position and move up); start in industry (get in through the controllership side and move up to CFO); and treasury operations (typically, treasury is not fed by public accounting).

Long gone are the days of starting in finance with one company and counting on working your way up to ultimately become CFO. With companies--particularly private, small and mid-sized--changing so rapidly, the talent can't adapt to changing needs quickly enough, forcing more competition for that top spot. In addition, companies are now looking for specific skill sets to bridge a point in the company's life cycle--whether for raising public capital or getting private equity, spinning off a division, managing an acquisition, creating an exit strategy, complying with Sarbanes-Oxley regulations, etc.

Enter the era of the specialist.

Stephen Kasprisin was initially hired for a six-month assignment by $20 million Irvine, Calif.-based Naturade Inc. to fill the spot of its CFO, who had departed.

At the time, Naturade was in a turnaround situation, and needed an experienced CFO who could step in and get the job done. It didn't want to hire full-time until assessing a candidate's fit with its environment, working with a dynamic leader and a small and close-knit staff. Kasprisin was eventually asked to remain full-time as COO and CFO, making this the fourth CFO position in his 28-year career.

His career path began, he says, going through the "normal learning curve," working for about five years in various companies and industries, for then-Big Eight firm Coopers and Lybrand, in Cleveland, and earning his CPA. His career became "more entrepreneurial," he explains, when he left public accounting to work with small companies or start-ups, and he built a base in change management, turnarounds, restructurings and companies experiencing high growth.

Kasprisin has been CFO for companies in the fields of hardware/lawn and garden, grocery-distribution, medical devices and now for Naturade, a distributor of nutritional supplements, selling primarily to health food stores, such as Whole Foods, and club stores, such as WalMart and Costco.

Was it difficult to change industries? Kasprisin says what he found difficult when seeking a position was not his skill set, but rather "the inherent bias of the hiring managers, who want to hire somebody with industry experience," which he dubs "the wrong approach."

What's important in most industries, he argues--except those in regulated industries such as banks or hospitals--is knowing the sound fundamentals of running a business. "I go into a company with no preconceived notion, and I know how to do the basic blocking and tackling of the CFO. I spend a lot of time asking questions and learning about the industry, so that I can then apply the idiosyncrasies of the industry to the basics of running a business. I'm a pretty quick study [on] the key performance indicators and requirements of an industry."

Choosing Interim Positions

So, while for Kasprisin, interim was a bridge to a permanent spot, to many, "interim" is the job--often a career choice due to a job loss, but also as a desire to do something different or as a capstone to a successful career. For those with Tatum Partners, "interim CFO" is a choice. Tatum Partners CFO, a division of Tatum Partners (the other division is Tatum CIO) began in 1993 with seven partners; it now numbers 400 partners in 30 markets and projects to nearly double its current revenue by 2007.

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"The stigma of a CFO in transition is a lot different than it was 10-15 years ago," says McCracken. So, while many of Tatum's newest partners join when they are in transition due to a job loss, many others see "interim" as an opportunity, and transition themselves into joining the firm.

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One reality driving the interim trend is shortened CFO tenure. McCracken quotes firm research that average tenure is 30 to 36 months, while interim assignments typically last from two months to two years. When you consider in today's market-place that it takes from three months to nine months to land a top-level position (and up to a year for the large-company CFOs), David Doll, a Chicago-based partner, says he doesn't see much difference between Tatum's approach and a permanent CFO position.

The mindset of Tatum partners is "interim is permanent," notes Doll. "Don't view this as a stop-gap because you're between permanent gigs. You have to really believe you are well-suited to be successful for this, and you have to believe there is a market for interim CFOs," which he believes to be true.

Doll's career was on a track that would likely take him to a large-company CFO spot, but he changed his destination enroute. Launching his career, he turned down Arthur Andersen, opting for a smaller CPA firm to do more auditing, tax and consulting. A CPA by that time, he entered the large-company arena, in positions for United States Gypsum Co., Abbott Laboratories Inc. and United Technologies Corp., where he rose to Manager of Internal Audit. After about 18 years, he decided instead of waiting for the CFO spot in a large company, he'd switch and become "a bigger fish in a smaller pond." He accepted the CFO position in a $50-million privately held company, and says he's "never regretted it."

His career progression since then has included: being CFO simultaneously of two companies, then for a magazine publishing company. Doll says many smaller companies really don't need a full-time CFO, nor can they afford one, but at certain times they do require the expertise a high-caliber CFO can bring.

As for obstacles when switching industries, Doll concedes that there's a learning curve, but one way to move through that is to "listen very carefully to people already in place." In addition, he notes, there are certain things in the CFO job that don't change from industry to industry; many are not finance-related, but rather executive-related. Naturally, he says, "You can't get away from knowing where the cash flow is coming from, but there are common denominators among both the executive skill sets and the technical that are probably more important even than industry knowledge."

As for the interim role, Doll likes the fact that he brings a "fresh set of eyes" to each placement. "There is something different behaviorally and physiologically when you're not an employee who, perhaps, is counted upon to go along with the company agenda." As an outsider, he believes, he can tell a CEO and board of directors--with consistent, diplomatic and political objectivity--why he believes something will or will not work.

Dallas-based CandE Wright has spent her entire 20-year career as an interim financial executive--with the past 15 in the CFO spot. She says she's always been a good "networker," but joined the Tatum network six-and-a-half years ago to get help in marketing herself, since timing was a constant issue.

When you're working on an assignment, she explains, it generally has a time limit, but all too often goes longer than anticipated. "They get attached to you," she says, noting that sometime that's needed, and sometimes it's just a comfort-level issue. In order to land your next assignment, one needs to know when to gear up his or her self-marketing. Joining Tatum solved that problem for Wright, since she believed that the CFO-quality level of her colleagues was excellent, and she was comfortable handing over a waiting assignment to a colleague.

Since 1998, Wright has served as a CFO for eight clients in assignments that were supposed to last 60-90 days each, but averaged 15 months. "They all start out with a specific short-term need, but my clients have all converted into longer-term relationships."

Once you get in there, she explains, "you add so much on the strategic level that they don't want to let you go." She works primarily for private companies with revenues ranging between $8 million and $260 million; the majority of clients are in the $20 million to $40 million range.

Wright's is a non-traditional background. She holds a Bachelor of Science in Economics, and her path to the CFO level has come through on-the-job training. She's had courses in accounting--her first job was in accounting--then treasury and then operations. Most of her assignments involve both the finance and operations side.

Wright is hired by companies to perform a specific task: fix a broken finance and accounting department or business plan; lead a turnaround; position for an exit strategy; and recapitalize, a need that emerged as several clients were growing faster than their infrastructure could support. She has experience in a variety of industries--telecommunications, direct selling, food manufacturing, third-party administrators, retail and restaurant, office distribution and manufacturing.

Making the transition to different industries isn't so difficult, says Wright. "About 80 percent of the skill set and expertise at the CFO level can transfer across industries. About 20 percent is industry-specific--there are nuances to each industry--with the exception of healthcare and maybe oil and gas," she contends.

For Allina's Harrison, moving from one role to another is a matter of taking a skill set and experience base from one professional area and applying it to another. "There's clearly been a learning curve, and it takes different periods of time for different parts of it--it depends on some of your natural inclinations and skills. I spend a lot more time on the people part, and I really enjoy that."

It's obvious that long gone are the days of the bean-counter, non-people-person CFO. "It's an 'old world' view that CFOs are somehow sitting in the back room," asserts Harrison. "These days, financial performance and the connection between financial performance and operations and strategy is not something that you can put in silos. Organizations that do that will be unsuccessful."

By Ellen M. Heffes

The Search for the Evolving CFO

Executive recruiter Gordon Grand 3rd recalls that years ago, when his firm, Russell Reynolds Associates, placed Fred D. Anderson as the new CFO of Apple Computer, the then-struggling company was down to a paltry two weeks' worth of cash. Anderson, now retired, preserved that cash and worked with CEO Steve Jobs, the fabled tech visionary, to right the company and put it on its current course.

In Anderson's eight years as finance chief, the company flew through some heavy turbulence, during which time Anderson was a force in the cockpit. There was a liquidity crisis averted through a bond offering and asset management improvements, a massive restructuring and a series of strategic moves to position Apple for growth.

Could a new CFO, even one as skilled as Anderson, make it through eight tumultuous years at a major company these days? That's a tough question at a time when CFO "churn" remains significant, when impatience is a byword in corporate suites and when companies increasingly are turning to specialists for situational expertise. Then, too, there's a little distraction known as The Sarbanes-Oxley Act.

These are difficult times for finance chiefs, squeezed by a less-than-robust economy, restive shareholders and directors and incessant cost pressures in the face of growth challenges. "Interim CFOs" are a hot commodity (see related article on page 38). Sarbanes-Oxley compliance is taking huge gobs of time, and so, often, is interaction with the audit committee, whose role as a financial watchdog has been elevated from a bit player to a star.

Most recruiters interviewed for this article contend that increasingly, CEOs and boards come to a point where if they sense they need someone who has vital industry or event experience, they will look outside for a new CFO who has that. As a result, there's a growing feeling that it's harder for CFOs to develop a career path.

"In the past few years, a company might have been hunkered down, taking expenses out," says Charles B. "Chuck" Eldridge, senior client partner and managing director, Financial Officers Practice, at Korn/Ferry International. "Where they've been reshaping finance, they now say, 'We need to grow the business. We need someone experienced with doing due diligence and integrating businesses.'" And so the call might go out to a recruiter to start scrolling through his or her database to develop some names.

Grand, who co-leads the Corporate Officers Practice at Russell Reynolds and leads its Financial Officers Practice, sees a more proactive process at work. Companies will look to change finance chiefs if the incumbent's skill sets and potential are deemed lacking--"if the CEO looks at the business 12 months or 18 months out and decides his or her CFO isn't the person who will get them there." Grand says his firm sometimes gets tapped for "pre-searches" where a CEO will says, "Take 30 days, and see the kind of people who might be interested," without engaging in an official search.

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Turnover in the CFO post has actually dropped statistically since 2000 at the largest companies, according to Crist Associates of Hinsdale, Ill., which tracks CFO changes at the Fortune 500 and S & P 500 companies. "There has been a decreasing trend in CFO changes within the last five years," the firm noted in its latest annual Crist Volatility Report. "This may be due to the CFO becoming a more strategic part of the CEO office, thus increasing the stability of the role." At the same time, the firm's research shows that companies are far more likely to look outside for a CFO than a CEO.

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Anecdotally, however, turnover remains high at small and private companies. Laurence J. Stybel, founder of Stybel Peabody Lincolnshire in Boston, whose recruiting practice involves mostly smaller to mid-cap companies, some of them privately held, sees CFOs increasingly as hired guns, brought in by the CEO to work on or solve various issues confronting the company. With that, it's hard to develop a career track these days, he says.

"The era of the Renaissance CFO is over," Stybel says firmly. At a private company, "the exit strategy determines the longevity of the person in the CFO job." If a company has elected to go public and its investment bankers feel they need a finance chief who has done an initial public offering, the current CFO's days may be numbered, he says, and the company will do a search to bring on someone with the appropriate experience.

A result of this focus on specialization--and industry specialization is also important, Stybel believes--is that "there is really no bench strength" being developed for top finance roles.

Of course, a change of CEOs is also cause for uncertainty. "Often, a new CEO will make quick changes--[he or she] will come in and automatically make changes in their direct reports," says Eldridge. "A CEO and a board may say, 'We now are going in one direction, and we believe we need to find a CFO who is aligned with that.' That's no offense to the former CFO." He adds, however, that "we have seen reports of CFOs who can survive a few CEO changes" in one organization.

"When the CEO comes in, he/she is going to change out the CFO and several of the vice president positions," echoes Tomilee Gill, president of Executives Unlimited Inc., a firm specializing in direct hire, try-out-to-hire as well as interim senior-level executives. "A lot of it just has to do with the different level of patience--wanting to see results faster, and the churn takes place with that."

Grand downplays the volume of CFO turnover, saying the scandals of recent years have conveyed an impression of widespread fraud and dishonesty and frequent firings that doesn't really stand up to scrutiny. However, there is "a lot more activity in the marketplace among companies," Grand says. "There are a number of CFOs in public companies who have decided they wanted to be in the private sector instead."

Grand adds, "What we find is that CEOs are looking for people who have been through experiences where the CEO finds the company now. If I'm going through a restructuring, I want someone [as CFO] who's not going to have to go to school" to carry it out.

Much has been said in recent years about finding top finance officers with a good accounting background and uncompromised integrity--and those are still very much in demand. "Today, there is tremendous value being placed on the CPA and the controller-ship experience," says Eldridge. "A shining sticker has been placed on the on the CPA, and there's been a pendulum swing to the importance of [that credential]. Companies that are in trouble want to demonstrate to internal and external audiences that they're bringing in credentialed people."

Says Gill: "An accountant that can really look at numbers and understand them and evaluate them and bring strategy to those numbers, is one that can create greater accountability within the organization."

"I think a better way to put it is to recognize the needs of companies in the broader economy," says Grand. "In every market cycle, there is a preference for someone in operations and finance, rather than in treasury. Those are people that have a CPA, have experience in running a business; they have broader management and leadership experience than people in treasury. Treasury guys tend to be financial technicians, and a lot of them are deal people."

The recruiters interviewed were somewhat divided on the ability of CFOs to change industries. To Eldridge, a record of successful change is a plus. "Those moves are really valued by companies," he says. "They like the fact that [a person] can learn another business quickly and has developed new relationships within that industry. The person in real difficulty is the person who has been in one company for many years."

"If you're going from a manufacturing and distribution company and they are manufacturing widgets, it's probably a difficult transition to go into the pharmaceutical industry, which is highly regulated," says Gill. "However, if they're in a company that is in the distribution business, and they understand products that are similar to that in the pharmaceutical industry--yes, you can do it."

Grand agrees that moving among certain industries can be difficult. He divides the corporate world into three "buckets"--financial services, healthcare and everything else. Switching "buckets" can be more than challenging, he suggests, particularly given the heavy regulatory burdens in financial services and healthcare.

Then there's the headache known as Sarbanes-Oxley compliance, which has reached near-migraine levels at many public companies; even private companies are feeling the heat to treat it as a best practices standard. How does it factor into a CFO search?

"It's a given that the CFO candidate is going to have not just supervised people dealing with [Sarbanes-Oxley], but to understand it as well," says Grand, adding that "it's an expense in terms of resources and opportunity costs. It's been an enormous frustration because it involves so much [of the CFO's] time. The audit committee meeting is no longer a half-hour conference call, it's a five- or six-hour hour meeting."

Eldridge says the Act has spurred some companies to look for supporting roles to better handle compliance. "There's more of a premium on technical skills than ever before. If we were talking last year, internal audit was hot. Another of the emerging hot areas is putting people in chief administrative officer (CAO) roles, where you're putting an emphasis on building internal capabilities. If the CFO doesn't have the full suite of technical skills, companies are hiring a CAO to be the tech guru."

Any list of attributes for a would-be finance chief should start with personal integrity. Asked how recruiters can assess that, Eldridge says, "It starts with a grounding--where they went to school, the companies they went to, the brand companies they stayed with. Those are very important. Confirming those accomplishments is two to three times as important as it was--and a lot more goes into validating that. You're even having boards involved in that process," not just the recruiters.

Grand adds that the dance between candidate and company has grown far more complicated. "The due diligence process has increased ten-fold. [Companies are] digging really deeply into [the candidate's] background. CFO candidates themselves are asking a lot more questions as well." No one on either side wants to be stuck with a partner that a bit more research could have averted.

By Jeffrey Marshall

Moving from CFO Toward CEO

This past July, when Jim Parker, the unassuming lawyer who had taken over as CEO of Southwest Airlines from founding dynamo Herb Kelleher, stepped down, the company's board didn't look far for a successor: CFO Gary Kelly. Kelly was a known commodity, having been with Southwest for 18 years, the last 15 as CFO.

Kelly's elevation path, to vice chairman and CEO directly from CFO, is still rare. It's far more common, recruiters and management specialists say, for someone in finance to go through an operating role or two first, perhaps as chief operating officer. But clearly, as the strategic and risk management components of the CFO role have multiplied in recent years, many top finance officers are seen as chief executive timber.

Recruiters point to the fact that the CFO may simply be the single executive most knowledgeable about the company and its businesses. "All CFOs are being asked to be more then financial technicians. If you're at an analyst presentation, the analysts want to see that the CFO knows as much or more about the business than the CEO. If there's a problem in Thailand, they want to see the CFO explain the numbers there," says Gordon Grand 3rd, who runs the Financial Officer Practice at Russell Reynolds Associates in New York.

Adds Charles Eldridge, a managing director at Korn/Ferry International, "When you look at who's got the best hand on the business, it may be the CFO." (See table for a recent list of CFOs who have been promoted or took higher jobs at another company.)

Still, the likelihood of a CFO moving further up the corporate ladder depends greatly on the industry he or she is in. Grand argues that this is far more common "in capital-intensive industries, where managing the financial infrastructure is key," like oil and autos, airlines, utilities and telecommunications. It would be hard to do at Nike Inc., which is a marketing-driven company, he says.

In the airline industry, in which the biggest U.S. carriers are either in bankruptcy, emerging from it or fighting to stave it off, costs are the industry's unrelenting bugbear. Given that, elevating someone like Kelly, a CFO with a deeply ingrained view of the important numbers, is perhaps not surprising.

In a brief interview posted on Southwest's Web site, Kelly says, "I have a conservative financial management style that is consistent with Herb's and our board's. We share the same philosophies and have meshed over a long period of time ... Having a CEO with financial skills and an understanding of what drives costs is a real asset in this difficult, competitive revenue environment."

Financial services and heavy manufacturing businesses, such as banking and the automobile industry, have also seen a series of CFOs find their way to the top job, like G. Richard Wagoner Jr., the CEO of General Motors Corp. But Wagoner, who was CFO for just two years, later spent about nine years combined as a division president and chief operating officer. He also had experience overseas, once considered a classic requisite for a would-be CEO.

Another factor that's helping CFOs make the leap to the top is the dwindling number of chief operating officers. Absence of a COO often makes the CFO the No. 2 executive in a company and a more logical choice. "As the number of COOs declines, CFOs gain importance and prominence," noted Crist Associates in the latest 2004 Crist Volatility Report.

For years, recruiters, management experts and others have painted a picture of CEO candidates as coming from marketing, sales or division management backgrounds, rather than finance. That's probably still statistically valid, but Korn/Ferry has studied the comparative traits of CFOs and CEOs and made some interesting observations, including what it calls "striking similarities."

Like what? Both positions scored almost equally in "thinking competencies" such as "action-focused" and "flexible," for instance, in a study done by Korn/Ferry in conjunction with the Marshall School of Business at the University of Southern California. CEOs scored somewhat higher on "complexity," which the study said was indicative of superior facility with strategic vision, but CFOs scored slightly higher on creativity, which the authors said indicated more open-mindedness and willingness to explore alternatives.

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Other findings were perhaps more predictable. The study found that CEOs were better at building strong performance teams and had better relationship skills, yet weren't quite as "directive and structured in their approach to managing others" as the finance chiefs. Emotional findings were revealing: CEOs had more empathy, greater ability to deal with ambiguity, higher energy levels and far more confidence than CFOs.

Summing up, Korn/Ferry concluded that the similarities were considerably greater than the differences, especially in thinking and leadership skills, with the emotional traits the source of the greatest disparities between the two positions. The firm said its judgments were derived from its database of 500,000 placed executives and "success profiles" of the top 20 percent of the individuals in the job categories. All the conclusions, it says, were validated through rigorous analysis of the data by the professors at USC.

CFO TO CEO (or president)

Matthew Hart, from CFO Hilton Hotels Corp., to president and COO.

James Myers, from CFO to CEO, Petco Animal Supplies Co., San Diego.

C. John Wilder, from CFO at Entergy Corp. to CEO at TXU Corp.

Robert A. Niblock. President and CEO-elect at Lowe's, was formerly CFO.

Mark Furlong. CFO of Marshall & Ilstey Corp., to CEO of Marshall & Ilsley Bank.

Neil G. Budnick, president of MBIA Insurance Corp., from CFO at MBIA Inc.

John Bryant, CFO at Kellogg Co., to president of Kellogg's international operations.

John W. Tate, CFO at Williams-Sonoma and Krispy Kreme Doughnuts Inc., to COO at Krispy Kreme and then to COO at Restoration Hardware.

Colleen Sayther Cunningham, CFO at Havas North America, to President and CEO, FEI 

Source: Financial Executive research

--Jeffrey Marshall