In Sunday’s Renatus email, Mark Flood asked a question that has come up in more than a few of our boardroom conversations this year. If you are building an org chart with CEO succession in mind, what should you hire for when you appoint a Chief Financial Officer, so that a CEO successor can emerge from that seat? It plays straight into what we see at Barden every week, so I want to add what 25 years of working with Irish boards, CEOs, and CFOs has taught me.
Where I first saw the pattern
One of the first things I learned in recruitment 25 years ago came from working with Kerry Group. Many of its leaders, not just the CEO, came from an accounting background. Kerry Group was, and still is, a tremendous training ground for accountants and tax professionals who want a career beyond accounting. Edmond Scanlon, one of the six CEOs Mark names, is the current evidence of it.
Kerry Group may have set the mould, but CRH, Glanbia, and the other businesses in Mark’s article followed it. Look at their leadership teams outside of finance, at the managing directors of regions and the general managers of business units, and you would be hard-pressed to find one without a material share of those roles held by accountants. It is a clear pattern across Irish plc and plc-equivalent businesses.
Why accountants?
There are countless variables behind it, but I would go back 20 or 30 years. The accounting profession was highly respected and attracted some of the best minds in the country. Training contracts taught discipline and hard work and gave trainees a view inside big businesses that very few other professions offered.
Accountants also sat close to the commercials. Whether it was budgeting, forecasting, analysis, and planning, setting prices or negotiating with customers, there was always an accountant at the table or in the background. A solicitor, by comparison, has different touch points in a business. So it does not surprise me to see accountants in these seats today, because they were among the only people exposed to that kind of activity.
A job title means nothing without the context
We have a saying in Barden that a job title means nothing without the context, and it applies to the CFO more than most. Whether a CFO is the natural successor to the CEO often comes down to how the CEO and board see the role of finance, and to the financial position of the business when they make the appointment.
Take an organisation in severe financial difficulty, carrying significant debt. At that moment, the board wants a CFO who is prudent and risk-averse, and that is the right call. Five years later, the business is in a much stronger position because of that CFO’s stewardship, and the CEO role becomes available. Unless the board now wants a prudent, risk-averse CEO, they do not have a successor in that seat, because the person was hired for what the business needed then.
The same happens with an ambitious programme of acquisitions. A board brings in a CFO with significant M&A experience, who spends their time on the deal side rather than leading the team or the commercial organisation the deals are building. When succession comes around, the board has a CFO with the skill set the business needed in the past, not the one it will need in the future.
In our Chief Financial Officer Talent Monitor, we define the CFO as someone who stewards and leads the finance function and also owns the organisation’s funding relationships, whether with investors or banks. Owning the funding relationship is the important piece. Some CFOs sit on the board and some do not. So when assessing a CFO role, you need to understand what it means in that organisation, the situation the business is in, what it will require tomorrow, and how closely it aligns with the CEO role.
Made, not found
Mark’s conclusion is that the unicorn, the accountant with commercial leadership qualities, is usually made rather than found. I agree. His point about giving a CFO a P&L to run, as CRH did with Jim Mintern, is the clearest route I know of. There is a caveat, though. You can teach someone a great deal, but you cannot teach attitude or natural leadership ability.
Any organisation appointing a CFO, or any member of its leadership team, without testing for those qualities is missing a trick, and risks misaligning that person with what the business needs in the future. For a CEO and board with a solid long-term strategy, they need to identify who will lead that strategy when none of the current team is there. That is why succession has become such a big talking point around the boardroom.
The accounting profession has also evolved
Chartered Accountants Ireland’s view of what an accountant means in a business has changed dramatically over the last 15 to 20 years. That has culminated in its positioning around Trusted Business Leadership and its “Where Business Leaders Begin” campaign. The profession now sets out to create business people.
We see that every year. We meet hundreds of newly qualified accountants, and a significant proportion are trained to get a job in business. Quite a few do not want to work as accountants at all. In my experience, the commercially minded finance professional Mark calls a unicorn is becoming a lot less rare.
Why this conversation is happening now
From a business perspective, Ireland really began to find its feet in the 1990s, largely through the multinationals that set up here. It took time for their people to spin out and for the clustering effect to produce Irish-owned businesses of real scale, so only in the last 20 to 25 years has a pedigree of Irish business emerged with leadership roles of this kind.
Add 25 or 30 years to the career of someone who started in their early to mid-20s, and those leaders are now in their mid to late 50s. Succession has always been a consideration for boards. In reality, 25 years on, there are more boards and more serious Irish companies, and as a consequence there are more serious conversations about succession happening. This demographic is quite possibly a key variable in the rise of those conversations, so expect more of them, not less.
Where to start
If none of this rings true for your business, it is worth asking why you view the finance function the way you do. Consider how you could get finance more involved in the business, and who you need driving that, whether in the CFO seat or elsewhere.
A good place to start is where your business is going over the next two, five, and ten years, and whether your CFO role is set up for that future or for the past. The answer should inform how you build your C-suite and structure your leadership team for the years ahead.
