The 2014 Summit Leadership Conference held earlier this summer shed a bright light on the next phase in the life of a Chief Financial Officer (CFO). Mike Walsh, CEO of innovation research lab, Tomorrow, spoke of current financial leaders as a “strategic CFO” that play the traditional role of supporting the financial growth of a company but also creates the innovation that helps a company grow. Similarly, Xerox CEO, Ursula Burns, spoke of the CFO’s role morphing from a strict finance role to one that helps establish strategic goals and acts as a partnership with the CEO.
Clearly, a career as a financial executive, even one as specialized as CFO, can take many paths. Therefore, the educational choices are not necessarily as blatant as they used to be.
The traditional MBA, accounting and finance degrees, while still important, are slowly taking a backseat to the practical and strategic tools needed by today’s financial professionals. So-called “softer skills” of management and everyday interaction, along with a greater emphasis on goals and transparency need to be part of the (future) CFO’s arsenal.
Start With Something Else
“The idea that someone gets 120 hours of accounting education and then maybe gets a CPA, works for a public accounting firm, then crosses over and becomes a corporate controller to work their way up the ladder, is probably not the best route today,” says Robert Howell, Distinguished Visiting Professor of Business Administration at the Tuck School of Business at Dartmouth. “I think a broader education rather than a narrower one is a better way to start,” he stresses. Howell points to Leslie Seidman, former Financial Accounting Standards Board Chairman, as an example of someone who started her career by studying something non-financial. Seidman completed an English degree from Colgate University before she studied accounting or received her MBA.
Howell, himself, cites his education in electrical engineering, prior to his studies in accounting. “I didn’t need all that undergraduate accounting,” he says.
But some students, even at the undergraduate level, may already know they are aiming for careers in finance and accounting or are still searching, albeit in some financial discipline. When this is the case, notes Mary Ellen Morris, Director MS Programs and Lecturer in Accounting and Finance at Clark University, students should consider getting a “solid base” in all of the business disciplines as well as technical skills in finance and accounting.
“Either through an internship or first work experience, they can experiment whether or not the career path they have chosen is for them, they will have an opportunity to decide if it is, refocus and then decide on a Masters program where they can really specialize in the area that they’ve chosen.”
A prime example of the type of internship that allows students to grow into the field as they learn occurs at General Electric. GE’s Financial Management Program (FMP) provides a two-year cycle within four rotational assignments, which often include: auditing, treasury/cash management, forecasting, accounting, financial planning and other various financial disciplines. Howell notes that many of the people in this program are taken from a variety of liberal arts backgrounds.
Xavier Vallverdu, is operational controller with GE Canada (although he first went through the FMP in Europe). He says the difference between the education he got in the classroom and the one he received through the FMP is in the practical nature of the lessons. “It’s really taking the theory to the practice and seeing how your day-to-day activity actually drives results into the organization,” he says. He goes on to say that by challenging oneself and immersing in this kind of program, and getting in front of difficult tasks, “you are going to be able to demonstrate the ability to understand technical concepts, and make observations and recommendations to the business based on what you are seeing.”
The CFO’s Changing Role
According to the consulting firm McKinsey & Co., today’s CFOs can be labeled into one of four separate categories. They discuss:
- The Finance Expert, which typically refers to internal hires with years of experience rotating through multiple roles with the finance function.
- The Generalist in which highly capital-intensive industries place value on operational capabilities.
- The Performance Leader. These are CFOs with strong track records in transformation both within finance and throughout the organization.
- The Growth Champion is usually externally hired and is the least common CFO, according to McKinsey. They are most common in industries with frequent disruptions that require changes in resource allocation.
Even if industry attempts to put a description to the type of financial executive/CFO it needs, is education meeting those needs and are students prepared when they exit school? “I don’t know of any MBA program that is going to prepare that person for running a big company,” says Mark Walker, Associate Professor of Finance with the University of Mississippi. “Initially [MBA degrees] were designed for non-business majors so that people could develop management skills on top of technical skills they might have already had.”
He further states that students are better served to get some work or practical experience between undergraduate and graduate work in order to better understand how things work and how to make the connections in practice that will serve the companies they work for.
Even with the combination of school and practical training the role of CFO has been changing over time. One of those changes within the CFO role is directly correlated to the decline in numbers of COOs almost every year since 2001. According to an annual analysis of companies in the Fortune 500 and the S&P 500 by search firm Crist|Kolder Associates, COOs have declined to their lowest level and operate in 35.2 percent of companies.
“As people go through their careers it’s a matter of continually building skill sets,” adds Walker on how students or practitioners can evolve with the changing nature of the job. “No matter where a student starts, as long as they are willing to make that investment in their own skills and they have an interest and motivation to build on that, they can lead into the upper levels of management.”
Howell agrees and says CFOs today have a much broader job description. In the past, he explains, CFOs were the chief “number tumblers” but today act as number two to the CEO. They have to have a similar strategic understanding and perspective as the CEO, as well as the financial skills to “push back” if the strategic direction being taken is somehow not in line with company goals and needs.
Meeting Needs
While gaps may exist and roles are changing, there has been some movement both at the industry and academic levels. John Elliot, Dean of the University of Connecticut’s (UConn) School of Business, says the ranking of business schools by the media, starting in the late 1980s, helped form new attitudes. “In the absence of rankings, it wasn’t clear how important the student was in the equation,” he explains. By focusing on career outcomes and satisfaction, the media helped re-focus business schools on those dimensions.
Another “force for good” and way in which business schools have adapted and changed comes through the Association to Advance Collegiate Schools of Business (AACSB) — a global voluntary peer group devoted to advancing management education. Elliot says the AACSB has been working over the past 15 years to be coordinated and thoughtful about what students need to learn. “I would say today business schools are more aware of what they are trying to accomplish, hold themselves accountable for attainment of those goals, and in the process service their students better than they did 30 years ago.”
On the ground, academic institutions are working with industry to better meet their needs and offer students the programs that will make them better suited to industry’s demands. For example, notes Elliot, four years ago UConn was considering new Masters of Science programs and went to private industry to consult with them on it. “A lot of companies engaged with us to develop that program [in financial risk management] and it is now up and running and in it’s fourth year.”
Similarly, UConn consulted with private industry on a program in data analytics and project management.
The question, stresses Elliot, is how and when do CFO students get additional education and what additional education do they need? Should it be part of a degree, separate or some combination? Because not everyone wants a degree but still wants the knowledge, UConn, for example, has developed a certificate program that is four courses instead of 10 that focuses on data analytics or risk management.
While MBAs have traditionally been general they are becoming more tailored to industry and career paths says Morris. She says Clark is establishing itself as one of the foremost schools in the world that looks at sustainability. Currently she is developing one of the world’s first courses that deals with sustainability in finance and accounting. Clark also specializes in international MBA programs as it pertains to finance and accounting. “At the graduate level, they can narrow down and focus more of what they want to do in the next 10 years. That’s where they can become specialists and gain the experience they need,” she adds.
More than many other degrees, explains Morris, an MBA will allow students to explore a variety of tracks not necessarily available to them through other more specific areas (such as Masters of Finance or Masters of Accountancy). “They can take one or two or three courses, in say a 10 or 15-course MBA program — that is often what will spark the light in them that says ‘this is really what I want to do or don’t want to do.’”
Howell agrees and says in combination with a diverse undergraduate background, an MBA can provide the right balance of education that broadens students’ interest with the ability to “pick up the business and accounting at the MBA level,” he says.
The Post-Financial Crisis CFO
Education is clearly evolving to meet diverse demands both by students and industry. But sometimes, external events have a way of changing the course of how people think of an issue and what is being taught in a new environment. Since the turn of the 21st century many financial scandals, recessions and subsequent regulations have transpired.
Morris says the credit crisis of 2008-09 has definitely changed attitudes of what is expected from the accounting community. “The transparency that is now required, for example, by the Dodd Frank Act and prior to that the Sarbanes Oxley Act, created a tremendous need and therefore demand in both accounting and finance professions for people to assist companies with those issues or from a regulatory compliance standpoint — oversight or enforcement.”
And while it created job opportunities, it amplified the need for those people to be educated about the crisis and the tools and means to prevent it, she explains.
Now What?
According to Elliot, the MBA was “the launch” for graduate management education. A general curriculum in the first year was often balanced by a more specialized focus the second year. Today, there is global growth of the MBA program in places like India and China but in the US there has been a bit of a downturn of the MBA and part of that had to do with the recent recession, he adds. People became wary of leaving a job to get an MBA as well.
The tide is in the process of changing again, adds Elliot. As schools (like UConn and others) create more specialized areas within their MBA programs, and create a greater number of alternatives, people are seeking these more specialized programs to hone their skills and create opportunities for themselves in targeted areas.
Overall, the evolution of financial education and the MBA program has gone from a more generalist approach to a more specialized tone dictated not only by the needs of industry but also by the economic environment and the interests of would-be financial executives. The changing role of the CFO and regulatory realities have also played a role in what education should look like. And while it’s fair to assume the MBA will never go away, it certainly comes in newer sizes and shapes