For CFOs, The To-Do List Lengthens

It's been about a year since the meltdown at Enron Corp. began in earnest, and what a year it has been. The drumbeat of negative headlines has been almost incessant, and the corporate miscreants and their misdeeds are so well known that few financial managers need a recap. At companies like Tyco International, WorldCom Inc., Global Crossing and Qwest Communications International, the flames may be out, but the embers are still flickering - and may be for some time.

Overlay on these scandals the sickening slide of the stock markets and an economy so weak that some economists still fear a "double dip" recession. Earnings at many companies are anemic, and most revisions are downward. Good news is at a premium - almost a complete turnaround from the rollicking years of the late 1990s, when earnings were soaring and confidence was almost recklessly high.

In an era of contraction, reduced expectations and higher market skepticism (if not cynicism or resignation), the demands on CFOs are unprecedented. Financial Executive spoke to a number of executive recruiters about the changing concerns of top finance officers, qualities that are especially important and the altered relationship between a CFO candidate and the hiring company.

Just do it - all of it. If anything, recruiters say, CFOs and other top finance officers are being asked to do more than ever before, even as they are wrestling with new regulatory or legal mandates like the Sarbanes-Oxley Act, enacted this summer, that, among other things, requires CEOs and CFOs to certify the company's financial statements.

"It's a very confusing time. A lot of CFOs are being squeezed," says Allen Galorenzo, a principal in Florham Park, N.J., with recruiting firm Foster McKay Group, a 31-year-old company specializing in the finance field. "They are no longer just financial persons - companies are relying on them for a lot more, and they wear many different hats. They're very much into IT, HR, legal. There will be a lot of people who really can't perform. For the good ones, it's clearly more difficult to attract them to look at opportunities."

"You can almost say today, [companies] are looking for everything," says John T. Gardner, vice chairman of the Board Services Group at Heidrick & Struggles in New York. "I think that clients want a CFO candidate to have a full range of technical financial skills - the control, the treasury, the risk management, the investor relations - plus the strategic skills to be a full business partner with the CEO. I think, in addition, they also need to be an important thought leader and change agent as part of the entire management team.

Gardner goes on: "The breadth of the job is very demanding. They need to have all of those traditional things; yet, no one is saying that CFOs don't need to help companies deliver against firm commitment. They probably need to know the business better today then they ever have. They need to be able, along with the CEO, to ask the right questions, so they need to know the operation. And, some of these additional demands on the CFO are bound to put more pressure on the entire financial organization. So, you are going to see a need for stronger people - not just the CFO, but [in] the next layers down."

Accountability is a huge shadow hanging over many finance organizations. "Years ago, the CFO wasn't being blamed as much as he or she is now," Galorenzo says. "Finance and accounting might not have been the first - it might have been R&D or marketing. Now with all the accounting scandals we've had, it's somewhat like professional sports: If the team does poorly, the manager gets fired. CEOs are under fire, and boards are starting to blame the CFO for the economy."

One obvious result is that many more CFOs have lost their jobs - although, in many cases, it's understood that all the onus isn't on them. If you, as a CFO, were dismissed "absolutely for no fault of your own, and the ground shifted under you, and the circumstances are public knowledge, that's not a handicap," says Charles Wardell 3rd, managing director of Korn/Ferry International's Northeast practice and head of the New York Financial Services Practice. "There are many people who are very qualified, very able, whose life suddenly shifted."

"A lot of CFO opportunities today are troubled ones," says Gardner, who says his firm was recently looking for CFOs for The Warnaco Group and Sunbeam Corp. - two companies that have essentially collapsed and are attempting to emerge from bankruptcy protection. "Certainly, those folks are going to look at people who have been through tough times," he says.

Since the focus is increasingly on the messenger, communication skills have become more vital than ever. "I think there continues to be an increasing requirement for CFOs to be extremely articulate and very good communicators," Gardner maintains. "They obviously need to be able to talk about the numbers; but they also need to be able to talk about the strategy. When you get on an investor conference call today, you hear the very good CFOs not just reporting on the numbers; but they are business people. They put it all in context."

He adds: "It seems like these CFOs are doing more road shows or external events without the CEO present then they used to. So, I see them as the primary spokesman more often. In response to that, quite a few CFOs I know have taken some professional steps to improve their ability - they've had coaching. They've had some of their long-time financial or their investor/public relations firms come in and give them training on how to be effective."

With what many call a "back-to-basics" mandate spreading across corporate America, the need for top-notch financial skills is stronger than ever. Some recruiters note that a few years ago, those weren't as vital.

"The non-traditional CFO that was popping up in dot-com boom didn't have the historic accounting background," says Jim DiPietropolo, a director with Foster McKay. "They were relying more on the auditors. And a lot of the people who started dot-com firms wanted CFOs who wouldn't rock the boat. Those [CFOs] are having a tough time now. A lot of companies have said they will now require a CPA and public accounting experience."

One area that may be getting less emphasis in this high-stress time is CFOs serving on boards, especially for another company. While some organizations have actively reached out for CFOs to head their audit committees, there appears to be pushback from employers of those they are trying to bring in, says Gardner. "With all the new requirements and pressures on the CFO, their own companies in some cases are saying, `Gee, is this really a good time for you to be spending your time outside? Yes, you are going to learn a lot - and we support it - but right now isn't the right time."

Of course, one of the great unknowns these days is what impact the Sarbanes-Oxley Act of 2002 and other legislative and regulatory initiatives will have on corporate reporting and the concomitant pressures on CFOs. Many clearly fear there has already been an overreaction to what they feel were isolated cases of fraud and chicanery that tarred too many with the same brush.

A common reaction is anger and frustration. "Ninety-nine percent of the honest, hard-working CFOs out there are outraged that these [accounting scandals] happened," says Korn/Ferry's Wardell.

Senior finance executives "are outraged that events have led to Washington interference, and they're not sure that Washington legislation won't, in the end, cause more harm that good," says a high-level recruiter who asked not to be named. "Governance broke down at the board level. There's a general feeling that a very few people were running criminal enterprises and should put spend time in jail for it, but that this has created a whole new era of oversight."

While it's often said that tough times produce great leaders, an unending battlefield slog may not be for everyone. "I think one of the things that you have to ask yourself is: are you up to the challenge?," says Gardner. "The CFO job is not going to get any easier - it is going to get harder. It's going to be more demanding from every single aspect. It's going to be more demanding intellectually. It's going to be more demanding just in terms of the physical attributes of the job.

"I think that it's important that the CFO asks himself [or herself]: Is this really what I want to do? Because they have to have a 1,000 percent commitment. They have to have huge passion and tremendous energy to do the CFO job. The CFO also has to ask himself/herself: Do I have all the skills it takes to do today's job?"

Subscribe to Financial Executive! The flagship publication of Financial Executives International (FEI), the magazine provides senior financial executives with financial, business and management news, trends and strategies to help them work better, faster and smarter. For more information about FEI, visit www.fei.org.