It goes without saying that the Chief Financial Officer (CFO) role is one of the most important for hirers to get right. The person in charge of financial strategy can play a huge role in the success – or failure – of an organisation. But while responsibilities such as managing cash flow has always been central to what CFOs do, it’s been interesting to note how this position’s parameters have shifted in recent years. I’ve seen this in the transport sector, as well as the broader logistics space, autonomous cold chain, and private equity funds with direct interests in these industries.
Profitability is key
So, what is the difference between a CFO and, say, a financial controller or head of accounting?
One key responsibility for CFOs as they develop their careers is to move from managing budgets and financial statements to pushing the profitability of their organisation in earnest. As important as it is to oversee income statements, keeping track of free cash flow is the true measure of success. Company assets and balance sheet assets do not necessarily translate; indeed, some of the most valuable assets, such as flexibility, responsiveness, and the urgency that drives high levels of discretionary effort, will not appear on a P&L ledger. Perhaps one way of framing how we think about the finance executive role is to consider elevating it to ‘Chief Profitability Officer’: a function focused on generating greater cash flow by driving and enabling growth through volume, price, and productivity.
‘CF-No’ or ‘CF-Know’?
Arguably, however, the main divergence between a CFO and a chief accounting officer is in executive responsibility. The CFO typically reports to the CEO and will act as a key liaison for directing a company’s financial strategy. But what that entails is also changing. Tom Hood of the Association of International Certified Professional Accountants notes that where a corporate financial leader might once have acted as the ‘CF-No', closing the purse strings for plans that didn’t fit the budget, now they are more likely to be seen as the ‘CF-Know’: someone with a holistic view of the company and who can use that insight and experience to drive value creation.
This broadly tallies with what I’ve seen myself as the expectations for CFOs have evolved. When I began working in executive search, it was normal for CFOs to build their careers over long stints at the same company. There are still many successful people for whom this is the case – so what’s the problem? Well, having a proven track record is still important; it’s just that when businesses look to hire finance professionals in the C-suite nowadays, there is often another definition of what relevant prior experience means.
Case study
As a case in point, I’ll mention that we recently worked with a mid-cap PE fund based in the US on a CFO placement. The client sought someone with strong experience across the board in transport and logistics, but with specific dealings in the M&A space – as well as prior involvement either with the sale of a business, and/or taking an organisation to IPO. This was essential for the client, given the typical selling span of mid-cap funds.
The candidate we placed had excellent financial and operational credentials, with direct experience working with equity offerings, financial restructuring, capital market transactions, debt treasury, cash management, and investor relations – not to mention M&As. He had gone through several large sales and helped to prepare another company to go public. The candidate really covered everything the client was looking for – but rather than having a pure finance background, like a chief accounting or treasury officer, this individual had the hands-on operational experience needed.
I’ve seen similar things happen before with CFO placements, particularly in the private equity space. Increasingly, potential CFO candidates need to have carried out a sale – both in mid-cap and larger PE firms. While I don’t wish to speak for hiring managers across the transport and logistics space, such cases nonetheless seem to underline that growing businesses want new C-suite leaders to have experience working in agile environments.
Key features of the CFO role
If nothing else, my work on CFO placements led me to think about the key attributes that are needed for the role. Just what makes an effective chief financial officer in 2024? What should you look for when hiring – or, if you’re a candidate targeting an executive finance role in the C-suite, how do you boost your skillset?
The Global Supply Chain Institute at the University of Tennessee Knoxville has identified the following key areas for CFOs in the supply chain space to consider:
Risk management
Supply chains are notoriously fragile. We have seen plenty of examples in recent years, with geopolitical turmoil such as the war in Ukraine and the cost of living crisis sending shockwaves across trade worldwide. It is of course difficult, if not impossible, to predict large-scale disruptions, but CFOs with the nous to manage risks – not to mention keep down any costs incurred by supply chain issues – are major assets for any logistics organisation.
Technology
The report further cites familiarity with financial reporting and forecasting as essential for CFOs in the logistics space. Merely delegating data analytics to others is not enough; knowing and using such tools are significant differentiators for finance executives.
Cybersecurity
Sadly, scams and hacking are all too common nowadays. Businesses are often targeted given their access to sensitive information and bank details, so it should be a central responsibility of the CFO to ensure that the data security of their logistics company is safe.
Other attributes that budding CFOs might want to consider include:
ESG
Chief Sustainability Officer (CSO) appointments have skyrocketed over the past 15 years – but all too often, the individual is not empowered to make meaningful, environmentally friendly changes across their business. The CFO has a unique ability to assess and drive sustainable solutions that can still align with their company’s financial targets.
Leadership and culture
With many companies seeking to become as agile as possible – often by using technology and automation to boost efficiency and output – it is up to the CFO to build finance teams that promote transparency and collaboration across the organisation, underlining the crucial role this function plays. A strong and open leader with excellent communication skills is a real asset to this end – not least when it comes to...
Stakeholder management
The CFO will be a central point of contact for various financial institutions, stakeholders, regulators, shareholders, and other stakeholders with financial interests or business with the logistics business. Building and maintaining strong relationships with such bodies will be crucial to the CFO’s success.
Looking ahead
It’s been fascinating to see how the CFO role has evolved in recent years – and I’m sure it is only set to develop further as companies across industries like transport and logistics, supply chain management, and private equity continue to find ways to innovate their offerings. I’m always keen to help companies in these sectors to find the strongest candidates for their finance teams – don’t hesitate to get in touch if you would like advice.
Special thanks to Alín Campián for his contribution to this article.