Many CFOs are unhappy with team composition, believe they lack requisite skills to meet evolving business needs

Senior finance leaders recognise that great talent is the key to delivering business value especially as the finance function evolves toward a more advisory-based service model.

However, most finance teams lack the requisite skills to evolve from a controlling/reporting role (“governance”) to a consultative partner role (“guidance”) because the talent management approach lags behind the service model.

In a study by CEB, we found that the majority of CFOs is unhappy with the mix of talent on their teams and over half believe they don’t have the right skills mix to meet evolving business needs. This skills gap is widespread in finance.

CEB conducted the study among 2,200 finance professionals across 75 different companies to identify behaviours that drive the most successful finance departments. Finance managers in tax, treasury, accounting and financial planning roles were asked to assess whether their direct reports were likely to exhibit behaviours identified as “must-have’ in our competency model. They were also assessed on hiring, training and performance management programmes to help researchers evaluate which talent levers are most effective.

Through the study, CEB found that non-technical finance skills can be clustered into five key categories — Builder, Persuader, Strategist, Learner and Doer Competencies — and that the typical finance team is weak in competencies that matter the most.

A CRITICAL TALENT GAP IN FINANCE

Key factors that have contributed to the deepening of talent challenges in recent years include:

Disproportionate focus on balance sheet: Organisations going through a financial crisis tend to focus more on the balance sheet and maintaining financial discipline and less on developing talent. During the lean years between2008 and 2011, 63 per cent of finance teams put recruitment efforts on hold, 52 per cent put training and development programmes on hold and 51 per cent reduced budget for learning and development.

Growing gap between HR-led strategies and finance needs: HR competency models are often applied too broadly across corporate functions. The frustration between HR and Finance is mutual: 63 per cent of finance managers say they believe HR does not understand the roles it is trying to fill and 57 per cent of HR people say hiring managers do not understand the recruiting process.

Lack of investments in soft skill development: Many CFOs have emphasised the importance of soft skills, but have not been making substantial investments to improve their staff on those skills. A recent study found that, of the finance teams that see themselves as business partners, only 41 per cent invest in soft-skills training.

Broken pipeline of future leaders: Since 2009, leadership investment for the middle management layer has declined by 20 per cent, leading to their lack of readiness to take on additional responsibilities and train junior staff. A 2010 study* found that 81 per cent of respondents were dissatisfied with the readiness of the leadership pipeline.

WHAT OUR RESEARCH REVEALED: THE NEW FINANCE SKILL SET

In a “governance-oriented” business model, the focus should be on building a well-rounded finance team and balancing competencies at a portfolio level, rather than searching for individuals with a perfect mix of competencies.

The compositions of skills that the research identified as critical for finance are: Builder Competencies characterised by talent development, ability to manage and utilise a portfolio of skill sets and performance manage their teams; Persuader Competencies characterised by strong communication such as use of narratives and graphics to convey messages; Strategist Competencies characterised by understanding of business operations as well as technology; Learner Competencies characterised by flexibility and learning and improvement; Doer Competencies characterised by strong functional expertise, problem solving and judgement.

Most finance teams are strong at Doer and Learner competencies but weaker in Builder, Strategist and Persuader competencies. However, the most significant driver of department effectiveness is the set of Builder competencies, followed by the Strategist and Persuader competencies.

In fact, finance teams that invest in what we refer to as the Pathfinder skill set — a combination of Builder, Strategist and Persuader competencies — are three times more likely to make strategic business decisions, twice as likely to be highly productive and nearly three times more likely to be strong in attracting and retaining the best talent.

However, finding an employee with a perfect mix of competencies (Pathfinder competencies) is highly unlikely. Only 10 per cent of the sample excelled at one of the Builder, Persuader or Strategist competency groups.

FIVE IMPERATIVES FOR DEVELOPING A NEW FINANCE SKILL SET

The best finance departments are redesigning hiring strategies around critical competencies and embedding them into skill development and performance management protocols. Our research uncovered five imperatives for developing a well-rounded finance team.

First identify competencies that should be bought versus taught. Distinguish between innate (influence and flexible thinking), hard-to-develop (business acumen) and trainable skills (functional expertise) in your finance talent strategy.
Second, revamp hiring methods and introduce new assessment methods. Raise the bar on hiring. The best finance departments rely on case-based interviews to assess hard-to-teach and hard-to-observe competencies, which are difficult to assess using typical Q&A-based finance interviews.

Third, get creative in sourcing finance candidates. Explore unconventional candidate pools to source finance talent with desirable finance staff behaviours, instead of recruiting for specific positions from typical candidate sources.

Fourth, turn your managers into coaches. Over-invest in coaching because it has the highest impact on skill improvement. The best finance departments offer narrative-based advice (stories, analogies, etc.) and encourage staff to extend professional networks to increase exposure to additional potential coaches.

Finally, don’t neglect performance management. Measure and reward the competencies that drive department effectiveness. The best finance departments place significantly more emphasis on leadership and business acumen skills for their entry-level to junior managers compared to other organisations.

Kruti Bharucha is currently Senior Director and Leader of CEB’s Finance Practice in India.

* ACCA, 2010; Harvard Business Publishing Global Executive Survey