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So You Want To Be A CFO?
By Suma CM
Unlike their well-known CEO bosses, chief financial officers aren’t usually household names. Everyone recognizes the Meg Whitmans and Jeffrey Immelts of the world, but you’d have to be a diehard company information nerd or investment analyst to rattle off their financial counterparts (Rajiv Dutta at eBay and Keith Sherin at General Electric, in case you’re not). Only those who have fallen from grace, like Enron’s notorious Andy Fastow, seem to spark any interest in the public consciousness. For the most part, people think of CFOs as well-compensated bean-counters who live and breathe financial statements and Securities and Exchange Commission filings—if they think of CFOs at all.
Despite this reputation, not all CFOs toil in obscurity. Former GE CFO Dennis Dammerman, for example, helped bring the chief financial officer’s job out of obscurity, becoming then-CEO Jack Welch’s right-hand man as well as a regular on Wall Street.
And CFOs do much more than deal with compliance issues and balance sheets. In fact, they’re instrumental to a company’s strategy. As CFO of Southwest Airlines, for example, McCombs BBA alumnus Gary Kelly introduced a fuel-hedging strategy that is still saving the company lots of money, giving Southwest an obvious competitive advantage in an industry staggered by increased competition and rising oil prices. In 2004, Kelly was named vice chairman and CEO of the company.
Looking at the job from this perspective, it’s easy to see why many MBAs are interested in becoming CFOs. So how do CFOs get to where they are?
Just as some companies “groom” future CEOs, several top corporations are known for being a hothouse for the next generation of financial talent. A recent article in CFO magazine noted that so-called “academy companies” like PepsiCo, Motorola, and General Electric routinely develop top-notch financial leaders because of their history of nurturing and promoting high-potential executives. A more recent addition to the roster is Dell, whose executives have gone on to top financial positions at companies such as Computer Associates. A stint at one of these big companies, many say, is the equivalent of several jobs at smaller firms, and can fast-track a promising young employee into the CFO spot.
But what if you’re not quite there yet? If you’re burning the midnight oil balancing the books for your company’s regional sales division, how do you go from low-rung CPA to high-powered CFO?
You can start by taking some advice from your fellow alumni. Many McCombs MBA graduates currently hold the coveted three-letter title, and many more held the title before going on to other top spots. To get you started, we talked to alumni who became chief financial officers at leading companies in several industries. Here’s what they learned along the way.
Making Tracks
How quickly you get to the CFO spot often depends on the size of the company you’re targeting.
Sona Chandwani, MBA ’02, landed her job as chief financial officer of AIDS Project Los Angeles just a few years out of business school. “Before attending McCombs, I was in public accounting, at Arthur Andersen,” says Chandwani. “I had an interest in the nonprofit industry, but it wasn’t until I had completed an internship during school that I really focused on the sector as a career possibility.” Chandwani worked at a museum in Dallas in a strategic planning capacity for a year before landing the job at AIDS Project Los Angeles. She’s responsible for the overall financial picture of the $17 million agency.
In contrast, Lynn Anderson, MBA ’85, put in his time at General Electric for 17 years before seeking other opportunities. “I wanted to be at a large corporation with international presence,” says Anderson, now CFO of Broadwing Communications, a telecom solutions company in Columbia, Maryland. “At GE, I had the opportunity to do analysis and planning, plus some corporate strategy work, in a number of areas including Southeast Asia. I also was the CFO on several of the projects I worked on.” After leaving GE during the dot-com bubble, Anderson worked at a startup before taking on the CFO role at Corvis Equipment, an optical networking company that later changed its name to Broadwing. “As CFO of a public company, I have broad responsibilities, including investor relations, SEC filings, and public disclosure,” says Anderson. “It’s a very dynamic and interactive role.”
Some CFOs find themselves in the job with little warning or preparation. Darron Ash, MBA ’89, started out in public accounting after business school and jumped to the client side after five years. “I went to The Morningstar Group as corporate controller,” says Ash. “The company, which was formerly 7-Eleven’s captive dairy, had been spun off in a leveraged buyout. But the CFO who hired me quit literally an hour after doing so. I closed the door and thought, I could either go back to Arthur Andersen or I could open my door and take on this opportunity.” Ash became the de facto CFO at the age of 29, and had to wear many hats at once: “I was in charge of the IT group, financial accounting at the corporate office, payroll, human resources operations, investor relations, and shareholder services.” The trial by fire paid off. Today, Ash is CFO of Hicks, Muse, Tate & Furst, a private equity firm in Dallas.
Beyond the Quant Jock
The ability to see the big picture is often associated with the CEO job, but it’s just as useful in the financial role. A good CFO is much more than a spreadsheet whiz or a natural with balance sheets. “It’s important to learn as much as you can about the company’s business outside the accounting function,” says Ash. “It’s a detriment to an organization if the financial people operate only in their own silos.”
A healthy curiosity about everything will help. “You should be inquisitive and be interested in everything about the firm—how it works and why it works that way,” says Andy Kerner, MBA ’85, CFO of Centex Homes, a subsidiary of Centex Corporation.
And while an overarching perspective helps CFOs do their job, it’s also a prerequisite for those who want to move on to the top spot. “You have to start exhibiting that at the controller level in order to step up,” says Chris Johnson, MBA ’95, CFO and vice president of Houston-based Champion Technologies, the world’s largest privately owned oilfield chemical company. “You should be able to work across boundaries and think strategically.”
Although having a CPA isn’t a requirement for the CFO job, it’s definitely an advantage. “Even today, many of the things I work on involve accounting questions,” says Johnson. “So it would have been helpful if I had taken more courses in that area or gotten my CPA early on.”
Apart from the obvious skills of finance and accounting, a CFO must have “bullet-proof integrity and determination,” says Gustavo Lasala, MBA ’04, CFO of ACCION Texas, the country’s largest microlender. Such a squeaky-clean character is important because CFOs have to be able to project impartiality. “The top financial person has to have credibility with the board and other executive members. It should be clear that they’re not on anyone’s side,” adds Johnson.
When communicating financial information, a CFO must remain clear-headed. “Be focused, determined and leave your emotions at home,” says Lasala. “There is no such thing as good news or bad news. What makes the difference is the timing, the accuracy and the way it is delivered.”
Corner Office Ambitions
A stint as CFO can be a stepping-stone on the way to the top job. Not every CFO pursues the CEO role, but a good many have that goal in mind. Depending on the opportunities available at a company, the leap may be internal or external; executive recruiters often tap CFOs to fill CEO spots at their client companies. Whether the bigger role is a good fit “depends on your personality,” says Ash. “Some people like to stay in their comfort zone and just get the general ledger out. Personally, I think CFO is a great progression toward COO or CEO. Most strategic decisions a company makes have some economic impact, and at a minimum, CEOs need to understand what that impact is.”
Indeed, the modern CFO is a strategist, says Richard Kincaid, MBA ’86, CFO-turned-CEO of Chicago-based Equity Office Properties Trust, the nation’s largest owner and manager of office buildings. “The CFO has to be detail-oriented but also comfortable speaking with Wall Street. So the CFO position prepares you as well as any other for the CEO spot,” Kincaid says. “But there is a fundamental difference between being a member of the executive team and implementing someone else’s vision, and creating and leading that team yourself.” Kincaid himself was tapped for the top job by his company’s board after they had already announced an external search. “After they saw me running the day-to-day operations, they offered me the CEO slot,” he says.
New Responsibilities
In 2002, Congress passed the Sarbanes-Oxley Act, which required all qualifying public companies to issue statements certifying the accuracy of their SEC filings and financial statements. While most CFOs welcome the new processes, compliance places a whole new set of demands on their time, and external auditors no longer feel comfortable helping companies interpret the numbers.
“The dividing line between the auditor and the company is as bright as it’s ever been, so there’s not as much give and take. There is also a more aggressive auditing culture. So the role is definitely harder,” says Kincaid.
Broadwing’s Anderson is optimistic that the pendulum can swing back from the current environment. “If you have a well-run organization, most of what’s now required is already happening – the documentation, review, and continual updating,” he says.
CFOs have to be careful, however, that all this compliance activity doesn’t get in the way of normal operations. “Every day there seem to be more requirements,” notes Andy Kerner, “but the key is not to lose sight of the fact that you’re still running a business.”
