As the CFO remit gets broader and broader, the seat is beginning to attract individuals from different backgrounds, experience levels and skill sets outside of traditional accounting. 

While this opens up a wider range of potential candidates, this also means the traditional pipelines to the CFO seat are becoming less and less reliable. For companies, that means succession planning is becoming more critical — companies should be less focused on hunting for already experienced CFOs and more focused on developing those leaders, said Jim Lawson, co-leader of Russell Reynolds Associates’ CFO practice.

“You really need to make bold moves and give finance people a chance to sit in roles that might take a little bit of time to ramp up to,” Lawson said in an interview.

The new CFO path

A recent study published in May by RRA, a leadership advisory firm, pointed to the rapidly expanding number of responsibilities today’s CFOs are juggling, prompting changes in who is interested in the role and the skill sets and experience needed for the position.

There are fewer CFOs today who began their careers at the Big Four accounting firms such as Ernst & Young, KPMG, Deloitte and PricewaterhouseCoopers, for example, while the number of less-tenured or experienced CFOs who hold CPA certifications has shrunk as well.

In 2012, 55% of S&P 2000 CFOs had CPA designations, the study found. By 2022, that figure was down to 43%.

Part of the reason behind the shifts in financial leaders’ backgrounds is that the skills needed by such leaders have morphed away from those related to traditional fiduciary responsibilities into operational and capital allocation talents or expertise.

“What we’ve seen in the last few years is while having operational experience continues to be very important, this theme around capital allocation strategy, (being the) external communication interface, has been the leading trend more recently,” Lawson said.

The change in the experience that CFOs are bringing to their jobs means that accessing and developing future financial leaders should be a top priority for businesses today, as the career journeys of many CFOs veer off from their historic paths. The number of financial leaders who hold MBAs could potentially fall in the coming years, for example, according to the RRA study, which found professionals in younger generations — such as millennials — are less likely to hold such degrees.

While the number of CFOs in the S&P 2000 who held MBAs increased to 48% last year from 42% in 2012, the percentage of millennial CFOs with such degrees fell to 38% compared to 50% for Generation X and baby boomer CFOs, the study found.

Certifications like CPAs and MBAs have become less common following a trend in the early 2000s when many companies stopped paying for the completion of such programs, Lawson said — and as a natural consequence, those certifications are less prioritized than they might have been previously when filling the CFO chair.

“Do you have to get an MBA to be the CFO of a big company? The answer is not necessarily,” Lawson said.

The new CFO career pipeline

Another trend that could be impacting where future financial leaders are likely to come from is the increasing specialization of finance talent, the RRA study said: in the past, certain larger corporations served as “hotbeds” for upcoming leaders in the space, thanks to rotational programs that covered a wide remit of roles, business sectors and use cases, the study found.

As specialization increased, that means the “direct reports to CFOs’ responsibilities within the finance function had become a bit more siloed,” Lawson said.

While experience at hotbeds of financial talent like the Big Four is still highly prized, RRA is expecting the number of CFOs that have that training to slump in future years — a factor that will also change who is tackling what financial responsibilities as well as the future career paths of finance leaders.

For example, regional or division CFOs now have the ability to be more strategic, because they are no longer the ones doing all the transactional accounting, statutory reporting and local taxes, Lawson said — which could also be one of the factors for why CPA certification popularity is declining.  

The tech factor

New technologies like automation and AI are also changing the CFOs’ day-to-day responsibilities, which — while coming with some potential flaws or cons — could also be a positive for financial leaders.

“As tasks become more automated, it's helping the CFO spend less time mining the data and more time analyzing the data, a difference which is really positive for the CFO,” Lawson said.

As CFOs’ makeup shifts to prioritize these operational skills, an emphasis on training is key for companies who want to tap future financial leaders for the seat. The emphasis on such experience — which means CFOs are also becoming more essential in driving business strategy, in addition to business execution — could also be changing the future career path for those who wind up in the chair.

The trend of CFOs taking on CEO roles at companies has increased, for example, and is likely to continue in the future, Lawson said, although he pointed to such moves being more likely in certain sectors such as manufacturing and perhaps less likely in sectors such as technology.

“I think we'll continue to see more CFOs become CEOs as a result of CFOs getting a better opportunity to be part of the business strategy and capital allocation decisions,” he said.