It pays to be a CFO right now. From 2020 to 2021, Chief Financial Officer compensation rose 9%. For a company and its owners, CFO hiring has never been more critical. Chief Financial Officers are needed to steer companies through these volatile economic times including continued pandemic uncertainty, a wild stock market, a likely upcoming recession, an out-of-whack supply chain, inflation, and a challenging labor market. Any of those one issues would require a strong CFO to navigate, but all together means exceptional leadership is absolutely necessary.
So how do you become a CFO? What are companies looking for in CFO hiring? A CPA degree is often key for anyone who aspires to a CFO role. An MBA degree, adds an additional layer of expertise that will be attractive to those hiring, because the most common ask – after technical competence – is for a “strategic” CFO. This can be augmented with Financial Planning & Analysis (FP&A) experience as it adds a “windshield” approach to help plan for the future – not just a “rear view mirror” approach found in ticking and tying the numbers. Some CFOs come from investment banking, but if they do and they do not have the technical skills, they will need a strong Controller to focus on the technical requirements of the debits and credits. Bankers understand M&A, capital raising etc. and can often be strategic but the best CFOs can drive the car with one eye on where they were and one eye on where they are going.
At Lancor, we are almost exclusively focused on PE and Sponsor backed opportunities. Most of the candidates we are targeting for CFO searches get calls almost every week to change jobs. If these executives have been through a successful transaction or two – from buy to sell – they will be in constant demand. Many Private Equity firms realize that their businesses simply cannot succeed without strong financial management and they cannot fix what they cannot measure. Therefore, CFOs who are not pulling their weight are being replaced, and for new assets, the CFO role is one of the first and most important hires.
As far as compensation, an S&P 500 CFO may get a touch more in base and bonus compensation, but PE-backed CFOs often make much more in total compensation because of equity opportunities. I expect that the trend of increased pay and competition for hires will continue for the top quartile of PE firms and their portfolio companies. The best firms need the best talent and if the CFO has had one or two successful exits and a demonstrated history of developing best practices – they will always command a premium.