CFO Talent Report 2021 WHAT’S NEXT FOR FINANCE LEADERSHIP ODGERS BERNDTSON CFO PRACTICE THE CFO REPORT Over the past 16 years, Odgers Berndtson tracked CFO TALENT movements in CFO leadership and analyzed trends in demographics, tenure, education and other aspects of professional development to better understand how the REPORT 2021 composition of top CFOs is evolving. We also interviewed leaders from Canada’s top organizations, including WHAT’S NEXT Shopify, Celestica and George Weston Limited, in order to gain insight into how public companies are recruiting, FOR FINANCE managing succession planning and developing their LEADERSHIP finance talent for the future. What we continue to see is that the growing demand The CFO role has never been more critical or more in for strategic acumen, transformational capabilities and demand — and yet the gap continues to grow between balanced oversight of an ever-expanding portfolio has what companies want in their CFOs and their ability to made the CFO role one of the most demanding and critical recruit and develop these top finance leaders. roles in the C-suite, and also increasingly harder to fill. Canada is in the midst of a CFO talent crunch and our new Chief Financial Officers have been thrust into the spotlight report explores what organizations can do about it. to help their companies adjust to market conditions, reinvent outdated business models or simply ensure enough liquidity to survive. To be successful, today’s finance leaders must quickly move beyond the numbers Succession planning is and understand the key levers to creating value across the more important than ever business and driving growth. Given the frenetic pace of change, having a proven and steady hand in the CFO chair as leadership tenures who knows the business inside and out has become more continue to shrink important than ever. Yet CFO tenure is at an all-time low and companies are having to replace their CFOs more quickly than ever before. This explains why more than half of CFOs were appointed Diversity and equity are internally in 2020 — the highest number in 16 years. still enormous challenges Organizations without a succession plan in place to move finance talent up the ranks are putting the future of their for most organizations leadership team — and organization — at risk. A lack of progress on the gender diversity front is equally concerning. Despite the fact that over 50% of the accountants entering the workforce are women, there There is a growing is poor female CFO representation at Canada’s top 100 demand for leaders publicly-traded organizations based on the ranking by the Globe and Mail’s Report on Business. At the time with multi-industry of publication, there were no female CFOs in the top 20 experience companies and only two in the top 50. If organizations don’t start addressing these issues, the CFO talent pool will continue to shrink, as will the pool of future directors and audit chairs. A CPA designation is highly valued, but How are companies solving these challenges? Expanding breadth of experience the criteria for finance talent is the key to building a broader bench for the future. We are already seeing a and leadership skills softening in the number of CFOs with a CPA designation are essential and an increase in CFOs with multi-industry experience. 2 THE CFO REPORT Given the current environment, patience SUCCESSION for CFO underperformance is at an all- time low and competition for the best and brightest CFO talent in the market PLANNING is at an all-time high. In response to these trends, coupled with the growing BUILDING demand for wider organizational expertise, many businesses have become deeply FROM WITHIN committed to helping their top talent grow internally. SHRINKING TENURES INCREASE THE IMPORTANCE OF SUCCESSION PLANNING “This important framework helps us build Talent planning has been rising on the executive agenda for the last decade, robust development and any competent board now requires plans and ensures that its organization to develop a thorough approach to succession planning in we grow and develop order to mitigate risk. It’s not overly surprising, then, to see that organizations our internal talent.” are increasingly choosing internal Pavi Binning, president at Wittington appointments for CFO succession. Investments and board director at George Weston Limited and Loblaw Companies Our research shows that, in 2020, 64% Limited, shared that talent management of sitting CFOs from Canada’s top 100 has been a significant focus both at the publicly-traded companies were promoted executive and the board level of George from within — the highest number Weston and their companies for many of internal appointments in 16 years. years. Loblaw, for example, has a strong Conversely, first-time CFOs appointed track record of internal development with from outside the organization make up former president Sarah Davis. 10%. The data is clear — the most likely path for any aspiring CFO is from within. Davis was groomed for the position from within the finance function and movement Another number we’ve tracked is the through operational roles, including shrinking tenure among CFOs. While stepping outside of finance to become this is a common trend among all C-level chief administrative officer and leading positions, it’s nonetheless alarming to functions such as supply chain, operations, see that CFO tenure has now dropped information technology and human well below the five-year mark, given the resources. amount of expertise and institutional knowledge held by these leaders. Succession planning at George Weston is a rigorous process, Binning shares. “Each year, the board receives presentations 3 from each business that lay out succession into every executive position, all the potential successors and “By having successors in detailed reports outlining each individual’s strengths, place for our key roles, we development timelines and areas that require growth and expansion. This is an important framework, and are typically able to manage it helps us build robust development plans to ensure turnover at the senior levels that we grow and develop our internal talent within the organization.” He adds, “Building the skills and without needing to hire from capabilities of individuals throughout their career is the outside. Rather, we focus crucial to helping them grow and fulfil their potential.” on bringing outside talent into Another organization that stands out in this regard is Celestica. The $5-billion multinational electronics manager and director roles, manufacturing services provider has successfully so we can then develop those promoted CFOs from within since 1994, when it was carved out of IBM and sold to private equity leaders to prepare them for firm ONEX. Mandeep Chawla, the current CFO, spoke senior roles when they to us about their finance-focused leadership program. open up.” “Because we operate in multiple industries and many different countries, we place a premium on institutional Experienced board director, audit committee chair knowledge and we’re constantly discussing succession at Shopify and former TD Bank Group CFO Colleen planning,” Chawla shares. “We are always looking at Johnston has experience entering the CFO role from what support and experiences our top talent needs to an external organization but also recognizes the continue developing over the next five years.” importance of building from within. He adds: “By having successors in place for our key “You want to go internal whenever you can because roles, we are typically able to manage turnover at the they are the people that understand the company, senior levels without needing to hire from the outside. already thrive in the culture and are most likely to Rather, we focus on bringing outside talent into succeed in the role,” she shares. “At the end of the day, manager and director roles, so we can then develop though, it is key to identify the leaders with fire in the those leaders and prepare them for senior roles when belly and coachability. The right strategic person can they open up.” learn the role or a new industry if they have the right attitude to succeed.” Average CFO Tenure Over 16 Years 6 5.6 5.6 5 5.3 4 4.2 3 2 1 0 2004 2009 2014 2020 4 64% OF SITTING CFOs ARE PROMOTED INTERNALLY SOURCE: ODGERS BERNDTSON CFO REPORT 5 THE CFO REPORT Fewer diverse CFOs will lead to fewer diverse audit THE DIVERSITY chairs and directors in the future, along with an overall weakening of both levels of the finance hierarchy. And for aspiring female CFOs and other diverse ADVANTAGE communities, having role models to emulate is critically CANADA IS important to changing the makeup of leadership teams. When you consider that, according to Catalyst, FALLING BEHIND women now represent 29% of the other senior management roles in Canada, it begs the question: DIVERSITY IS STILL AN ENORMOUS Why are women failing to secure the top CFO roles in CHALLENGE AT THE CFO LEVEL the country? IN CANADA Despite Canada’s wealth of female talent in the finance Women CFOs Leading in and accounting profession, there has been a relative lack Top 100 Canadian Organizations of progress on gender diversity at the CFO level. 10% Today, women make up only 8% of CFOs in Canada’s 8% 8.0 top 100 largest public companies compared with 7% 7.0 7.0 in 2014 (a paltry 1% increase in 6 years). Even more concerning is the fact that, when you look more closely 6% at the data, we are losing ground. 4% 4.0 % Female The last time we conducted this research in 2014, women held some of the most visible CFO roles out of the top 2% 20 companies surveyed.