Risks and bias in researching pathways to chief financial officer

¶ … CFO?

There are several risks apparent when investigating issues relating to human subjects. One risk is that the study may have a detrimental impact on the subjects. Further risks are that the study may be skewed by human subjectivity. If questions are asked of the subjects, the answers may not be entirely honest, particularly if the subject is sensitive. Related to this risk is the potential that the study will be impacted by bias on the part of the researcher. This bias can find its way into the design of the research itself and guide the responses of the subjects.

There are no specific ethical issues regarding my study. The subjects are all adults from non-vulnerable groups. The study concerns their professional careers, a subject with little inherent sensitivity. The topic does not address ethical issues in the subjects' careers, nor does it expose any proprietary commercial information that may be sensitive in nature. There is, however, a small amount of bias in my approach. For decades, there has been a relatively standard career path for individuals wishing to become a Chief Financial Officer, and some of those assumptions could possibly have worked their way into my research.

In order to negate the impact of any potential bias, I have taken as objective approach as possible to the issue. Further, I have evaluated my study against secondary sources including both CFOs and those whose career is to hire CFOs. I have sourced information from as many different perspectives as possible, in order that any bias I may have had is eliminated.

If this project were for publication, I would apply for an exempt review. There is no risk to those involved in the survey, and those involved are not in any vulnerable group. Therefore the exempt review is the most appropriate for this project.

2) Although I feel that I have few biases, there are certain assumptions that can influence my data collection. These include a view that the path to becoming CFO comprises a certain set of attributes such as education and work experience. This view discounts less quantifiable factors, such as interpersonal relationships, and is rooted in my North American outlook towards business culture. In many parts of the world promotion to such a position likely would require the cultivation of a large network of relationships.

This assumption - that the path to the CFO office is largely based on a certain combination of experience and education - is consistent with my personal values. Not only does this path seem most reasonable to me, but other paths make little sense. To create a study that yields practical information, I am not convinced that vagaries such as family connections or relationships should be included, as for many prospective CFOs they either have these things or they do.

I intend to address this conflict with my values and assumptions by incorporating a non-quantifiable component to my study to incorporate such considerations. Ultimately, I may not use the results of that information, as blending easily quantifiable variables with unquantifiable ones may make for messy research and obfuscation of results. However, by gathering some information I intend to ascertain whether or not that particular set of information is worthy of further exploration. In this way, I will not include it, but I will not rule it out either.

Though I do not intend any direct interpersonal challenges to my work, I would deal with them by listening to the beliefs of those opposed. In this study, I would be surprised if somebody felt I was completely off base, which makes those perspectives particularly valuable. By taking the time to understand such perspectives I would allow the opportunity to develop further study of the issue based on those alternate views.

3) My research question is: "What education, experience, personality traits and skills are needed to become a CFO?

To determine the answer to this question, I will undertake the following process. I will design a survey, which will pose a series of questions to the respondents. These questions will be about specific levels of education received. This will include questions about both academic and professional education, since both are applicable to the position. I will also examine the issue of experience by inquiring what types of positions have been held by today's CFOs. This will help to examine the career path that they have taken to find themselves in this position.

Questions concerning skills will be split into two types - hard skills and soft skills. The questions with regards to the hard skills will require the respondents to provide a list detailing some of their hard skills. These portions of the survey, and the portions concerning education and experience, will be in the form of open-ended questions to help eliminate bias on both the part of myself and of the respondents.

There will also be questions regarding soft skills and personality traits. These will be more reflective in nature than the other questions, but will still be formatted in the same open-ended way. It is hoped that the respondents will take the time to reflect on their traits and soft skills. In order to help ascertain what skills are considered most important, we shall ask CFOs specifically which skills they wish they had but do not. That will give a sense of areas which are valuable to a CFO today, but that may not have been taken into consideration when hiring.

While the main survey will be sent to current CFOs, a secondary survey will be sent to headhunters that specialize in CFO recruitment. These individuals have a keen sense of what firms expect from a CFO today. It will be valuable to compare the results of these two different sources of information to examine the degree to which they intersect.

For this research, qualitative measures help to gauge the importance of some factors that are difficult to quantify. The most obvious benefit is the ability to incorporate all of the factors into the study, rather than just those that are easily quantifiable. Some of what goes into becoming a CFO is vague, and tough to pinpoint at the best of times. One factor as cited in the literature was the increasing need for leadership. Yet, leadership is such a vague concept that it cannot easily be quantified. Using qualitative measures we can attempt to determine what exactly the term means to different people, how important is it to the role, and how much of it a CFO candidate should have. Another benefit is that it allows certain skills to be translated, and better grouped together. Different respondents may use different words or phrases to connote the same thing. Qualitative research allows for better synthesis of these differences, and can help to mitigate the influence of differences in respondent's interpretation of certain terms or questions.

The drawback to using qualitative research is that it can lead to an overreliance on anecdotal sources. This puts the study at risk for overreliance on the researcher's interpretations. In turn, this increases the risk that the researcher's biases will color the survey results, as those biases can reasonably be assumed to creep into the interpretations. Using qualitative research also makes it more difficult for outside parties, such as the reader, to check for biases and other areas. Whatever drawbacks numbers may have, they are finite, and that alone allows them to connote greater meaning. Qualitative results can be lost in the researcher's phraseology, numbers cannot.

Likewise, quantitative research can help with this study in that it does provide clean, finite answers. It is entirely appropriate for many of the questions in this study. They are a way to distill hundreds of unique stories into a coherent and consistent set of information, which is what will be required in order for this survey to have usefulness. Also, having concrete numbers allows readers to examine the data for themselves, without the filtering lens of the researcher. Another benefit is that quantitative measures can be compared with one another. We will be able to correlate any variables that are quantitative in nature. This will allow us to gain greater insight into some of the key issues regarding career paths that lead to CFO posts. For example, two variables may both be common among CFOs but may turn out to be mutually exclusive. Those with CPA designation may not need MBAs, so there may be low correlation between the two. Quantitative research will allow us to test correlations of different variables to determine if there is more than one path, and if so the degree to which the different paths may intersect.

However, there are drawbacks to quantitative research in this study. One is that some responses are going to be difficult to quantify. This would have to be overcome either by making adjustments to the survey structure, or by using imprecise proxies, to quantify some answers. This increases the risk that the information will be distorted. Another drawback is that not all of the data will be numerical. Questions about soft skills and personality traits can be quantified through various means, but to use more sophisticated measures of personality type and communication style would be beyond the scope of this project, more worthy of entire studies of their own. Thus, quantification of all variables could lead to overcomplication of the study, which increases the risk that the number of surveys returned will not be statistically significant.

For this survey, the ideal is a mix of qualitative and quantitative. This will allow us leeway in interpreting responses, which by virtue of the question structure, may involve many similar but slightly different responses. Using qualitative analysis will also help to understand some of the quantitative results. It allows for some perspective and comparison to be achieved.

There are many variables that we will be able to measure quantitatively. We should use both types of research because to do so will give us better results. Those variables that are highly quantitative in nature should be evaluated as quantitative. We hope that the majority of variables can reasonably be translated into quantitative measures, as this will allow for better correlation analysis between them. For this type of research, we feel the quantitative approach is the strongest, but prefer to use qualitative analysis for some variables for the sake of expediency. Further, this approach reflects the hiring process for the CFO position, in which both qualitative and quantitative factors are taken into consideration.

4) This research will consist of two surveys. One will be directed at CFOs, the other directed at headhunters who hire CFOs. That these two groups have approached the issue of becoming a CFO from different perspectives necessitates two different surveys. The surveys will be sent to 1400 CFOs around the country. We hope to either piggyback the surveys with the quarterly survey from Robert Half, or use their mailing list. Their surveys receive strong return rates, which would make them a strong partner. If we go on our own, we will use a database of CFOs and possibly have a smaller sample size.

We will also send surveys to a much smaller group of headhunters. We hope to identify 40-50 of these industry experts and submit their survey to them by mail as well. The information we get from them will contain their biases, but will also be based on information that has already been aggregated by their offices.

5) Part I: Introduction

The role of the Chief Financial Officer, having remained unchanged for decades, has begun to evolve in recent years. The traditional career path to become a CFO went through accounting, treasury or finance. CFOs were often viewed as bean counters, unworthy of consideration as a serious executive.

However, the CFO position has become more prominent in recent years. Accounting scandals have unraveled the value of several corporations, encouraging boards to raise the profile of the position. CFOs have taken on greater leadership roles, and are beginning to supplant COOs with their increasing involvement in strategic issues. More CFOs are being tapped to become CEOs in recent years, something that was once a rare occurrence.

Given this shift, I feel that it is time to re-evaluate the notion of the CFO career path. Chief Financial Officers today need a different set of skills and experiences than they once did, a direct result of the new challenges encompassed within the role. This study is especially relevant for me, as I view the CFO role as something that I aspire to at some point in my future.

There are two intended audiences for this study. The first comprises students and junior accounting staff who are mapping out their career path. This study will be of direct benefit to them, in giving them a sense of the skills, education and experience they should be building. The other audience is comprised of those studying broader issues in strategy, executive structure and governance. The need for better CFOs is widely understood, as is the fact that the role is in a state of flux. But knowing precisely how the market as a whole views the CFO role will contribute to studies in these broader issues.

Therefore, I intend to answer the following question: "What education, experience, personality traits and skills are needed to become a CFO?" The study will examine the types of education, both academic and professional, is required. The intent is that these will also be correlated with one another, to determine what total education package is demanded by today's CFO marketplace. In addition, the study will examine the different career paths taken by those who have become CFOs today. There is a view that the tradition paths - through accounting or treasury - are no longer the only paths a person can take to the CFO's office. Also, the study will examine the soft skills and personality traits to try to identify trends in those areas. Too much emphasis has been placed in the past on the acquisition of formal education and experience, but today the role seems to demand advanced leadership and communication skills as well. We will examine the prevalence of these demands and try to correlate those with career paths, to help identify how today's CFOs acquired those skills.

Some of the limitations to this study are that it only captures the role of the Chief Financial Officer today. This role is presently in a period of expansion and clarification. This is due to the changing needs of CEOs and boards. The role is also subject to major legal and regulatory changes. The introduction of the Sarbanes-Oxley Act, for example, had a dramatic impact on not only the role of the CFO, but the value of that role within the organization. The role of the CFO is different today than it was ten years ago. It is not unreasonable to expect that the role will be different in ten years' time. So the study is limited in its ability to reflect whatever shifts the role may undergo, thus limiting its value as a career-planning tool.

Another limitation is that the study only reflects North American firms, and therefore generally can be considered to reflect North American business values. Globalization has brought ideas and influences from other cultures to our business world, and our ideas to their world. While the size of the American economy and U.S. listing requirements will inevitably result in a certain amount of hegemony, it should also be understood that the global business arena is comprised of many different corporate cultures. My study does not reflect the values of those cultures, and is not intended to give any sort of universal insight into the CFO position. It merely reflects the business culture in one part of the world, today.

There are several industry-specific terms that will be used in this study. They include:

CEO - Chief Executive Officer, the head of the company. The CEO is hired by the board of directors, and is responsible for hiring the CFO. This understanding of basic organization structure is essential.

CFO - Chief Financial Officer, the executive in charge of finance and accounting issues at most corporations

COO - Chief Operation Officer, an executive in charge of operational issues

CPA - Certified Professional Accountant, a professional accounting designation. In most states, only designated accountants are allowed to audit financial statements

GAAP - Generally Accepted Accounting Principles, a code that outlines the fundamentals of how financial statements should be prepared and reported

Headhunter - an executive recruiter. For the purposes of this paper, most headhunters will specialize in identifying candidates for open CFO positions

Sarbanes-Oxley Act (SOX) - a law passed in 2002 that placed additional reporting and governance requirements on corporations and their executives.

Part III: Research Methodology

The research will consist of two surveys, distributed to CFOs and to CFO headhunters. The survey will inquire of the CFOs what skills they posses from the four categories. The headhunters will be asked what skills corporations are seeking when they look for a new CFO.

The survey will ideally be sent in conjunction with the existing Robert Half survey. If this is not possible, we would acquire their mailing list. Alternately, we would build a smaller survey list. The surveys would then be returned by the CFOs and the results tabulated. We would also attempt to correlate different variables, to identify any trends or exclusivity among them. We would do the same for the headhunters. Their results would be in a separate pool, and would be compared with the CFO results.

We chose this method because we feel that the best way to reflect the corporate environment today is to analyze it directly. Rather than theorize about the requirements of CFOs, we want to find out directly from the source what skills, education, experience and personality traits they possess. Secondary research would not be sufficiently strong as to have value. Our mix of quantitative and qualitative measures is appropriate because the questions are open-ended, and some of these are non-quantifiable.

We do not anticipate any ethical issues with this project, since the participants are all adults from non-vulnerable groups, and the information discussed is neither proprietary nor sensitive. Should any ethical issues arise, we will treat them with sensitivity and make whatever adjustments are necessary to accommodate those sensitivities.

There are some sources of potential bias. We are examining the issue based on what we feel are the historical requirements for the CFO position. There may be requirements that we do not address in our survey. Also, we are operating from a North American business perspective. The requirements for a CFO may be completely different in other business cultures, and our audience may be exposed to those other cultures in the course of their international business.

We hope to address some of the potential biases by polling two different groups, to give us different perspectives. We realize there may be certain biases on our part, and are willing to state those up front. We do not feel that any of our biases would compromise the value of the project, as long as we are honest about the limitations that the potential biases may lend the project.

Part IV: Results and Discussion expect to find that the CFO role today places almost as much emphasis on soft skills and personality traits as it does on education and experience. I anticipate that in terms of education, there will still be a divide between MBA and CPA, and that the two are not mutually exclusive. In an informal survey of online job postings, I found that the CPA was required for just 3 positions out of 20, but recommended for 12 more. For the five that did not explicitly mention it, knowledge of GAAP and SOX were listed as requirements, largely precluding candidates without a CPA. If a follow-up study were conducted five years from now, I would expect CPA adoption to be near-universal, given the trend towards increased governance.

A expect to find that work experience will amount to a minimum of ten years, presumably in progressive positions. The work experience requirement I expect will all include some accounting or treasury experience. There will be a quarter to a third of positions, however, that request experience in another aspect of the company. I believe that soft skills will be considered a very important attribute, almost as important as the hard skills. This will include communication, leadership, negotiating, and motivational skills. I expect that less emphasis will be placed on personality traits, but among those who do demand certain personality traits that integrity and honesty will be paramount.

The reason I feel that that a CPA will be the most common trait of a modern CFO is due to the importance of the position in governance. A CPA is considered to give the CFO the required skills with regards to financial statement analysis and the ability to identify risky, illegal or unethical behaviors on the part of other managers or executives. I feel that the traditional career path through accounting and treasury is still the most important component of work experience but that time spent in another field will be requested by some firms because of the more well-rounded nature of the modern CFO position.

I believe that with the increasing view of the CFO as a leader, a motivator, and a strategic partner to the CEO, the soft skills of leadership, communication and motivation are going to be widely requested. I do not believe the adoption of these requirements will be universal, however, because they are relatively recent requirements, and some firms will still view the CFOs position the way it was viewed twenty years ago. Lastly, the study of personality and the way it reflects on executive hiring is a relatively new and unexplored branch. There will be some adoption of personality requirements for CFOs, but it will lag the other variables specifically because of the lack of familiarity, even in executive recruiting circles.

If our expected results do not occur, the next step will be to follow up and find out why. This study is the first step in a series of studies to explore the issue, and is mainly intended to provide an overview of the issue, a starting point. Because of this, deviations from expectations are not only expected, but are anticipated as they will form the core of the next round of research into the subject.