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How CFOs are mastering change in the face of new challenges
In this episode of The Better Finance Podcast, the speakers explore challenges that are shaping the role of the CFO.
Related topics
In The Better Finance podcast, Myles Corson hosts Jenna Fisher and Jim Lawson, co-leaders of the Global Financial Officers practice at Russell Reynolds Associates. The duo share their extensive backgrounds in finance and recruitment, setting the stage for a deep dive into the transformative role of the modern CFO.
The conversation highlights the expanded scope of CFO responsibilities, from traditional fiduciary duties to strategic capital allocation and growth facilitation. Jim notes the shift towards strategy due to changing economic conditions, while Jenna points out the CFO's growing role in potentially succeeding to CEO positions, given the decline of the COO role.
They also examine the importance of developing finance talent in light of automation and specialization within finance functions. The role of technology, particularly artificial intelligence (AI), was discussed as a tool for optimizing operations and preparing for future leadership roles.
They emphasize the significance of diversity, equity, and inclusion in building effective finance teams and the positive impact of diverse perspectives on performance. Looking forward, they speculated on the future of the CFO role, suggesting that talent may increasingly come from private equity and investment banking sectors.
Key takeaways:
- Explore the dynamic role of CFOs in today's economy, focusing on how CFOs can navigate challenges posed by artificial intelligence and the digital revolution
- Understand the expanded responsibilities of CFOs beyond traditional stewardship to encompass strategic business leadership
- Identify the importance of proactive talent development within the finance function to promote future readiness and adaptability
- Appreciate the significance of diversity, equity, and inclusion in creating effective finance teams and how diverse perspectives can lead to improved performance and decision-making within organizations
For your convenience, full text transcript of this podcast is also available.
Jim Lawson
“When it's time for the CFOs number to be called potentially be a CEO, the ones who are able to develop relationships across the C-suite are the ones who are ultimately the most successful.”Myles Corson
That was Jim Lawson, Co-Global Leader of the Financial Officers Practice at Russel Reynolds Associates. And I’m Myles Corson from Ernst & Young [EY]., host of The EY Better Finance podcast. A series that explores the changing dynamics of the business world and what it means for finance leaders of today and tomorrow by sharing insights from global leaders on key topics affecting the world of corporate finance.I have the pleasure of being joined by Jim, alongside Jenna Fisher, who co-lead the Global Financial Officers Practice at Russell Reynolds Associates. Together, we explore the transformative journey of the CFO role in today's fast-evolving business world. We discuss the critical importance of nurturing talent, embracing diversity and the emerging trajectory from CFO to CEO. So, without further ado, let's jump into this exciting conversation.
Corson
Jenna and Jim, great to have you. Thank you for joining me today.Jenna Fisher
Thanks so much for having us on.Lawson
Thank you.Corson
As we get started, perhaps you can do some brief intros to yourselves and your background and how you got to where you are today.Lawson
I Co-Lead the Global Financial Officers practice with Jenna. So I'm based in the New York area and by way of background, I started my career in the Big Four. I was a CPA [Certified Public Accountant] at Pricewatershouse Coopers [PWC], spent about 10 years there, then went inhouse and led FP&A [Financial planning and analysis] for a public company and I've been at the firm for 13 years. So I focused my time recruiting CFOs [Chief Financial Officers] to public companies and private equity backed companies, but then also do a lot of work with succession, executive assessment and other Advisory services in the C-suite.Fisher
And I co-lead the Global Financial Officers practice with Jim. I've been here at Russell Reynolds for a little over 20 years. I'm based in the Bay Area in California, and I attended the Wharton School of Business, Duke School of Law, Rice undergrad, and my fun fact is that I'm married to a CFO. So, we're all about CFOs 24x7 around here.Corson
Fantastic. Well, I can't think of two better people to share perspectives on what is happening in the role of the CFO. As we get started, perhaps you could share what you're seeing in terms of the key factors that are changing the landscape for CFOs in the business environment we're facing today?Fisher
There are a handful of factors that have definitely come to the forefront over the last 12 to 24 months coming out of the pandemic [COVID-19 pandemic] and then we saw obviously some big booms to the capital markets and then some retrenchment, and there's been a lot of volatility and uncertain economic growth over the past year or two. Alongside that, again, I think as an outgrowth of the pandemic, there's been some real misalignment in terms of talent. We saw a lot of folks retire at the end of the first year or two of the pandemic and that has had a deleterious impact on the availability of talent for finance teams. And then of course, AI [Artificial Intelligence], digital transformation, certainly a hot topic if you get any group of CFOs together, AI always comes up as one of those disruptive forces.Feel like we're living through what the Internet was back in 1998. We're still figuring out what it's going to have as an impact and then of course, there's geopolitical uncertainty. I would layer on top of all of that, which keeps us all on our toes and tethered to newsreels. But we joke around here that CFOs are sometimes a recession proof industry because in a good market, of course, more roles are created and then in a bad market, CFOs often get blamed unfairly or fairly for the fall of the company and so we're definitely seeing the outcroppings of that right now in our practice.
Corson
Fantastic. Jim, anything you would add in terms of the environment we're operating in?Lawson: What's interesting is some of these topics are interconnected. So on the AI thread, CFOs are being asked to use AI to costs in their teams and I think they're still going through the process of how is this going to impact the shape of the finance team, the location of the finance team and then once a lot of the AI initiatives are in place, how does that impact the development of the team when the team is managing very automated processes. Is there things missing in their development? Those two topics ̶ AI and team development are two of the hot topics and they're very intertwined.
Corson
That's a fantastic place to start and we'll unpack some of the consequences of that as we go through. One thing I did want to talk about in terms of how the CFO role has evolved is the scope of the role and obviously, you've touched on a number of areas that potentially impact the CFOs role. One of the things that we've observed is the CFOs are being asked to take on a lot more responsibility and that can be in terms of the existing scope of responsibilities, but also taking on additional functional responsibilities across the business. What are some of the trends you're seeing there in terms of what CFOs are being asked to do?Lawson
I think over the last 20 years, the trend went from doubling down on controls and fiduciary responsibilities coming out of Sarbanes-Oxley [Sarbanes-Oxley Act of 2022] and then for a good 10 years, we heard a lot around operational responsibilities, partnership with the business, driving operational efficiencies in the organization. We saw a lot of CFOs take on general management [GM] roles. Some of them took on general management roles as part of incremental to their CFO role.I would say right now the key ask from our clients when we're doing searches or we're doing succession exercises is around capital allocation and strategy. Interest rates are higher, the cost to borrow, the cost of capital is higher, and CFOs are really being tapped to be on the frontline of strategy and where is growth coming from. So, we've definitely seen that pivot in the last three or four years. As it relates to responsibilities, I always say anytime there is, whether it's shared service implementation, a systems upgrade, it seems like the finance team is responsible for that. CFOs are known for being organized and being able to drive teams. So, the incremental responsibilities often come through projects, but the threat of capital allocation strategy is definitely the one we're hearing the most about right now.
Fisher
And I would just add on to that to say that we've also seen over the course of time in the last decade or so, a real decline of the COO [Chief Operating Officer] role. I think hand in glove with that, the role of the CFO has expanded and I always joke whenever a client does ask us to conduct a COO search for them, there's really no such thing as a standard archetype or blueprint for a COO because it's everything that the CFO and CEO don't want to do and so they really can differ quite wildly, but I think what we're seeing certainly is CFOs are taking on more, thus eliminating the need in many companies for even a COO and when we do see a COO role, often times it's a developmental role to help move the CFO from that position into potentially the CEO role, therefore and we're seeing at the same time an increase in the number of CEOs who used to be CFOs. It's almost never an immediate transition from CFO to CEO. Rather there's usually a COO, GM, President, COO role in between, but I think because of the role that CFOs play as the lead communicator, often the face of the company, more and more companies are looking for the CFO to take on perhaps the CEO role in time and so that has definitely changed some of the potentiality that we're seeing in many of these roles.Corson
That's fantastic and again, I think that steppingstone into general management and the top job is certainly something that we've seen in our research, the DNA of the CFO and that there's still a big aspiration that we talked about that have expanded role is providing the experience to be able to take that step up. Just going back to this question about the resource allocation that the strategic role because I think it's so important to shift from just protecting and optimizing value to actually enabling value creation and driving the return, not just measuring the investment. How do you see successful CFOs really playing a role in helping with that value creation and really having a seat at the strategy table?Lawson
From an M&A [Mergers and Acquisitions] perspective, I think there's a lot of challenges right now relative to the valuations still remain high and the interest rates also remain high, So the cost to borrow. So we are seeing CFOs have a lot of pressure around finding growth for the organization and that includes whether it's investing in new businesses or divesting in less profitable businesses. So that portfolio evaluation process in the last few years has been an essential aspect that the board is leveraging the CFO to really take the reins on and I think there's a lot of pressure there. There's pressure to grow, but also there's pressure not to make poor decisions in light of an environment that's flattening for a long time. We're not seeing a lot of M&A activity. We're not seeing a lot of divestitures and carveouts in the past two or three years. So a lot of the conservative CFOs are just waiting this out, while some are being a little bit more aggressive.Fisher
Just to build on what Jim said, I think the other real trend line we're seeing is more and more prevalence of private equity. Certainly, they've raised huge coffers over the last year or so. Some are midway through, some are just starting to deploy that capital and that will no doubt have an impact. I mean, if you looked at our historic pie chart of where we saw activity historically, say a decade ago, PE [Private Equity] may have comprised 25% to maybe 30% of that. Today, it's nearly half of the searches we're seeing and so certainly, when you look at the background of these private equity sponsors and investors, they love a good CFO and they speak their same language. It's arguably the most important job at many of their portfolio companies, the person they're going to call 24x7 to get answers to their most burning questions and so we're definitely seeing that also have an impact on the skillset needed for CFOs to be successful.Corson
The PE example is fantastic. You could also take the analyst example, right, analysts want to talk to CFOs and I think it really highlights that importance of being able to communicate effectively and articulate complex issues in simple terms as you think about the skillsets that really effective CFOs need to have, how important is that communication and the stakeholder engagement piece?Fisher
I think it's really important. Jim and I were just talking about this earlier today. As we see capital markets opening up, I think it will become more and more important, particularly for those companies that are on the precipice of filing an S1, for example, they'll use their CFO as a spokesperson for the company. If you look at the core analytic skills that are generally most valued by our clients, I go back to FP&A [Financial Planning and Analysis] as that sort of operational finance toolkit is the one that's probably most in demand, but probably followed secondarily by the ability to tell a story persuasively, compellingly, to be that external consiglieri and storyteller to investors.Corson
Fantastic. I love that consiglieri word. It's such an important power behind the throne, the CFOs play to CEOs. Our research shows that the strength of that CFO-CEO relationship is really important and in many cases, it is very strong because it's so important. Well, we've also seen some challenges is perhaps CFO relationships with other functional leaders, other C-suite executives, anything you'd observe there in terms of how CFOs can be more successful engaging at that C-suite level?Lawson
When we look at the CFO psychometric profile, they spike in areas of being measured, modest and analytic and the strong CFOs recognize the fact that not all the business leaders are going to be able to be as numerate and they'll want to make some decisions on capital allocation based on businesses that they have a passion for, and might not exactly understand how they're going to fit in financially. But I do think from a leadership style perspective, the CFOs who can empathize with the business and can really help them along that journey and not just say no, that it's too expensive, we can't afford it, but really in partnership, put together a model and bring everyone along and then show why it may not be a good capital allocation decision for the company and I do think when it's time for the CFOs number to be called potentially be a CEO, the ones who are able to develop those relationships across the C-suite are the ones who are ultimately the most successful.Fisher
And I would say not just the CFOs, but also those who can help their teams build that bridge to other parts of the organization. I always think of a great CFO is they're likethe center of a wheel with spokes emanating out into all the different and disparate parts of the business, and it's not enough for one person to be able to do it. You really need to create a culture of partnership and empathy so that the people who are on your team, whether they're direct report or a direct to your direct, they can also do that and one way we've seen some of our clients do that is for more junior, let's say director level or even senior manager level folks, is to give them the opportunity to work in sales for a period of time, to work in a different part of the business outside of finance to again, sort of understand the pain points that that team might have and I think that can serve people really well and for a long time in the future be beneficial.Corson
As we just close out the conversation on the scope of the CFO role, we talked about the value creation, the resource allocation piece. Yes, I think it's also just worth touching on the risk management and compliance aspects because that foundation piece of the role I don't think is ever going to go away. But is there anything that you've seen there in terms of how that's evolved or the changing thinking in that more traditional area of the CFO scope of responsibility?Lawson
Specifically within the finance function itself in companies, I think the controller role is becoming more and more important and having someone that wants that role as a career endpoint just so that things are locked up around the fiduciary aspects of the role and it does seem like the corporate controller/chief accounting officers are the ones taking on more and more responsibilities, enterprise risk management, a lot of the financial transformation exercises. So, it is very important for any CFO who wants to be strategic and be involved in these capital allocation and strategy discussions to have a fiduciary accounting function that's just world class and a strong leader in that space.Fisher
Yeah, and certainly the vast majority of CFOs have enterprise risk management reporting up to them, but I wouldn't say there's been an increased push for that in recent years. Where we actually have seen a bit more of an emphasis on it is actually at the board level. We also spend a good chunk of our time recruiting members of audit committees for boards. There we're seeing more of a focus on it. In fact, it's really interesting because it used to be the case that we would mostly recruit current or recently retired CFOs, recently retired Big Four partners to boards and they're still very much in demand. But I would add on to that, to Jim's point, there is more of an appetite for hiring chief accounting officers from large public companies or recently retired chief accounting officers from large public companies because they do bring that enterprise risk management perspective.Corson
Let's switch case a little bit thinking about the impact of technology and data and how that's also impacting the CFO role. What do you see as being some of the key trends there and implications for CFOs and how they need to be operating?Fisher
We mentioned it briefly earlier, but AI, I just was at a dinner with about 30 CFOs and the number one topic du jour was AI and how we're going to end up utilizing and harnessing that power and also thinking about it strategically in a way that isn't overly concerning for the teams in the finance org because I think lots of people are worried, hey, am I going to lose my job because of this? And really, I think the first order of business for many CFOs is just to think about what are the really banal, mundane rote tasks that nobody in the finance organization enjoys doing and let's think about how we can outsource those first and foremost to AI.Clearly, we have lots of time and data to go before we've figured out how it's going to be impacted, but I think there are lots of potential use cases like revenue forecasting, error detection, decision support, FP&A, some controls pieces, cashflow, tax compliance. So I think there are lots of use cases for it. But again, I think it's also important to realize that some of those skills are really foundational because we build upon them as we're growing in our finance career and so how do we strike the right balance between, yes, removing costs and removing things that nobody really enjoys doing and also making sure that young people coming out of undergrad, let's say, who are doing their first job, how are they going to garner the skills and get the experience they need so that they can up level themselves and grow throughout their career?
Corson
Jim, anything to add?Lawson
On Jenna's point around how AI and automation will impact those that are coming up the finance function and this is something that we worry a lot about and ensuring that the junior level finance executives are learning some of the fundamentals, whether it's how to run a discounted cashflow initially by hand and then using automated tools that they're just getting a different experience than the current CFOs received 20 plus years ago.Fisher
And I think it also underscores, to your point, Myles around the partnership that is necessitated for the CFO to have around the organization. As we think about CFOs driving digital transformation efforts within their organizations, it's really important that the CFO has a strong partnership with the CIO [Chief Information Officer] and the IT department to make sure that we can expedite the implementation of technology while also mitigating some of the risks that Jim points out.Corson
That's really helpful. I appreciate sharing those perspectives and I think you touched on what we see, which is obviously CFOs have a role helping to drive digital transformation for the enterprise. They're doing it for the finance function that they're directly responsible for. Then also this personal aspect, and I think particularly, Jenna, to your point about the adoption of AI, how is CFOs modeling the adoption themselves, right? They're starting to use AI and what they do themselves day-to-day and I think there's some interesting use cases coming up in terms of how CFOs are using it to prepare for analyst presentations, for example, and role modeling some of that behavior of experimentation and starting to use the technology.We'd try to touch on some of the aspects of the talent development and one of the key elements for CFOs to be successful is that responsibility for developing the next generation of finance talent and Jim, you've alluded to it, the career path for a lot of people coming into the finance profession now is going to look very different to what it's been in the past, particularly for those entry level jobs where automation is taking away a lot of the roles and the tasks where many of us in our generation learn how to do things very tangibly. As you look at the CFOs that you work with, what are some of the ones that are really successful in this talent development role doing differentially than their peers?
Lawson
One of the other threads around the functional areas within finance, whether it's tax, treasury or investor relations, controlling and I mean they're all becoming very specialized. Ten years ago you saw a lot of top talent rotating through investor relations or treasury, not so much tax, but we're seeing that rotation not happen as much as it did in the past and our clients are relying more on external advisors around investor relations coaching or using third parties to round out talent development because the opportunity, especially in large organizations to have a broader set of responsibilities. One thing we do see clients do when succession is on the horizon will elevate one of the financial executives into a role where they have a few things reporting in like tax or treasury, sometimes IR. Our opinion is that often happens too late.We see CEO succession is now happening years and years in advance and boards are now just starting to talk about CFO succession and what I find interesting for CEO succession, if the leader is really strong in the industry and in the commercial aspects of the role or maybe the technology, you can surround that individual with an executive team that covers the blind side, so to speak. It's really tough to do that for the CFO if the internal CFO succession candidate has not touched some of the critical areas, especially the external facing aspects of the role, treasury, investor relations, there's a risk and a lot of boards just don't get comfortable with an internal candidate who has not seen the breadth of the finance function.
Corson
That makes a lot of sense and I suppose this question about how do you identify talent early enough and how do you make those investments? What are the experiences, that sort of passport that you need to be stamping on your way through to build that credibility and that confidence that the board is going to need to have, particularly for internal candidates? The examples you'd point to.Fisher
I think when we think about who's CFO ready or who the NextGen talent is going to be a part of, we think of it both in terms of experiential more technical skills as well as the more leadership ones that perhaps we've historically thought were more esoteric. But now thanks to the ability for us to really have a data-driven approach to leadership qualifications and qualities and competencies, we can actually put that into a numerical scorecard if you will and so we have a partnership here at Russell Reynolds with Hogan, which is generally considered to be the preeminent assessment tool and there's been, I'd say, a pretty big sea change in terms of what we thought was most dispositive of great leadership and what that looked like.It used to be 10 years ago, we thought that it was these more loud, extroverted, disruptive, risk taking, heroic, galvanizing kinds of traits, almost like akin to a military leader. That was sort of what leadership looked like and what we've actually found through our research in partnership with Hogan is that what is most dispositive of a successful leader is, yes, sometimes to be those more loud, extroverted qualities. But we know that 86% of CFOs are actually introverts and we also know that they make excellent leaders or they can. So what's most important is the ability to toggle between seemingly anachronistic ends of a spectrum. So on the one hand, yes, sometimes being risk taking and galvanizing, but equally in the right moment, being pragmatic, being reluctant, being connecting, being vulnerable, these quieter forms of leadership and frankly, this is where a lot of CFOs really shine and both are equally important depending upon the context. From a skillset perspective, FP&A, I alluded to that earlier that's certainly one of the core skills that all of our clients, public and private, will point toward.
I think another is the ability to think like an owner. So if you were going to own 100% of the equity of a company, what decisions would you make and how can you make those decisions quickly? Time is money and so thinking in real time about the decisions that need to be made and helping to galvanize support for that perspective. So I think it's really both and what's really nice about the science we have behind leadership now is that we can start to infuse some of these tests and assessments into our leadership and team development. So, we can look at people who are 5, 10 years out of school and help them think about where are the areas in which you need to be rounded out, both as a leader as well as in terms of your experience, skillset and we can help be much more planful and mindful so that you check as many of the boxes as possible. Nobody's the purple Unicorn. Nobody checks all the boxes. But you want to have as many of those skillsets amalgamated under your belt, if you will, before you step into the CFO seat and put a wrapper around all of it.
Corson
That's a great summary on the introversion point. I love what Daniel Pink describes as ambiverts, people that can flex between the introvert and extroverts end of the spectrum and it's based on circumstances, which things, what you would describe in general and Jim, I wanted to pick up actually because you used the word empathetic or empathy earlier on? It's such an important word, right? It's not one you necessarily associate with CFOs. They tend to be more on the logical, analytical side of the spectrum is a sort of a generalization. Our research shows that to be successful in driving transformation, you have to get these human elements right and so that sort of empathy, the ability to listen to your team and unlock all of that insight and knowledge that exists in the team and create the psychology for people to be open and honest, particularly when you're going through longer term transformation journey, which is difficult for everybody. Is that something, again you see in your research as being a differentiator?Lawson
Absolutely and the one thing I would tell young people coming up the finance function, it's not about getting your CPA, CFA[Chartered Financial Analyst], CMA[Certified Management Accountant] and checking these boxes relative to like technical experience. It's really focusing on your self-awareness, your emotional intelligence, your ability to work with the business, business leaders and develop your own team. That's really where you breakthrough from the direct report to a CFO to the CFO role, especially in large, complicated companies.Fisher
And I think we're seeing this on a broad stage when you look at the role that many CEOs, for example, have to play in their communities and their companies. I think if you look at secular trend lines, especially for young people, a lot of trust that people have had historically in institutions, whether it's government or religion or whatever, has fallen by the wayside and companies are being called upon to opine and have a perspective on things that CEOs 20-30 years ago really never had to and why that matters in thinking about the development of a CFO is that you need to be testing for and growing your intellectual curiosity, your growth mindset, your ability to step into a role, frankly, that you can't possibly be 100% prepared for.So when we see the best CFOs and the best companies that are doing really a beautiful job of training people for the future, they're giving people these rotational opportunities, they're job swapping, they're giving people expat assignments, they're putting them into positions where they don't know all the answers. There isn't necessarily a playbook, but they've got to figure it out. They've got to build the right partnerships and bridges with other colleagues and figure it out and so I think it's a great way to test and develop people as they grow in their career to help ready them for whether it's CFO or CEO or whatever they aspire to.
Corson
That really resonates in number of conversations I've had with CFOs, they would fully acknowledge most of them aren’t the finished product on day one, and they're on their own journey I think to your point, Jenna, the way you create the capacity and the headroom to grow yourself is by building a great team around you to take on the things that you can no longer find the time to do. So one thing, Jenna, you're a very passionate advocate for the importance of diversity, equity and inclusion (DEI). So I was interested how you're seeing CFOs play a role there in building their teams and how do you implicitly know that this is the right thing to do? There's benefits from it, but how do you also measure some of the success that you should be driving from DEI programs?Fisher
There are myriad data sets and proof points around how more diverse executive teams will outperform their competitor sets. One example I always like to cite is there's a researcher at Stanford who did an exercise where she had two groups of students. One was a completely homogeneous group, all the same gender, same major, same racial background and they were given a puzzle to solve and they had an hour to work on the puzzle. At the end of the hour, they said, how do you think you did? And they said we crushed it and then they asked them, and did you have a good time? Did you enjoy working together? And they said, yes, it was so fun. Then they inserted one different person. They had a woman who had a different major, different ethnic background into the mix and same puzzle.They worked on it for the same amount of time. They came out, asked them the same two questions, and they said it was not fun. Like we argued it was not an enjoyable experience really and we don't really think we did that well. But ultimately, the group that was heterogeneous in composition did 60% better than the group that felt really good because everybody will sort of groupthink and all got along swimmingly and it's a good reminder that sometimes as leaders, it might be our natural inclination to look for other people who look like us, literally or figuratively, but it's so important to bring in other perspectives because it ultimately does yield a better outcome because we have the discourse and we have a conversation that might feel sort of uncomfortable and tough, but hopefully it yields a better outcome and so I am passionate about this topic.
I wrote a book about it last year and I think companies have really gotten belligerent around this and they realize that look it’s a war for talent. Jim and I are on the leading edges of that war every day for our clients looking for the best talent and the company that really realized, okay, we need to be more inclusive. We need to look and help develop people that maybe haven't had that opportunity historically. They will be the winners. They'll retain more people, they'll be able to attract more people, and ultimately they'll perform better financially and I don't suggest any of this out of any sort of benevolence of purpose. It's really out of cold blooded carnivorous capitalism that I think diversity will ultimately win the day.
Corson
Just building on that point of heterogeneous teams, one of the things we also observe with CFOs is obviously they see some of the challenges in the boardroom, in the C-suite, where with having different perspectives, different backgrounds, in many ways that's a positive. You want diversity of perspective, different opinions, but ultimately the organization has to come together. Now, whilst it may not get to consensus, you need commitment and the executive team to be driving commitment and I think the role CFOs can play in delivering on that commitment is important. Is that something that you'd see the CFO is playing an important role in that C-suite environment to deliver?Fisher
You raised the point Myles about boards. Certainly, I think boards sort of led the way as companies started to think about how are the ways in which we can infuse more diversity. We certainly saw that start at the board level. In concert with that, the CFO role is one that, well, historically, for example, only about 16% to 17% of CFOs are women, about 3% to 4% are people of color. We've seen great strides over the last few years. Again, I think because we've seen so many CFOs retire, there was a bull run in the markets for 13.5 years. COVID- sort of upended that and a lot of CFOs said, yeah, great, I've hit my number. I'm ready to exit stage left. I can go sit on boards. I could be an advisor. I can work in private equity as an operating partner and that really has given rise to a next gen of talent that is truly more diverse than the generation that preceded it.I still think there's lots of room to improve, but the general secular trend lines are positive. One of the things that we watch for here at Russell Reynolds that we're keeping an eye on as we think about the disparity between supply and demand is once women and people of color in particular become public company CFOs, they are besieged with board opportunities, probably not surprising to many listening and so keeping them in their seats so we don't lose them “to board roles” full time going plural as they say in the UK and so that is something that really does necessitate the constant care and feeding of the pipeline behind it and the other thing I would say that I think it's really imperative, particularly as we're thinking about the disparity between men and women, for example, at the CEO level, it's about 10% of CEOs are women.
So, we clearly are a small minority. We need to give people earlier in their careers P&L[profit and loss] exposure. The CFO role is the much better way to get insight and to have impact into running a P&L versus let's say, being a general counsel or being a head of HR, which are wonderful roles of course and actually have a lot more diversity found in those functional areas. But I think the CFO role is uniquely tethered to potentially becoming a CEO because of that P&L responsibility piece of it.
Corson
We've covered a lot of ground. We've talked a bit about where we've come from. As the two of you sort of look forward, some of the things you expect to see happening over the next couple of years, particularly in terms of how the CFO role continues to evolve. Anything that you think we should be preparing for or attuned to?Lawson
One of the things we're always looking for is where's the talent going to come from? One of the unfortunate realities that we're seeing in the market right now is the traditional Academy training grounds. There are less of the leadership training programs that existed even 10 years ago. We're seeing a lot less expat assignments, as I mentioned earlier, we're seeing a lot less moving between finance, functional roles, rotational roles. So it does leave us sometimes worried around where the next generation of CFO is going to come from. We think with the focus on capital allocation strategy, we could see some coming out of private equity.We think we'll continue to see a lot of investment bankers make the change. We think that the opportunities around AI and automation will take some of those aspects of the CFO role that are very like financial platform building and systems and streamline a lot of those responsibilities. So the CFO can continue to be strategic and it wouldn't shock me if the trends continue to grow towards CFOs becoming CEOs. Investors care a lot about companies that have a focused strategy, that are focused on consistent and profitable businesses and there's no one better than the CFO to lead that process for a company.
Fisher
If I were to give advice to a young person coming out of Business School, let's say, I think there's been a lot of focus over the last few years of going to more entrepreneurial, high-growth kinds of companies and that can be great, but I think it's also extremely important to think about who are your mentors? Who are you learning from, you’re getting brand and scale on your resume, but also having people you can look up to and learn from. One of the innovative offerings we just started doing here at Russell Reynolds is partnering either first time CFOs or people who aspire to be CEOs with mentors, people who are recently retired, very experienced CFOs. Because sometimes I think there's a bias where executives or board members even think, oh, either that person can just call somebody on the board.I used to be a CFO. But the reality is in practice, is a nascent, newly minted CFO really going to call his or her audit committee chair and say, hey, I'm not sure what to do here. I have this question. It's kind of dumb. Probably not. It's kind of their boss's boss, right? And so having somebody who's exogenous to the company, who you can just pick up and phone a friend and ask a question that might seem silly on some level, but is not, it's actually a really important question is such an important thing to be able to do and if you don't do it through something like what Russell Reynolds has done, I mean, having a former boss that you could call and say, hey, how would you have handled this? So really, those foundational experiences and mentors are so valuable, not just in the moment, but longitudinally throughout the decades of your career.