HireLabs Perspective: A CEO’s bare necessities
New data from ExecuNet Survey 2009 on C-class trends proves a distinct point – Executives do not spend enough time on the job to hit peak performance.
This is made worse by the fact that executives spend half of a year actively searching for jobs.
So the questions is not what competencies must executives possess to stay motivated – rather it is how well can executives understand the business.
Having asked that question, it shouldn’t be difficult to grasp the underlying factor that executives must speak finance. Add to that a strong leadership ability, and you’ve got a true superstar executive who can really begin to rake in greater benefits for the business while staying motivated.
It has, thus, come to pass, that given the new dynamics of a new economy, the best person to have on the helm will be the one with a strong financial background. After all, when the business speaks finance, who better an interpreter than a master financial ‘linguist’.
The following article, from the Canadian Institute of Chartered Accountants, should help shed some new insight into the phenomena and it’s value in the current economic downturn:
They’re often referred to as pencil pushers and human calculators. But a closer look at corporate Canada’s executive suites reveals that a growing number of accountants are also proudly wearing the titles of president or chief executive officer, or both.
“The qualifications of an accountant are highly desirable today for companies looking to fill a CEO position” says Peter Grech, managing director at Grech Associates Executive Search Inc., an executive recruitment firm in Toronto.
“From the searches we’ve worked on at that level, there has certainly been a strong interest in finding someone who is, say, a chief financial officer ready to move up to CEO.”
Studies by the Canadian Institute of Chartered Accountants lend credence to Mr. Grech’s observations. Last year, according to the institute, close to 10 per cent of CEOs and presidents of ROB 1000 companies were chartered accountants. Compare this to the year 2000, when about 8 per cent of CEOs and close to 9 per cent of presidents were CAs.
CAs aren’t the only accountants occupying more of the top posts in the country. David Fletcher, a spokesperson for CMA Canada, the organization that represents certified management accountants, says CMAs hold 5 per cent of CEO positions in Canada, double the number from five years ago.
Another accounting organization, the Certified General Accountants Association of Canada, doesn’t track these kinds of statistics. But its president and CEO, Anthony Ariganello, proudly points to himself as an example; before joining CGA Canada, Mr. Ariganello was president and CEO of Avon Canada.
“I started off as the controller and then gradually assumed more responsibility in the areas of legal and logistics,” says Mr. Ariganello, who is a CGA and a certified public accountant. “I then became VP of finance before becoming president and CEO.”
So what is turning companies on to accountants as CEOs?
Tim Hamilton, a partner at Calgary executive search firm Hamilton Hall Soles/Ray & Berndston Inc., throws out a couple of hints: Enron and WorldCom.
“In the wake of these corporate scandals, I think the executives with financial education are more marketable as CEOs because they’re viewed as someone who can be held to a higher level of accountability,” he says.
Jean Bedard, CEO of Sportscene Group Inc., based in Boucherville, Que., agrees. He says being a chartered accountant helped him to understand quickly what needed to be done at his company, which manages a popular sports-themed restaurant chain, La Cage aux Sports. Last year, the publicly traded company’s overall revenue topped $105-million, a 16-per-cent increase over 2005.
“I was able to quickly grasp what needed to be done with our company’s governance, probably a lot more easily than a CEO who wasn’t coming from an accounting background,” Mr. Bedard says.
“And I’m proud to say that two years ago, we won the Korn/Ferry award for good governance,” he adds, referring to an award from Korn/Ferry International, an executive recruitment firm based in Los Angeles.
Accountants have accountability and ethics drilled into them from day one as part of their education, says Kevin Dancey, CICA’s president and CEO. “That’s very important to shareholders,” he says. “When you’re part of a profession like ours, having that strong code of values and ethics is very important, and that’s been ingrained in our training.”
Many companies see mergers and acquisitions as critical to survival and growth, says Mr. Ariganello, and having a CEO with a strong grasp of financial structures and the ability to read meaning into the numbers on a financial statement can give a company a distinct edge in complex business deals.
Mr. Ariganello says his ability to quickly size up a company’s financials served him well at Avon. “I would sit in meetings to review the budget or the year-end financials, and I could take a look at financial statements and size them up in 30 minutes,” he says. “Whereas for a CEO without an accounting background, it would probably take half a day.”
Mr. Hamilton says accountant CEOs are particularly valuable during tough economic times, when companies must often make cuts to their operations. Having someone at the helm who truly understands the financial implications of each decision can make a huge difference, he says.
Wynne Powell, a CGA who is president and chief operating officer at London Drugs Ltd., based in Richmond, B.C., knows exactly what Mr. Hamilton is talking about. Looking at a financial statement, he can see problems that those without a financial background are likely to miss.
“For example, if I’m looking at a report from a division that’s telling me gross margin is a problem, I can look at that report and see that the problem isn’t just the gross margin, it’s also the inventory that isn’t turning well enough,” he says. “And that’s resulting in a depressed margin because the inventory is decreasing in value as it gets older.”
Indeed, CICA’s latest study of ROB 1000 companies suggests that having an accountant running the show can yield healthy returns. The organization found that companies whose president or CEO was a CA realized an average return on equity of 3.8 per cent and a return on capital of 2.5 per cent, versus -2.1 per cent and 0.6 per cent, respectively, for companies whose top officer was not a CA.
But while most people acknowledge accountants’ financial wisdom, some still hang on to the traditional stereotype — accountants as shy characters who are good at doing taxes and balancing books but somewhat inept when it comes to dealing with people.
“That stereotype is slowly disappearing,” says Mr. Hamilton. “All those jokes about accountants, while still humorous, are probably less true today.”
A key factor behind this changing image is the inclusion in school curricula of courses that focus on people-and-management skills as well as strategic thinking. CMA Canada, for instance, puts great emphasis on leadership and communication skills.
Jane Peverett, president and CEO of British Columbia Transmission Corp., the Crown corporation that manages the province’s electricity grid, says this was the main reason she chose to pursue a CMA designation.
“It was the ‘M’ in CMA that sold me, because that meant I would also learn about management and leadership,” she says.
Whether they’re certified as a CMA, CA, CGA or CPA, today’s accountants are a new breed of professionals, says Mr. Powell. Many are strong managers, entrepreneurs and business strategists, and they’re taking on broader roles in their companies — roles that often lead them all the way to the C-suite.
“Of course, putting an accountant at the head of a company doesn’t automatically engender success because you also need to know how to run an enterprise and how to manage people,” says Mr. Powell.
“Now if you had a leader with those two skills and a strong financial background, then I think you’ve got a winning combination.”
By the numbers:
23% Percentage of top officers (chair, CEO, president, CFO, COO and corporate secretary) in ROB 1000 companies who were chartered accountants in 2006
23% Percentage of top officers (chair, CEO, president, CFO, COO and corporate secretary) in ROB 1000 companies who were chartered accountants in 2006
3.8% Average return on equity realized at ROB 1000 companies whose president or CEO was a chartered accountant
-2.1% Average return on equity among ROB 1000 companies where neither the president nor CEO was a CA
Saleem Qureshi, COO at Hirelabs Inc., is of the opinion that C-level executives also need to be involved, especially when the executive is the CEO. He believes that the success traits necessary during the downturn not only enables a business to grow during the economic crises, but also adds enormous post-recession value to the business, as the necessary traits will have a ripple effect.
Saleem says the observations made in MAKING A KEY DECISION IN A DOWNTURN: GO ON THE OFFENSIVE OR BE DEFENSIVE?, an article published in the Jan/Feb 2009 issue of Ivey Business Journal, make serious sense.
The strategic decisions that rest upon a company’s executive must be swift, effective, and demonstrate short, medium, and long term value.
And that means an engaged executive who is motivated at the core.
To get started on our Sense™ system, or to experience a live demo at your institution, please contact HireLabs Inc. on +1 (650) 492 5007 or +1 (650) 492 5088.