CPA, MBA, CMA: How Much Do the Letters Really Matter?
As a recruiter specializing in CFO searches, Dave Arnold knows that companies want a lot from their head finance person. In particular, he says, they want real-world experience. For the kind of venture-backed and small-cap public companies he works with, a prospective CFO needs to have had experience with growth companies. Having taken a firm through an IPO, for example, is an especially attractive skill.
So, does this mean experience ever carries more weight than paper credentials like a CPA certification or MBA degree? The fact is they are still highly valued by employers. “Most companies want CPAs and MBAs,” says Arnold, the founder of Arnold Partners in Los Gatos, California. “One or both are almost always present…. I think it’s really important.”
But which one they want – and which one CFOs think companies should want – is a hot debate, and a topic frequently visited by Proformative members through the Questions section of the site. Particularly as of late – after a period when CFOs’ laser-like attention on accounting issues in the early 2000s evolved into a position that requires more strategic thinking at some companies – the backgrounds businesses expect of their new finance chiefs vary greatly.
A Rise in Demand for a Certain Type of CFO
Cindy Kraft, a career strategist with The CFO Coach, says companies are increasingly interested in hiring financial executives with an operational focus. “The MBA gives that broader, general management perspective,” she says.
Indeed, this year, 26 percent of CFOs appointed at large American companies came from a general management position rather than a finance role, up from 14 percent last year, according to an analysis done by executive recruiter Korn/Ferry International for the Wall Street Journal.
But Kraft says companies aren’t simply switching their recruitment from CPAs to MBAs. “The new trend, which probably has been over maybe the past two to three years, has been that combination of the CPA and MBA,” she says.
The importance of a CPA for financial officer positions has much to do with regulations. According to executive search firm Spencer Stuart, the percentage of CFOs holding a CPA certification rose from 29 percent to 45 percent when Sarbanes-Oxley took effect about a decade ago.
Even now, Kraft says, publicly traded companies almost universally want a CFO with a CPA to help them deal with extensive reporting requirements. But with private companies, a lack of certification isn’t necessarily a deal-breaker.
“What the CPA designation does add is a somewhat strong (if not absolute) assurance that the CPA CFO is extremely well versed in GAAP accounting,” he wrote. “Another benefit of a CPA CFO who started their career in the audit function of a CPA firm is that auditing teaches a great deal about controls and process, which is critically important in building a rock-solid financial organization.”
Still, it makes a difference how much someone has actually applied all those accounting rules in the real world. Indeed, says consulting CFO Wayne Spivak, passing the CPA exam and then spending time at an accounting firm — something most states require for licensing — can take professionals away from learning management skills. “You don’t know how a company really runs,” he says. “These are things you learn over time. It’s not something you’re going to learn in school.”
Even people like Arnold who see value in certifications say that going back to school isn’t always the right option for senior-level professionals. By the time they reach their first CFO post, Arnold says, they are usually too busy with their job and family to go back to school. Most couldn’t stop their careers to spend time doing the accounting work that most CPA certifications demand.
Arnold says he wouldn’t necessarily even advise a CFO who ended up between jobs to go back to school for an MBA if it meant being out of the workforce for an extended period. “There could be some negative stigma around that,” he says. “So you have to balance that out.”
As for CFOs who do have CPAs, Arnold says it’s a good idea to keep up with CPE credits, if only for the ability to speak knowledgeably with the company’s accounting firm. “The relationship with auditors has become more contentious,” he said. “A CFO who’s up to date on technical issues is probably more of an asset than somebody who isn’t.”
The Letters That Matter Now May Not Matter Later
For some CFOs, they see a distinct gap between what certifications are needed to do the job and what’s needed to get a new job. In an answer to a recent Proformative question, Daniel Poirier, CFO at Pro Tech International, said that his lack of a CPA made his job hunt two years ago difficult. “Having said that, I eventually did land a job as a CFO through my networking efforts … and my ability to sell myself prior to the [résumé] showing up on their desk,” he wrote. And, he added, “I have found that once in a position of responsibility, the lack of CPA designation has not been a hindrance in the performance of my duties.”
At the same time, Kraft says some certifications that might seem like they would help on the job aren’t particularly helpful in a job search. A CMA, or Certified Management Accountant designation, for example, is rarely a sought-after qualification. She says many people who have a CMA argue that it’s more relevant to running a company than a CPA. “You can believe that,” she says, “But if companies aren’t asking for it, that just flat out isn’t true."
Like Arnold, Kraft says companies are looking for paper certifications, but it’s just as important for CFOs to have a broad range of experiences if they want to be strong candidates for the next job. This means spending time overseas with subsidiaries and taking the time to understand the IT side of the business. “Those are the areas that I think are really important for up and coming CFOs, or when you’re looking for that next opportunity,” she says.
Livia Gershon is a freelance writer in Nashua, New Hampshire.