CPA CFO vs. Non-CPA CFO
The controversy is back.
Should Chief Financial Officers be required to hold a CPA designation, or not?
It began with a guest post on the FEI blog, with a couple of nightmares, I mean examples, of companies with non-CPA CFOs at the helm, and continued on through the comment section. This has also been a hot topic in Proformative, too.
Non-CPA CFOs say it doesn’t matter, shouldn’t matter because they can still do the job, and companies just don’t understand that fact. Companies “glorify” that piece of paper. What they fail to understand is that it’s not about them. It is about what corporate leadership has decided is right for the company.
The other argument is that CPAs are bean counters and not strategic leaders. I couldn’t disagree more. Many more of my clients began in accounting, secured their CPA, and have gone on to holding a seat at the executive table as strategic leaders.
Statistics from Spencer Stuart support what I see. The number of CPA CFOs has risen from 29% to 45% since 2003. Simultaneously, bean counting is out; driving strategic vision is in high demand. The two are not mutually exclusive.
Rather, I think it speaks more to the wiring of the individual. Some CPAs are numbers nerds. It’s what they love and where they feel comfortable. Their lifelong goal may be accounting. It works for them.
On the other hand, some numbers savvy folks are also quite high on the “D” (dominant) and “I” (influence) DISC scale. They have both leadership and people skills. Those CPA CFOs are both left brain and right brain thinkers and will always be high value targets.
Since you can’t change what a company has decided they need, it’s important as a candidate to identify your target audience. Who needs what you bring to the table? It’s a much easier sale then beating your head against a wall trying to convince someone else that they need / want / should buy something different.
One final thought ... the second example in the FEI blog post points to the reason why companies, as a rule, prefer to hire sitting CFOs over candidates who have never held that title.
Comments
Company: Mindful Business Solutions
I think you may be missing the point. A CPA designation indicates that an individual has received a certain level and kind of training and experience. While a non-CPA CFO may have equivalent experience and training, he has to work harder to prove it. Since many employers don't want to work harder, they require a CPA to eliminate work.
Company:
I respectfully disagree with your assertion that a CPA credential, or the lack of one, has anything to do with an employer's work ethic, Steve. It has everything to do with an employer viewing their finance leader as competent and capable and possessing the level of training that credential brings with it ... a view which the company who pays the salary is entitled to hold.
Company: Venture Resoureces, LLC
And I respectfully disagree with your comments Cindy. The broader strategic thinking, total company- operations viewpoint honed by an MBA who has had business operations and broader based financial analytical skills, not accounting- CPA based learning, is far better prepared to become not only a finacial leader of an organization but eventually a CEO of the same.
Company: Rexanto
Precisely; especially in this age when a posting for a CFO could result in hundreds of responses (or more), you need to apply filters. This is simply one that is applied when the req is generic and open.
Company: California Scottish Rite Foundation
I agree that Cindy is missing the point. I also disagree with STeve's response. The fact that should be conisered is the nature of the work expected form the CFO. While may non-CPA CFO's understand and have worked through SEC related activities, the CPA may be more familiar with the process. That aside, back to the nature of the work to determine the needs, ceritification of the CFO. I have found in many cases that all the certification means (either CPA or CMA) that the holder can pass a test and some experience. I look first at work expereince and levels of responsibility before I looka t certification.
Company:
Please help me understand ... what point am I missing?
Company: The Protective Group, Inc.
Cindy, your comment that a company wants what it wants is right on the money. Your logic in other areas is mixed, for instance you imply that only CPA's are someone numbers folks and that "those CPA/CFO's are...". Why do believe not having a CPA, or not having one, determines whether one is good at or comfortable with numbers? The CPA is less about numbers and more about rules and has nothing to do per se with having a strategic outlook. There are clearly CPA's that have one, and there are other CPA's that lack one. There is no correlation or causality between one and the other. The rise in the CPA statistic you mention has everything to do with Sarbanes-Oxley and public companies needing to feel comfortable with their compliance requirements and nothing to do with individuals ability to perform a job.
Company:
Thanks Damon. To be clear, I am not saying non-CPAs are uncomfortable with numbers. What I did say is that it is the basis of an argument I've seen put forth. "The other argument is that CPAs are bean counters and not strategic leaders. I couldn’t disagree more. Many more of my clients began in accounting, secured their CPA, and have gone on to holding a seat at the executive table as strategic leaders." You'll see in the middle of this excerpt that I state, "I couldn't disagree more."
My comments are that oftentimes it is about a person's wiring. If a CPA is a true numbers nerd, he is going to always want to stay in a place where he can analyze numbers rather than going outside his comfort zone and dealing with people. If, on the other hand, he loves numbers and loves working with people, "that" CPA has every potential to become a strategic leader.
I agree with your last sentence that not having a CPA credential, in and of itself, does not "necessarily" impact a candidate's ability to do the job. But that is the point of my blog post. It doesn't matter what you and I think, it matters what the company believes.
Company: Maine Modern Medicines
To CPA or not CPA: that is the question. I don't think Shakespeare will mind my paraphrasing for this discussion. Some of my best friends are CPAs. They are gifted folks who have a superb grip GAAP etc. They are excellent Controllers, but strategic planners they are not. I also have several Ivy League-educated MBA friends. They truly are strategic planners. Who would I chose for a CFO role? It depends. But, here is a handy pdf that lays out the roles of a CFO (dominated by MBAs) and that of a Controller (dominated by CPAs); not that I think any of you don't already know this. For me, I'd compare my CFO candidates to this list. http://candidateschair.com/wp-content/uploads/2008/12/cfo-vs-controller-candidates-chair.pdf
I hope you find this "Proformative".
Best,
Brian
Company: Jack and Jake's
My take is that the CPA designation is just one qualification that may or may not matter to the corporation. I know plenty of CPAs who would not make good CFOs and plenty who would. What separates the qualified candidates from the non-qualified candidates is people skills (the ability to influence others), numbers skills (let's call this what it really is: the baseline intelligence necessary to handle the complexity of the position), problem-solving skills, time management skills, and the ability to get stuff done (we call it GSD, though the "S" stands for another word). Layer on top of this specific industry, public, going public, money-raising, etc. experience, and you have the perfect candidate. If the candidate fits all of these criteria AND s/he's a CPA, wow! (BTW, I'm a CPA).
Company: Group Phoenix Advisors
that CPAs serve an important role in ensuring the accuracy, integrity, reliability and clarity of a company's financial information and performance. That is, of course, all historical regurgitation and a need that public co's have to satisfy extant rules and regulations (more often than not, written by CPA firms themselves). It's a self-fulfilling prophecy. The CFOs who I have worked with and for, predominantly exhibited a grasp of business dynamics, market influences, a cross-functional aptitude and a keen sense of what makes sense in terms of profit and sustainable growth and what is simply a hair-brained idea by some hotshot in marketing. To a man/woman, those CFOs viewed the CPA function in the light of compliance, reporting, audit, tax and accounting needs of the company. Strategy, planning, operational platform development and management, inter-function negotiation, guidance and cohesiveness, wise and timely counsel to the CEO and COO and board, managing earnings and analyst expectations, forging banking and investment relationships, negotiating profitable agreements and obligations, and motivating the company's executives and underlying staff towards a long-term plan and a profit-focused mindset is the TRUE CFO's role. And the best I have worked with and worked for, were NOT CPAs. That's my experience. It will differ from others. I am a CFO. I pride myself on understanding the role's demands on the historical and the forward-looking. I pride myself on understanding the essential foundations of solid accounting practices and compliance with applicable regulations and oversight. I also pride myself on understanding how my team and the rest of the company ought to operate within those regulatory paradigms in order to turn a profit. PROFIT is the driver of an established, successful, growing company. Losing sight of PROFIT in lieu of compliance, audits, taxation issues and other peripheral (to me) issues is death sentence to a CFO. My job is to make sure the company operates in a profitable manner, within the confines of the law. If my focus and professional 'upbringing' is heavily influenced by operating within the established guidelines while deferring profit-centric planning and execution as something 'I'll pick up as I go along', I don't know how good of a CFO I will be. CPAs and attorneys are adjunct functions to corporate profitability and growth. When those professionals sit in the driver's seat, i.e. the CFO, CEO or COO role, their professional tendencies don't always give way to the strict demands of the C-level position. The company is a living organism. While it needs to be mindful of its limits, it needs to be managed by someone who knows how to responsibly and productively test those limits in order to remain competitive and grow as a company. I am by no means advocating a loose and circumventing interpretation of the law or financial regulations in place for companies of any size. But I do believe an MBA or MS in Finance better prepares a CFO to look at the company in the context of the market, the government, the consumer and the employee, in order to attend to all stakeholders according to their influence on that 'living organism' and coalesce the corporation's activities through those tricky shoals, toward sustained profitability and growth.
Company: Stono Capital Management LLC
Great post and my thoughts and experience has been very similar. Unfortunately, this debate will rage on forever I fear.
Company: EMS-Sky Connect
I am not going to say one is better than the other. However, while a driver who is very conscious of traffic signals (compliance} may slow down the speed (of profitability), missing a traffic signal could lead to an outright crash, e.g. Enron! We should also not lose sight of the fact that a licensed CPA is subject to some strict rules of professional ethics in 'public interest', unlike the MBA holder.
Company: Group Phoenix Advisors
Joseph's comments are more succinct than mine, I'll readily admit. We all agree that a licensed CPA is subject to strict rules regarding professional advisory and ethics demonstrated in the course of their responsibilities and services rendered to the client. Let's also look at the Enron case as a PRIME EXAMPLE of how the rules are meaningless and irrelevant when the auditor doesn't want to lose a valuable client (even when it leads to the obliteration of a firm as storied and respected as AA was).
MBAs and CPAs are excessively conscious of the compliance and regulatory environment. Both are going to diligently perform their duties as CFO within the confines of the law (if their reputations and paychecks mean anything to them). Memorializing an ethics code doesn't necessarily prevent the Enron/AA marriage and disastrous divorce and death from happening. AA was primarily involved in the audit of WorldCom as well, as PWC was complicit in Kozlowski's questionable personal use of corporate funds. David Friehling was also a CPA, and worked tirelessly for Mr. Madoff to circumvent, undermine and shred to tatters the CPA Code of Ethics.
The strict rules of professional ethics are only meaningful to individuals and corporations with a strong conscience and a stronger focus on the absolute bare minimum required of company to remain profitable: STAY IN BUSINESS. Arthur Andersen and Mr. Friehling failed to defer to this basic prerequisite of achieving profit. So did Messrs. Lay, Skilling, Ebbers, Sullivan, Kozlowski, Madoff, etc. There is a business education, business sense, business ethics and business experience that can only be gained and honed by operating a business. There are no shortcuts to this accumulation of acumen and ability. There are no codified rules of ethics or standards of practice. It is based on a difficult-to-define mix of common sense and operational experience. The focus of most MBA programs is defining the playing field of economics and commerce to educate the student in the HOW of running a business. Regulatory and legal education are a part of that, but not the sole focus of that; and not all MBA programs stress ethics as a distinct and critical element in this operational education. I was fortunate to have pursued an MBA within a program that emphasized the role of ethics across the curriculum. It is a mindset and philosophy that has to be adopted and fostered. It can't merely be codified and licensed. Unlike the CPA holder, the MBA graduate is expected to know how to manage all or parts of a thriving business (and some of us get to manage the not so thriving businesses, but that's a completely different topic). It is a holistic education and a comprehensive skill set that you simply can't develop through years in an audit practice and a battery of tests and licensing requirements.
The dilemma is making sure the business the CFO is managing is thriving and staged for continued and sustainable growth and solvency, while addressing the ever-increasing boundaries, checks and balances imposed on business by the regulatory and oversight bodies. The focus should, in my opinion, always defer to the ongoing health and viability of the company. Not in spite of regulatory obligations, but within them. I also believe that the goal of these regulations should be clearly communicated within the MBA curriculum, and perhaps to Joseph's point, this is not being done consistently or effectively. I know MBA CFOs sometimes have a frustrated perspective when it comes to CPAs and attorneys, as 'necessary evils' required in the due course of business. I know CPA CFOs probably experience less of this frustration, as they come from a highly regulated work-environment, and as was pointed out, abide by a strict set of rules and ethical standards. The bottom line, in my view, is that the traffic signals, when ignored, can lead to outright crashes (sometimes enabled by the very CPAs paid to highlight those signals); again, in my view, the traffic signals, when increased in number and complexity, can also lead to outright crashes, of not just the company in question, but whole swaths of any economy. There is a balance we all need to attend to as CFOs- stay profitable, stay clear of the law. CPAs are an indelible component in maintaining that balance. So are MBAs. Each professional's credentials or aptitudes are indispensable to a thriving business, and because of that, neither should have a monopoly on the CFO suite.
Company: Earnest Products, Inc.
The role of a CFO is to direct the entire financial function of the company. To help the CEO execute his vision and interact with all senior managers responsible for the different disciplines of the company. The CFO is a financial visionary, taking the strategy and vision as set forth by the CEO and Board, developing the financial model and monitoring the ongoing performance of the company. Furthermore the CFO of a public company has to be the financial spokesperson for the company and essentially sell the company to the market place. The true training and educational background for a CFO is in finance and business management. There is no question that a CFO must be proficient in accounting and completely up to date with GAAP, FASB, etc... However, the only value to a CPA designation is their ability to render a PUBLIC opinion as to the financial statements. Let’s face it accountants are historians and not properly trained or educated in finance and financial modeling. I for one would much prefer a CFO with a Finance and business background with a strong grounding in accounting than a CPA.
Company: Westside Community Services
There seems to be fairly consistent agreement on what skills and aptitudes are necessary to be a successful CFO. I find it interesting that the main driver of this conversation appears to be stereotyping of professionals based on the initials following their name. I don't personally believe that most newly-minted MBA's with no prior work experience would be able to step adeptly into the CFO role any more than most newly-licensed CPA's. In addition, since public accounting firms are businesses, most CPA's who have served as senior managers or partners of firms have a wealth of business experience directly relevant to the CFO role. The 13 years I spent at a Big 4 firm before transitioning to the industry side provided me with ample experience in leading people, project management, strategy development and execution, financial modeling, communicating technical information to laypeople, new product development, and sales and marketing that has served me well as a CFO. That being said, I think that as professionals we all need to focus on skills outside of our natural comfort zone in order to meet the ever-increasing demands of the CFO role. As a CPA grounded in compliance and technical accounting, I focus my professional development on softer skills. Likewise,non-CPA CFO's have a responsibility to acquire and maintain sufficient knowledge of accounting and internal controls in order to oversee those functions. Lastly, all CFO's need to stay abreast of changes in regulations, including GAAP, that impact the business environment and the capital markets.
Company: Black Duck Software, Inc.
In responding to this issue I will admit an obvious bias in that I am a CPA CFO. That said, I've met some outstanding non-CPA CFOs and I've met some terrible CPA CFOs. 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. Non-CPA CFOs may or may not have a strong technical accounting background, which could be problematic, especially with a company that is public or thinking about going public. I also think that there is a difference between CPAs who have worked for national or international firms (I started my career with KPMG) versus those who have worked for local or regional firms. The selection process is much stricter for the national and international firms and the training is typically much more rigorous. Also, in the national and international firms, because they service higher level clients (very few local CPA firms have Fortune 500 clients), the level of sophistication is by definition higher.
When you get into this discussion about CPAs, there are other elements as well. Although all CPAs pass the same Uniform CPA exam, not all states have the same educational and experience requirements (I am licensed in Massachusetts and when I became a CPA I needed to meet specific educational requirements in addition to three years in the Audit (attest) function in order to become licensed. Furthermore, to maintain my license as a CPA, I have to receive 80 hours of continuing education every two years.
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. Although an MBA teaches a broad range of business subjects (and admittedly - I don't have an MBA), a CPA is very focused on accounting, tax, legal, and audit issues - all of which are important building blocks for a CFO.
In the end, the most important aspect to a good CFO has nothing to do with the initials after their name. It all comes down to experience. In my case, I've been CFO of eight companies over the course of the past thirty years including two public companies, a billion dollar plus division of a Fortune 500 company, and several VC-backed high growth companies. I've done business all over the world, have raised significant capital, and have successfully completed 80 M&A transactions to-date (I did have a mid-life crisis six years ago and left being a CFO for a few years to take a job as an investment banker - although most of my M&A experience is as a CFO).
The bottom line is that if you have two equally qualified candidates with very similar experience, the one with the CPA will probably get the job because to the outside world (and to the Board and the investors), the CPA designation is something that people know and trust. Around the world, CPA's are typically held in very high regard (in most countries, CPA's or CA's are held in higher regard than lawyers). The AICPA ran a long time branding program promoting the idea that CPAs were the "trusted business advisers".
With my prejudice admitted upfront, I won't take anything away from MBA CFOs and other non-CPA CFOs. Bill Gates is one of the richest men in the world (along with Mark Zuckerberg) and he didn't even graduate from college.
This has made for very interesting reading. Thanks to everyone who has participated in this dialogue.
Company: Stono Capital Management LLC
This has been a great discussion. My own experience has been that not being a CPA has not really stopped me from climbing the ladder to CFO of a small company. My father in law is a retired CFO of very large public company and has done very well and is on 3 board of directors in his "retirement". Also, without ever being a CPA though he does have a MBA and is a CMA. Does not being a CPA keep you from SOME jobs? Well of course it does because for better or for worse that is a requirement for some jobs.
Up until today, I had been studying for the CPA exam so I would be able to "check the box" down the road if I wanted a job that required a CPA. I was playing "the game". After reading so many of the posts here, coupled with my own experiences, I have decided it is just not needed or worth it TO ME. I have decided to spend the considerable amount of time I have been using studying by channeling that energy to bring even more "value" to both my employer and to my family. I fully understand that I could be "potentially" missing out on opportunities someday but that is fine. I bring a lot of other things to the table that serve myself as well as my current and future employers well.
Again, great discussion and this has helped me put to bed something I have felt in my heart for a long time. Now I can concentrate on things that really matter again.
Company:
I agree, Dan, that this debate isn't going to end any time soon! It is rooted in what a company actually needs vs. what it believes it needs.
Congrats on your decision, Dan. I'm a strong believer in playing from your strengths and passions to the target audience who needs what you bring to the table! It's not always an easy decision, but it is a good decision.
Company: Paul Adam Corp
I don't think that being a CPA automatically makes one a good CFO. Having passed the exam myself and having many years as a CFO, I have no problem in saying this. Working in public accounting is an entirely different ball of wax than being a corporate CFO. The skills required are different. A CFO spends much of his time on issues vastly different than a public accountant is faced with. A CPA comes in after the fact and considers whether or not the accounting fairly represents what happened in that company over the past year. It is the CFO who has to make financial decisions in the heat of battle on a daily basis that keeps the company financially viable over the course of the year. Those decisions cover a wide scope well beyond debits and credits. It is ludicrous to expect someone who spent 2 years in public accounting ticking and footing and watching someone else run a tight physical inventory then passing an exam to be in the same league as someone who has never chosen the field of public accounting to start with but instead entered the corporate world and had a successful track record rising to the level of Controller or CFO.
Public accounting is a different specialty in the profession than Controller or CFO. We all know CPA's who did their 2 years in public accounting, sleeping in hotels etc., passed the exam and said, "I am outta here" then entered the corporate life. Many never looked back and allowed their CPA certificate to go inactive. It really comes down to a person's track record in management accounting that qualifies someone to be a successful Controller or CFO. The issues one faces as a CFO or Controller on a daily basis, seldom revolve around footnotes in a financial statement.
In today's world, I believe that the CPA designation on a resume is simply used as a matter of reducing the number of resumes a recruiter etc. has to read. Meanwhile, many qualified candidates that really have the corporate experience and successful track record needed for the controller or CFO position at hand, are simply passed over. This will change once the economy turns.
Rather than those without CPA's feeling inferior, educate others as to the difference in experience and skill sets between a public accountant and a management accountant and the respective value of both.
Company: SBA * Consulting, LTD
I think R.Finelli hit the nail on the head.
Working in a public accounting firm drives different on-the-job training than working in "private" industry. Some public accounting educated accountants have backgrounds that rival and surpass their non-CPA brethren, but the other is just as true.
The question, in my viewpoint, is what exactly does the CPA piece of paper mean. Well, it tells me that you studied and passed some difficult tests. So you knew the information to pass those tests at that point in time. It also says you were willing to work extremely long hours (longer than your non-CPA counter-parts, maybe not or maybe) to qualify for the auditing aspect of the CPA license.
You got your piece of paper and now you can sign audits. And here's the kicker, that I've always smirked at, at least in private industry; that piece of paper, that ability to sign an audit is useless when you take the CFO position.
So, without that aspect, is the CPA better than the Non-CPA as a CFO? It all depends on the person, and to group, classify, analyze or create myths, it's just that, a myth.
Dick could be better than Jane. Jane learned from Mother and Father and Spot was always there.
Company:
You'all might be interested in reading the new article on top talent at CFO.com ... http://b.cfo-coach.com/yv4dJR
Here's a tease ... The most desirable finance staffer, says Donald Kilinski, CFO practice leader at recruiting firm DHR International, is a CPA who then gets an MBA.