In a double role: CFOs donning mantle of CEO – Suresh Raina quoted in Economic Times

Last month, a French company elevated its chief financial officer in India to head its business unit as chief operating officer (COO). Reason: to lead its inorganic growth plans in India, as the company felt that its finance head could double up as head strategic business initiatives.

“Our client was confident that its CFO could take up the role of COO as well and help in acquiring business in India,” said Suresh Raina, managing partner at Hunt Partners. There are many such cases of CFOs donning the hat of chief executive officer (CEO) and chief operating officer (COO). Exactly a year ago, Samrat Gupta was elevated from CFO as CEO of Tata Motors Finance.

Last month, NS Kannan, who served as a CFO at ICICI Bank NSE -1.81 %, was appointed the CEO of ICICI Prudential Life Insurance Company.

“Over the past 12 to 24 months, the CFO searches have evolved from just pure finance roles to CFOs who can co-pilot with CEOs in transforming the organisations and businesses,” said Monica Agrawal, head of financial services, India, Korn Ferry International.

Agrawal also cites the instance of Korn Ferry International’s CEO Gary Burnison who had joined the firm as CFO. “Ever since he took over as the CEO, our organisation has grown multifold as reflected in the stock price,” she said. The firm is listed on the NYSE.

With the rising demand for CFOs or CEOs in waiting, the salary of CFOs has risen by over 40% over last year or so. Due to paucity of this talent pool, pay packets have shot up by as much as Rs 5 crore over the past two years, according to search firms and human resource firms such as Korn Ferry, Transearch, BTI, Hunt Partners and IKYA.

 

“CFOs, unlike couple of years ago, are no longer just number crunchers,” Agrawal said. Compensations for CFOs range between Rs 2 crore and over Rs 5 crore (depending on the company’s size). This usually does not include stock options. Asmall cap company of Rs 100 crore in turnover is now ready to pay anywhere between Rs 1.5 crore and Rs 2.5 crore excluding variables (a jump of at least 30-40%), according to Uday Chawla, managing partners, Transearch India. Transearch is currently busy with about nine CFO search mandates from MNCs and Indian conglomerates. “From last year, we have seen a jump of more than double in demand for CFOs,’’ Chawla said. “Most companies prefer CFOs who have some experience in business operations,” he said.

The salary difference between an Indian and a global CFO is finally shrinking. “Capability of Indian CFO talent in comparison to worldwide talent, India’s rank in global’s MNC’s contribution to growth and business, has further put emphasis on Indian CFOs and thus enabled comparison of CFO compensation in India vis-a-vis the rest of the world,” said Lohit Bhatia, CEO-staffing at Ikya Human Capital.

Indian CFO transitioning into larger role of CEO is continuously happening in large companies: TCS (Rajesh Gopinathan), Siemens NSE -1.79 % (Sunil Mathur), Cipla (Umang Vohra), Pfizer NSE -0.60 % (S Sridhar), Quess Corp (Subrata Kumar Nag) are a few market leaders in their segments where CFO has been transitioned into CEO role after very successful stints.

“CFOs are also being looked at as an alternate to manage interim business period, between incumbent CEO’s exit and new CEO hiring, that is why probably running business as well is considered an additional advantage,” said James Agrawal, managing director of BTI Consultants India.

According to Agrawal, sectors such as infrastructure NSE 0.00 %, energy, healthcare, consumer services and ecommerce will further throw up demand for finance candidates with a strong focus on fundraising and investor relations experience.

Largely, the reason for high demand in CFOs is due to the evolving role of CFOs. “Financial function is becoming more complex over the years. From a pure accounting and book keeping role, it has become more strategic and business oriented,” said Raina.

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