russia cfo route to the top
TRANSCRIPT
Financial Officer Practice
IntroductIonThe modern chief financial officer is a leader. The role is evolving fast in terms of complexity and scope, so the remit of the modern CFO extends far beyond traditional financial responsibilities such as account-ing, controlling, treasury and tax. A successful CFO also shapes strategy, advising CEO and board on strategic, operational, risk and compliance issues as well as working closely with major investors and financial institutions.
The Russian CFO market is progressing rapidly and follows key UK and US trends, so we have carried out extensive research in order to provide international benchmarks. These benchmarks highlight some gaps in experience and in career planning. Attention should be paid to closing these gaps in order to establish a vigorous talent pipeline.
In many Russian companies, the CFO is the key decision-maker after the CEO. There are several reasons why this is so. First, a series of financial crises from 2008 demanded an intense focus on operational finance; second, the M&A scene in Russia is especially dynamic, and third, the need for CFOs to collaborate closely with major shareholders on special projects.
We hope that this report will be a useful tool to encourage closer under-standing of the role of the CFO in Russia, and the part that succession planning and talent development must increasingly play in its evolution:
» Career development for current and future CFOs. Which areas of experience must be developed in those for whom a CFO role is three to seven years away?
» Defining a CFO profile. How can market information help create a smooth CFO succession plan?
» International trends. What can mature markets tell us?
Russia CFO Route to the Top
russia cfo route to the top
SPENCER STUARTpage 2
MethodologyThe research uses data drawn from public sources and Spencer Stuart research that analyses the professional background and career paths of CFOs of the 100 largest Russian public companies by market capitalisation (using the 2016 ratings prepared by RIA Rating). Ratings are based on data from the Moscow Exchange, RIA Rating estimates of foreign exchange floors and issuers’ data, and Bank of Russia data. Capitalisation is estimated as of December 30, 2015.
We have compared Russian market data with Spencer Stuart CFO benchmarks from the UK (FTSE 100) and the US (Fortune 500) markets.
Industry acronymsCON – Consumer goods and servicesFS – Financial servicesIND – IndustrialLS – Life sciencesTMT – Technology, media and telecommunications
Function acronymsDFD – Divisional financial director FP&A – Financial planning and analysisGM – General managementCD/M&A – Corporate development/Mergers and acquisitionsControl – Financial controllerIR – Investor relationsONF – Other non-financeOGF – Other group financePS – Professional services
Key findings » 15 of the CFOs at the 100 largest Russian companies are women, compared with 11 in
the UK and 13 in the US.
» The average age of the Russian CFO is 43, compared with 52 in both the UK and US.
» The average CFO tenure in Russia is five years, compared with 4.5 in the UK and close to 5.5 in the US.
» 55% of CFO appointments are internal hirings, compared with 48% in UK and 61% in US.
» Russian CFOs promoted internally come predominantly from finance controller or divisional finance director roles.
» Annual CFO turnover among the 100 largest Russian companies is 13%, the same as in the UK and US.
» 24% of Russian CFOs sit on their board.
RUSSIA CFO ROUTE TO THE TOP
page 3
Companies ListAcron
Aeroflot
Alrosa
AvtoVAZ
Bank of Moscow (VTB)
Bashneft
Chelpipe
Chelyabinsk Zinc Plant
Cherkizovo
CTC Media
Dixy Group
Dorogobuzh
E.On
Enel
ETC
EVRAZ
FSK UES
Gazprom
Gazpromneft
Global Ports
Globaltrans Investment
Hals Development
Inter RAO
Irkutskenergo
KAMAZ
Kazanorgsintez
Krasnoyarskaya HES
Kubanenergo
Kuybishevazot
Lenta
LSR Group
Lukoil
M.Video
Magnit
Mail.ru
Mat’ I Ditya
Mechel
Megafon
MGTS
MMK
MOESK
Moscow Credit Bank
Moscow Exchange
Mosenergo
Mosoblbank
Mostotrest
MTS
NGP (Novorossiysk Grain Plant)
Nizhnekamskneftekhim
NLMK
NMTP
Norilsk Nickel
Novatek
OGK-2
O’Key Group
OTC Pharm
Otkritie
Pharmstandard
Phosagro
PIK
Polymetal International
Polyus Zoloto
Promsvyazbank
Protek
QIWI
RAO ES Vostoka
Raspadskaya
Rosbank
Rosgosstrakh
Rosneft
Rosseti
Rostelecom
Rusagro
Rusal
Rushydro
Saint Petersburg Bank
Sberbank
Severstal
Sistema
Slavneft - Megionneftegaz
Slavneft Yaroslavnefteorgsintez
Sollers
Southern Kuzbass
Surgutneftegaz
T Plus
Tatneft
TGK-1
Tinkoff Credit Systems
TMK
TransKonteyner
United Aircraft Corporation
United Wagon Company
Uralkali
Uralsib
Vimpelcom
Vozrozhdenie Bank
VSMPO AVISMA
VTB Bank
X5 Retail Group
Yandex
russia cfo route to the top
SPENCER STUARTpage 4
CoMpany breaKdown by industry
positions analysed
diversity
0
30
60
90
120
150
180
210
IND
66
37
186
FS
1424
79
TMT
9 10
70
CON
7
25
118
LS
4 4
44
Russia 100 FTSE 100 Fortune 500
15% 11% 13%
85% 89% 84%
Russia FTSE 100 Fortune 500
Female Male
100
97ACTIVE CFOs
VACANT POSITIONS
3
RUSSIA CFO ROUTE TO THE TOP
page 5
Russia has more female CFOs than both the UK and the US. In the early years of the Russian corporate environment (1991-2000) the role of financial director was looked upon as “women’s work”. Previously the Soviet management paradigm meant that few men worked in accounting and financial planning departments, so such work was associated predominantly with women. The gender balance started to shift in the late 1990s and early 2000s, when international consumer companies started to introduce management trainee programmes in the local market. Men began to be appointed to many of the junior roles in financial planning and analysis, accounting and reporting. At the same time, men began to outnumber their female colleagues in small and medium business financial roles from the 1990s, gradually moving up to middle-level management positions in large companies.
age
In any economy, the presence of a relatively young senior management tier indicates a rapidly developing market. In the industries we reviewed, Russian CFOs are on average nine years younger than their UK and US peers. In 2007, the average age of a CFO in Russia was 40, according to “The portrait of the modern financial director”, research conducted jointly by Financial Management magazine and Moscow International Higher Business School (MIRBIS).
Several factors have combined to account for the relative youth of many financial executives in Russia. This cohort had an advantage over older managers who grew up in the Soviet economy, without any international experience or management schooling. Nowadays young executives compete with older colleagues who have been educated and trained in international companies in 1990-2010, have gone through crises and corporate restruc-turing and experienced a competitive market environment. These factors lead to the increase of average CFO age.
0
10
20
30
40
50
60
IND
45
51 52
FS
42
50 51
TMT
41
52 53
CON
42
51 53
LS
42
53 52
Russia 100 FTSE 100 Fortune 500
russia cfo route to the top
SPENCER STUARTpage 6
eduCation and qualifiCations
MBAs and especially ACCA and CFA professional qualifications are not currently perceived as essential at the top 100 Russian companies. However, these qualifications are significant in appointments that entail a leadership role in Russian branches of international companies, or at smaller Russian companies.
Cfo turnover 2015
On average, turnover of CFOs at the largest Russian companies is about the same level as that in the UK and US. In 2015 one in seven of Russia’s top 100 companies appointed a new CFO.
0
5
10
15
20
25
MBA
21%
6%
ACCA
Russia
2%CFA
0
5
10
15
Russia 100
13%14%
FTSE 500
Percentage of new CFOs
Fortune 500
15%
RUSSIA CFO ROUTE TO THE TOP
page 7
internal or external hiring
In slightly more than half of cases a CFO was appointed from internal candi-dates. There is an even split between internal and external appointments. The largest Russian companies are more likely than the largest British companies to promote internally to CFO roles, but less likely than In the US, where 61% of CFOs are drawn from internal candidates.
Citizenship
In 2015, only six CFOs of the 100 largest Russian companies were foreign citizens. Russian nationals are replacing expatriates in top management, a trend that has been apparent over the past three years. According to research by RANEPA, the volume of work permits issued in 2015 for highly qualified managers dropped by 57% overall, compared with 2013. The number of permits in the same period issued to UK citizens fell by 68%, to Germans by 58% and to US citizens by 50%.
55%48%
61%
45%52%
39%
Russia FTSE 100 Fortune 500
External Internal
6%23%
94%77%
Russia FTSE 100
RussianNon-Russian
BritishNon-British
Russia Top 100 FTSE 100
russia cfo route to the top
SPENCER STUARTpage 8
possible Cfo Career traCK
The illustrated career paradigm does not reflect any actual hierarchy in any individual company, but it is a useful starting point for companies aiming to review development areas in order ultimately to enrich their talent pipeline.
In general, reporting, accounting, audit and treasury roles represent starting positions within the financial function. External relations roles necessarily are taken by experienced professionals, able to protect the company’s finan-cial position by deploying complex finance and investment management skills. Operational finance management fosters the ability to forge strong partnerships to drive cross-functional projects. M&A assignments and busi-ness development initiatives develop an understanding of, and contribute to, the long-term strategy of an organisation at a senior level. This accrued blend of experience and skills provide a CFO with a clear path to a board-level appointment.
Example of a career path in finance:
1. Auditor in Big Four firm
2. Analyst, senior analyst in financial planning and analysis
3. Financial manager, supply chain (business partner for supply chain function)
4. Treasury director
5. Corporate finance director
6. Finance director, international assets
7. CFO
Board/Management Committee
Strategy & Business DevelopmentMergers & Acquisition, Corporate &
Business Development, Strategic Planning and Analysis
OperationalFinancial Planning and Analysis, IT, Real Estate,
Administration, Human Resources
External RelationsInvestor Relations, Rating Agencies, Banking Relationships
Treasury & TaxCapital Markets, Corporate Finance, Cash Management, Foreign Exchange,
Structured Finance, Tax Planning and Optimization
Accounting FundamentalsAccounting, Controls, Financial and Regulatory Reporting, Audit and Sarbanes-Oxley
Strategic» Strategic thought partner» Executive Committee responsibility» Board-level exposure
Analytical» Complex thinker with actionable insights» Broader enterprise exposure » Emerging managerial responsibilities
Executional» Tactical decision-maker» Solid technical skills » Functional competency
RUSSIA CFO ROUTE TO THE TOP
page 9
prior position of Cfos
29% of CFOs in Russia and the UK has had previous experience in the role. First-time CFOs have often previously worked as finance director of a divi-sion or subsidiary of their company. The next largest pool from which CFOs in Russia are drawn is that of financial controller or director of controlling. Contrary to popular belief only 7% of CFOs have previously worked as chief accountant or head of reporting. In the UK and US even fewer CFOs are promoted from reporting roles.
CFO
DFD
GM
IR
ONF
Risk
PS
Control
Reporting
Corporate Finance
FP&A
Treasury
CD/M&A
18%36%
15% 21%
11% 15% 16%
8% 10% 14%
7% 5% 6%
5% 2% 2%
2%
4%
5%
4%
3%
9%
12%
3%
22%
29%
1%
3%
5%2%
2%
Russia 100 FTSE 100 Fortune 500
russia cfo route to the top
SPENCER STUARTpage 10
internal and external hiring, by industry
Compared with UK companies, Russian telecom and pharmaceutical companies more often seek CFO candidates from external sources. Companies in Russia’s consumer and financial services sectors prefer to promote from within. In industrial companies, UK CEOs and board members prefer to draw on external experience, while in Russia internal candidates were appointed to 56% of CFO positions. Fast-moving consumer goods (FMCG) companies facing tough competition frequently leverage internal development and training by hiring from within.
External Internal
CON FS LSIND
Russia 100
66.7%
33.3%
61.5%
38.5%25.0%
75.0%
56.9%
43.1%33.3%
66.7%
TMT
Fortune 50064.4%
35.6%
65.8%
34.2%
59.1%
40.9%
73.9%
26.1%
58.6%
41.4%
60.9%
39.1% 41.7%
58.3%50.0%50.0%
41.7%
58.3% 60.0%
40.0%FTSE 100
RUSSIA CFO ROUTE TO THE TOP
page 11
tenure
Despite the seeming instability of Russian management teams, the average tenure of a Russian CFO is longer than that of UK peers across all industries, except for TMT. The relatively shorter tenure of British CFOs may indicate that they are being promoted to other operational roles within a company.
finanCe baCKground, all Cfos
When examining the career profile of CFOs we have checked all positions served, therefore totals exceed the number of CFOs in each market. Both internal and external promotions are counted.
CON
FS
LS
IND
TMT
5.4
5.0
3.2
4.8
5.7
Russia 100
5.6
7.9
3.7
4.0
1.9
FTSE 100
6.0
5.9
5.5
5.0
5.2
Fortune 100
DFD
Controlling
PS
Audit
Treasury
FP&A
OGF
Tax
IR
Reporting
ONF
Corporate Finance
Other Finance
CD/M&A
MD/GM
25
23
21
18
17
16
11
44
53
11
10
9
7
9
2
Russia 100
66
29
37
64
43
36
7
7
6
44
20
19
FTSE 100
100
106
40
42
20
33
53
63
29
Fortune 500
russia cfo route to the top
SPENCER STUARTpage 12
In Russia, as in the UK, many CFOs are promoted from finance director roles at a company division, business unit or subsidiary. The career ladder of CFOs in UK companies is structured in a way that allows professionals to move every two or three years from one financial area to another. In Russia, such a transition usually happens only when an individual changes his or her employer, whereas their counterparts working for international companies expect planned transitions as a part of their professional devel-opment programme.
More than 64% of British CFOs have worked in consulting companies, while in Russia only 23% have accrued similar experience. In Russia only 21% of CFOs have other functional experience such as risk, compliance or project management, compared with 43% in UK.
The fact that so many finance professionals in Russia have to change employers in order to progress in their careers reiterates how important it is to devise structured professional development and succession programmes.
saMe seCtor previous experienCe
NO DATA on Fortune 500
No CFO in Russia’s financial services industry comes from any other sector. In contrast, our study found that not one Russian CFO working in FMCG had any experience of the consumer sector prior to their appointment – all were hired from other sectors. 83% of CFOs in the TMT sector came from other industries, compared with their counterparts in the UK, where only 25% of CFOs do not have relevant sector experience.
Yes No
CON FS LSIND
Russia 100
100% 100%33%
67%77%
23% 17%
83%
TMT
22%
78%
21%
79%
50%50%
33%
67%
25%
75%
FTSE 100
RUSSIA CFO ROUTE TO THE TOP
page 13
routes to the top: internal vs external hiring
We have checked all previous positions served by CFOs therefore totals exceed 100%.
In Russia it is essential for both internal and external CFO appointments to have experience as financial director or finance controller of a division or business unit. Only 25% of current CFOs have worked in reporting-related positions. This indicator is slightly higher among UK companies.
External Internal
DFD
Controlling
Reporting
MD/GM
Audit
Treasury
OGF
FP&A
Tax
IR
CFO
PS
CD/M&A
Other Finance
ONF
Corporate Finance
60%48%
43%48%
42%45%
25%27%
21%27%
13%23%
11%23%
23%20%
6%18%
25%11%
11%11%
13%7%
11%7%
13%5%
9%5%
4%0%
Russia
45%70%
47%34%
26%70%
43%28%
55%76%
15%24%
40%54%
26%38%
17%6%
23%16%
47%34%
11%2%
11%4%
FTSE 100
21%14%
21%3%
2%
18%53%
6%7%
14%14%
5%4%
2%12%
1%
1%2%
Fortune 500
russia cfo route to the top
SPENCER STUARTpage 14
UK companies especially value consulting experience, and external CFO candidates are often expected to have had a previous CFO role. That said, the career paths of UK CFOs quite often encompass functions unrelated to finance, such as project management, risk and compliance.
route by seCtor
Again, we checked all positions served by CFOs therefore the total exceeds 100%. As there are only four pharmaceutical and nine TMT businesses in the largest 100 Russian companies by capitalisation, we have not included their data in this chart.
While it is obvious that treasury experience is vital for banking, in manufac-turing and FMCG it is more technical, so in those sectors treasury directors rarely move into CFO roles. FS companies tend not to appoint CFOs from reporting or internal audit directors. An individual with consulting experi-ence will have a better chance of becoming a CFO in an FMCG or a FS company than in industry, whereas a financial controller has a better chance of being promoted to a CFO position in an industrial company.
DFD
CFO
GRP Control
Treasury
PS
MD/GM
ONF
Reporting
43%56%
57%41%
29%
50%5%
5%
0%
29%48%
29%
29%18%
43%
7%
7%
7%
24%
43%
36%17%
29%
21%23%
29%
Audit
CD/M&A
Other Finance
IR
Tax
FP&A
OGF
Corporate Finance
21%12%
14%
14%
14%
14%
14%
14%8%
0%15%
57% 29%
0%9%
9%
29%
0%
11%
0%
0%2%
Russia 100
CON FS IND
RUSSIA CFO ROUTE TO THE TOP
page 15
Amsterdam
Atlanta
Bangalore
Barcelona
Beijing
Bogota
Boston
Brussels
Buenos Aires
Calgary
Chicago
Copenhagen
Dallas
Dubai
Frankfurt
Geneva
Hong Kong
Houston
Istanbul
Johannesburg
Lima
London
Los Angeles
Madrid
Melbourne
Mexico City
Miami
Milan
Minneapolis/St. Paul
Montreal
Moscow
Mumbai
Munich
New Delhi
New York
Orange County
Paris
Philadelphia
Prague
Rome
San Francisco
Santiago
Sao Paulo
Seattle
Shanghai
Silicon Valley
Singapore
Stamford
Stockholm
Sydney
Tokyo
Toronto
Vienna
Warsaw
Washington, D.C.
Zurich © 2016 Spencer Stuart. All rights reserved. For information about copying, distributing and displaying this work, contact: [email protected].
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authorsAnton Storozhenko, Moscow office Gennady Vanin, Moscow office Viktoria Kim, Moscow office
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