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CFO Turnover Drops from 2009-2013 Levels

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After five years of historically high CFO turnover, 2014 has seen reduced volatility in the senior finance ranks. While this may be partially due to the relatively stable performance of public companies over the past year, industry observers point out that the increased role of long-term compensation in executive pay plans may also play a part.

Among other trends: for the first time ever >10% of CFOs have investment banking backgrounds, showing the increased roles of M&A across the past year. Only 30% of CFOs have a public accounting background, and approximately 70% of recent CFO hires have come from inside the company (a sharp increase from recent years). In terms of future opportunity, the industrial sector and services companies are most likely to choose a CEO with CFO experience, while healthcare and consumer goods companies are least likely.

How is your company increasing development and retention of top finance talent?

  • CFO.com – CFO Turnover Dips, Reversing Three-Year Trend
  • Financial Executives International Daily – CFO Musical Chairs May be Slowing (But Don’t Sit Still)
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    Adopting Pay-for-Performance Compensation Models

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    While adopting pay-for-performance executive compensation models has been a popular objective for Boards and shareholders for several years, actually implementing such systems has proven more difficult. 2014 is proving to be a watershed year for pay-for-performance, however. Tactics such as the inclusion of performance shares tied to specific goals in the executive pay mix, raising the bar for short-term incentive payouts, and increasing the ratio of overall long-term to short-term incentives, are putting more of an emphasis on meaningful performance outcomes.

    Companies are also responding to SEC pressure to include more explanation and analysis of executive compensation in the required Compensation Discussion & Analysis (CD&A) section of proxies, increasing transparency to shareholders. Additionally, many companies are working to strengthen internal communications about pay plans

    How is your company adopting pay-for performance for your executive compensation plans? Have you changed internal/external pay plan communications to provide greater transparency into evolving compensation models?

  • CFO.com – Pay for Performance Comes of Age
  • Financial Executives International Daily – Not Everyone is On Board with Executive Pay Communications
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    Risk and Strategic Planning

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    Risk management has been a function on the rise over the past ten years, with 93% of C-suite executives stating that it has impact on their organization’s business strategy. However, recent research reveals startling gaps in the ways that companies are integrating risk management into their strategic planning processes.

    For example, only 19% of companies rate their ERM process as effective in identifying risks that have not yet happened but could occur. Another opportunity warranting greater attention is the application of analytics: when asked to identify the top areas where their companies could benefit from improved use of data and analytics, executives ranked risk mitigation and risk identification first and second overall.
    How does your company integrate enterprise risk management with strategic planning? In what ways can risk be used more effectively to strengthen strategic plans and protect companies from the unexpected?

  • CFO.com – Companies Failing to Adjust Strategic Plans for Risks
  • Wall Street Journal – Risk Management More Influential in Strategic Planning, but Underutilized Overall
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    Corporate Responses to Customer Data Breaches

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    After a series of high profile data breaches affecting millions of consumers, executives and lawmakers are paying greater attention to data breach prevention and response standards. Criticisms of the affected companies range from insufficient security precautions, to poor disclosure and remediation.

    Federal regulators and banks have argued that retailers and payments systems processors should be held to the same strict data protection and notice standards as financial institutions. Other industry observers have pointed to poor customer service by affected companies following breaches. Has your company revisited its information security programs following recent data breaches? Do you have a formal plan for responding to potential breaches, including notice and remediation?

  • Forbes- 5 Lessons for Every Company from Target’s Data Breach
  • Reuters- U.S. Fed Official Says Uniform Data Breach Disclosure Rules Needed

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    Evolving CFO Priorities in 2014

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    After decades of growing stature as a senior finance executive, in recent years CFOs have taken on responsibility for a broad array of business functions, while also assuming a central role in managing corporate strategy and business performance.

    To achieve success CFOs need to master a broad range of new competencies and build strong relationships with key business leaders across the organization, all of this while managing against an ever-changing set of internal and external business challenges.

    How are you evolving your role, and that of your finance team, within your company? What opportunities and risks are top of mind for you as you look ahead to 2014?

  • CFO Magazine- 8 Top Issues for CFOs in 2014
  • CEB Blogs- Finance Transformation: The Top 5 Trends for 2014
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    Achieving Innovation-Based Growth

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    After five years of delivering earnings growth predominantly through productivity gains, many companies are increasing investment in innovation in the hope of achieving breakthrough growth. While innovation-based strategies are generally high risk/high reward, leading companies are developing ways to mitigate common risks and maximize likelihood of success.

    Successful innovation strategies involve broadening the net for perspectives and ideas through approaches like open innovation and crowd-sourcing, refining organizational design and role definition to maximize agility and collaboration, and deploying a strong “test and learn” culture that celebrates success and leverages failures as learning opportunities.

    How can companies increase their success with innovation-based growth strategies?

  • CIO Magazine- This C-Suite Recognizes that Failure is Part of Innovation
  • Harvard Business Review- Best Practices for Leading Through Innovation
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    Maximizing Strategic Planning Agility

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    As many companies head into strategic planning season, executives continue to struggle with planning in an environment marked by uncertainty and volatility. Leading companies counter these challenges by increasing attention paid to surfacing and continually monitoring the critical assumptions underpinning their strategic plans.

    Common assumptions may center on global economic growth, the price and availability of key resources, or changing customer preferences in core markets.

    What assumption areas do you believe companies should document and monitor to ensure the continued relevance of their strategic plans?

  • CFO Magazine- New Strategies Around Strategy
  • MIT Sloan School of Management- Eli Lilly’s Project Resilience: Anticipating the Future of the Pharmaceutical Industry
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    The Evolving CFO Agenda

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    While the roles and responsibilities have evolved for every member of the “C-Suite,” no executive’s span of control has expanded as much as that of the Chief Financial Officer. CFOs’ roles have grown beyond finance and accounting to increasingly encompass broader responsibility for corporate strategy and operations.

    Recent research reveals that the CFO agenda includes a diverse range of concerns including globalization, technology, risk management, talent, and corporate strategy (while traditional finance and regulatory responsibilities continue to grow more complex).

    What new responsibilities represent the most significant capability gaps for CFOs? How should the CFO profile be adapted to the business environment and needs of the company?

  • ACCA/IMA- The Changing Role of the CFO
  • McKinsey Quarterly- Today’s CFO: Which Profile Best Suits Your Company?
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    Maximizing the Impact of Mid-Year Budget Reviews

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    With mid-year fast approaching, many firms will be assessing revenue and cost performance against budgets drafted last year. Beyond using midyear reviews to simply monitor for overspending, CFOs can maximize the business impact of these reviews by operating three levers: communicating performance, making appropriate course corrections in the mid-year plan update, and maintaining productive pressure on the senior leadership team.

    Recent research reveals other persistent obstacles to successful long-term budget planning, including a lack of high-quality data to inform budgetary decisions, poor integration of capital projects and initiatives into planning processes, and ineffective communication of the plan.

    How does your company use mid-year budget reviews to position the firm for success in the current year and beyond? What challenges to long-term planning is your organization most focused on overcoming?

  • CFO Magazine- Keeping Revenue and Budget on Target
  • Business Finance Magazine- Long-Range Planning: The Good, the Bad (Some Ugly) and the Way Forward
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    What Boards Want to Hear from CFOs this Year

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    Beyond their traditional focus on strategic planning and corporate performance, Board agendas have grown to include a wide range of issues including risk, compliance, globalization and technology. To avoid being caught flat-footed, CFOs need to be prepared to respond to a broad range of potential Board inquiries.

    Experts cite a number of topics as high-interest to Boards in 2013, including new conflict compliance and reporting requirements facing companies, data security policies and approaches, social media options and risks, and the continued evolutions of companies’ global operations.

    What questions do you expect CFOs to receive from Boards in 2013-2014?

  • CFO Magazine – Getting on Board
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