Financial Officer

IntroductIonThis report provides a fresh overview of Russia’s current serving genera-tion of chief financial officers. Our ongoing data analysis shows that the present cohort of professional CFOs at the largest publicly traded Russian companies is becoming more competitive and mature:

» Managerial and professional capabilities are more valued than they were five to 10 years ago, when personal drive and ambition were more highly prized;

» Companies prefer to appoint CFOs from the internal talent pool;

» More CFOs are “first timers”: only 21% of current CFOs have previous experience in the role;

» Average tenure increased by 14% in 2016 but levelled off in 2017;

» CFOs are expected increasingly to play a more active part in commercial finance and to be capable of collaborating cross-functionally. These demands are proving especially challenging for many CFOs, and indeed represent the most commonly cited reason for departure from a post;

» We note the continued professionalisation of the CFO role, including a wider recognition of the value of MBAs and qualifications such as those awarded by ACCA.

Russia CFO Route to the Top 2018 edition

A changing role for a maturing economy

russia cfo route to the top

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AGe The average age of CFOs at the largest Russian companies has increased from 44.7 years in 2015 to 45.4 in 2017.

Russia is gradually approaching parity with the mature CFO function found in the UK and US, where the average age of a CFO is 53. As the Russian market more fully develops, its CFOs are increasingly able to bring to the role greater experience as well as demonstrable leadership stamina and instinct. The generation born in the 1970s is now at its managerial peak, succeeding their predecessors who came of age professionally in the Soviet period and entered senior managerial roles in the late 1990s and early 2000s. Managerial capabilities and solid professional experience are more highly rated now than in more turbulent times.

CON

41.5 43 43.3

FS

42.4 43.944.5

IND

44.6 46 45.9

LS

4244.5 45.5

TMT

41.4 42.344.8

0

10

20

30

40

50

0

10

20

30

40

50

2015

42.7 44.2

2016

45.3

2017

Average age of CFOs

Three-year analysis

Average age of CFOs by industry sector

▪ 2015 ▪ 2016 ▪ 2017

russia cfo route to the top

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inteRnAL VS eXteRnAL HiRinGThe rate at which CFOs are hired internally is rising year on year, from 55% in 2015 to 65% in 2017.

One of the universal indicators of a mature market is when businesses routinely put in place clear strategies for succession planning. Best practice identifies one or two potential successors for every senior role.

In terms of CFO talent, the Russian market is following the US market: 62% of Fortune 500 CFOs are internal appointments, with companies preferring to promote managers who already possess a deep understanding of the organisations’ culture and decision-making process. CEOs and boards in both Russia and the US tend to prefer dealing with internal candidates, and it can be easier to retain and develop internal talent than to find the ideal candidate in the marketplace. However, it is still important to benchmark an internal candidate against the best talent on the market. Appointing an internal candidate may come with advantages, but promoting a weak inter-nal candidate to the CFO role carries significant risks.

CON

67%63%

67%

FS

62%

69%64%

IND

57%59%

67%

LS

25%

33%33%

TMT

33%

50%

57%

0

10%

20%

30%

60%

50%

40%

70%

55% 59% 65%

45% 41% 35%

2015 2016 2017

Internal vs. External CFO appointments

▪ Internal ▪ External

Internal CFO appointments by industry sector

▪ 2015 ▪ 2016 ▪ 2017

russia cfo route to the top

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PReVioUS eXPeRienCe Expectations of a CFO’s previous experience are changing dramatically. Companies increasingly rate candidates who have managed the finance function of a division with its own P&L.

Notably, only 21% of CFOs came to the role with direct previous CFO experi-ence. The remaining 79% of the CFO cohort reviewed were undertaking the role for the first time.

More and more CFOs are being promoted from divisional finance director roles, having run the finance function of a separate business or product divi-sion. This increasingly visible career trend, alongside the shift towards internal hiring, is helping to shape a new CFO profile in Russia.

Fewer chief finance officers are being hired from equivalent CFO roles in outside companies, the proportion dropping from 29% in 2015 to 21% in 2017. This decline does not correspond to the US trend, where the number of CFOs with previous CFO experience is rising (from 23% in Fortune 500 companies in 2006, to 29% in 2017). Valued prior experience for new CFO appointments in the US includes divisional finance director roles (22%), control (20%), treasury (13%), and general management (12%).

Previous functional experience, by role

2015 2016 2017

CFO 29% 26% 21%

DFD 22% 26% 31%

Controlling 11% 11% 12%

Corporate Finance / M&A 10% 9% 7%

GM 8% 9% 4%

Reporting 7% 4% 10%

FP&A 3% 3% 7%

IR 3% 3% 2%

Treasury 3% 3% 2%

Risk 2% 2% 2%

Non-finance 2% 2% 1%

russia cfo route to the top

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tenURe Average tenure increased by 14% in 2016 but levelled off in 2017

Of the total number of CFO positions reviewed, 18% of incumbent CFOs changed in 2017, compared with 16% in 2016 and 13% in 2015. TMT (tech-nology, media and telecommunications) is the most dynamic sector for CFO turnover, recording the shortest average tenure in 2017, of 4.1 years. CFO tenure across the traditional sectors exceeds five years, with tenure in life sciences reaching 6.7 years.

The dynamics of the Russian CFO market are growing closer to those seen in the UK and US. Ambiguity and disruption demand that CFOs be adaptable and flexible in their responses to change. We are seeing that companies hiring CFOs are more frequently paying attention to commercial finance and cross-functional collaboration capabilities. These skills have always been criti-cally important, but recently many Russian companies have made a leap in the calibre of their management culture and business processes. It follows there-fore that CFOs will assume wider areas of responsibility and exercise more influence in the business. CFOs are expected to take deep dives into other functional areas, as well as commercial issues such as product profitability.

0

3

6

2015

5

5.7

2016 2017

5.7

CON

5.7 5.45.8

FS

4.85.2

5.6

IND

5.46.1 5.8

LS

5.05.7

6.7

TMT

3.23.9 4.1

0

6

4

2

8

Average tenure of CFOs

Years in current role

Average tenure of CFOs by sector

▪ 2015 ▪ 2016 ▪ 2017

russia cfo route to the top

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edUCAtion Those aspiring to CFO roles often are pursuing professional education qualifications — again, evidence of a maturing economy.

Nearly one-quarter (23%) of CFOs in Russia have MBAs (against 47% of Fortune 500 CFOs) and 11% hold ACCA qualifications. The latter represents an increase of 5 percentage points from the 6% recorded in 2015. Such professionalisation signals that international-standard qualifications are both valued and portable. Fourteen per cent of CFOs hold a PhD, a rise of 3 percentage points from 2015.

Such professionalisation is subtly changing the résumé of the modern CFO in Russia. During the country’s early stages as an emerging economy, in a period of rapid growth, working experience in tough situations and personal drive were sought after. Fiercer competition between professionals leads to greater educational and professional standards for future CFO leaders, giving companies a better choice of candidate for this vital role.

MBA

21%

25%23%

ACCA

6%

11% 11%

Ph.D.

11%13%14%

CFA

2% 2% 1%0

20%

10%

30%

CFO education

▪ 2015 ▪ 2016 ▪ 2017

russia cfo route to the top

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diVeRSitYWhile companies do not have diversity targets, a growing number have female CEOs.

Women make up 18% of the CFO cohort, slightly more than the 15% recorded in both 2015 and 2016. The proportion is higher than in mature economies such as the US, where female CFOs are in place at 13% of Fortune 500 companies (up from 7% in 2006), and the UK, where 7% of the CFOs at the top FTSE 100 companies are women.

Turning to citizenship (of either gender), 8% of CFOs are expatriates. The remaining 92% are Russian nationals. Many senior expatriates were replaced by Russian nationals in 2014–2015, and the balance has remained almost identical since then. Very few Russian companies went public recently or have gone through a major transformation or M&A. Consequently, companies have not had to attract seasoned international CFOs with relevant experience of European or US markets.

85% 85% 82%

15% 15% 18%

2015 2016 2017

CFO Diversity

▪ Male ▪ Female

russia cfo route to the top

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Collaborating and influencing

Research by Spencer Stuart has identified the crit-ical leadership capabilities that have the greatest influence on executive performance. One of the most important is collaborating and influencing.

This capability is made up of two distinct but inter-connected elements. It is about identifying and building relationships with stakeholders, and facili-tating dialogue to forge consensus and collectively achieve objectives. It also involves networking and working across boundaries when there are no formal lines of command or direct control. A CFO with highly developed collaborating skills is able to reach a shared decision, making a compromise if needed to deliver results.

By contrast, an executive who is weak at collabo-rating and influencing often prefers working alone or with direct reports only, avoiding direct contact with the CEO and other senior executives. Poor collaborators also do not like to share their ideas or disclose their agenda, securing their zone of responsibility and control from other executives. The senior finance leader who lacks the ability to collaborate and influence risks being regarded as merely the accountant. Indeed, our experience shows that a common reason for the failure of a new executive in the first 12 to 18 months is the inability to influence and collaborate across func-tions and business units.

In a matrixed business, for example, the ability to collaborate with and influence the CEO and other members of the management team is a differenti-ator. It is difficult to work closely alongside execu-tives outside of one’s own functional domain who don’t share the same language or perspective on the business. Executives who excel in this area have a strong understanding of the drivers of the business and find ways to engage and build part-nerships with their colleagues. These executives

also are most likely to end up in the CEO’s inner cabinet; they become a counsellor to the CEO and have a disproportionate impact on the senior leadership team, the strategy and the broader organisation.

Spencer Stuart’s proprietary methodology meas-ures an individual’s capacity for collaborating and influencing, by determining the level at which a CFO can affect an organisation. Every level has its own practical implication and a set of indicators that enable us to judge the degree of advancement. An individual’s capability is revealed via a struc-tured interviewing process and has to be confirmed by third-party referencing.

Collaborating and influencing capability can be developed through active use of communication skills, learning and development, and most notably by acquiring practical experience of systematic collaboration with other senior executives, both internally and externally. These skills also depend on a company’s scale: for example, we can see that collaborating is a strong skill of CFOs at the world’s biggest multinational companies. Executives have to collaborate actively to manage the finance function of a publicly-traded company, operating in dozens of countries and employing hundreds of thousands of people globally. From another point of view, the CFO of such a company would not survive in his role without an ability to reach shared and well-weighted decisions with his peers and external partners.

Russian companies are rapidly catching up with international leaders in corporate governance, business process maturity and the requirements for executives, so we are expecting to see higher expectations of future CFOs in terms of collabo-rating as well.

russia cfo route to the top

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MetHodoLoGYThe research uses data drawn from public sources and Spencer Stuart research that analyses the professional background and career paths of CFOs of the largest Russian public companies by market capitalisation. 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, 2017.

We have compared Russian market data with Spencer Stuart CFO bench-marks from the UK (FTSE 100) and the US (Fortune 500) markets in2017.

The majority of companies under review are industrial (63 companies out of 98), followed by financial services (15), consumer (9), technology, media and telecommunications (8) and life sciences (3). A full list of companies anal-ysed can be found on the following page.

Industry acronymsCON Consumer goods and

services

FS Financial services

IND Industrial

LS Life sciences

TMT Technology, media and telecommunications

Function acronymsDFD Divisional financial director

FP&A Financial planning and analysis

GM General management

CD/M&A

Corporate development/ Mergers and acquisitions

Control Financial controller

IR Investor relations

ONF Other non-finance

OGF Other group finance

PS Professional services

russia cfo route to the top

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Companies ListAcron Group

Aeroflot

Alrosa

AvtoVAZ

Bank Saint- Petersburg

Bashneft

Beluga Group

Chelpipe

Chelyabinsk Zinc Plant

Cherkizovo

Credit Bank of Moscow 

Detskiy Mir

Dixy Group

Dorogobuzh

Enel

Europlan

EVRAZ

FG “Future”

FSK UES

Gazprom

Gazprom Neft

Global Ports

Globaltrans Investment

Inter RAO

Irkutskenergo

KAMAZ

Kazanorgsintez

Kubanenergo

Kuibyshev Azot

Lenta

LSR Group

Lukoil

M.Video

Magnit

Mail.Ru Group

Mat’ I Ditya

Mechel

MegaFon

MGTS

MMK Group

MOESK

Moscow Exchange

Mosenergo

Mosoblbank

Mostotrest

MRSK Center

MTS

Nizhnekamskneftekhim

NLMK Group

NMTP

Norilsk Nickel

Novatek

O’Key Group

OGK-2

OTCPharm

Otkritie  

PhosAgro

PIK Group

Polymetal International

Polyus Zoloto

Promsvyazbank

Protek

QIWI Group

Raspadskaya

Rosbank

Rosgosstrakh

Rosneft

Rosseti

Rostelecom

Rusagro

Rusal

RusHydro

RussNeft

Sberbank

Severstal

Sistema

Slavneft

Sollers

Southern Kuzbass

Surgutneftegaz

Tatneft

TGK-1

Tinkoff Credit Systems

TMK

TNS Energo

TransKonteyner

Unipro

United Aircraft Corporation

United Wagon Company

Uralkali

Uralsib

Utair

VimpelCom

Vozrozhdenie Bank

VSMPO-AVISMA

VTB Bank

X5 Retail Group

Yandex

russia cfo route to the top

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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.

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AUtHoRSAnton Storozhenko Gennady Vanin Viktoria Kim

AboUt SPenCeR StUARtAt Spencer Stuart, we know how much leadership matters. We are trusted by organizations around the world to help them make the senior-level leadership decisions that have a lasting impact on their enterprises. Through our executive search, board and leadership advisory services, we help build and enhance high-performing teams for select clients ranging from major multinationals to emerging companies to nonprofit institutions.

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