Historically, the CFO role across all industries required a CPA and was driven by accounting, which has always been characterized as the language of business. By focusing on accounting operations and then budgeting and financial planning, one could ultimately make the leap from a controller position up to a CFO role.
This was the case in healthcare finance as well, and it was a field with a linear career trajectory up to the CFO, which in itself was a straightforward role. The CFO was relied upon for keeping the books and reporting the numbers. If an organization was looking to invest, the CFO was the individual who held the purse strings and provided insight to the CEO in making decisions, but that was typically the extent of the CFO’s strategic input.
This has changed, and the CFO role in healthcare has been elevated. It is hard to pinpoint when this occurred. It could have been when the Affordable Care Act (ACA) was first discussed, and there was a greater focus on population health. Or maybe it happened when health systems saw a need to focus on growing the business while lowering costs. Or was it when health systems changed from holding models to operating models?
Though it’s hard to identify when this transformation happened, one thing is clear: Today’s hospital/health system CFOs are essential strategic partners to CEOs and boards of directors. They help grow hospitals and health systems through allocation of resources in business ventures, some of which may not even directly relate to core healthcare services. Healthcare CFOs are relied upon for insights on business development, mergers and acquisitions, hospital operations, and medical group strategy.
A large gap
If healthcare CFO roles have grown and require a greater focus on strategy, how does one prepare for that role? Therein lies the challenge. In today’s environment, there is often a large gap between the CFO and the immediate successor to that position. Often, organizations do not have strong internal candidates ready to step into today’s elevated CFO position.
Also, past organizational finance structures were simple and straightforward. There was the CFO, likely followed by a controller who could have served as the second in command, or there may have been a designated vice president of financial operations. Maybe there was a treasurer on the team or investment strategy responsibilities were outsourced. Managed care contracting, medical group finance, and revenue cycle had leaders as well. These structures still exist today.
These roles require different skill sets, presenting challenges when, for example, a medical group finance executive tries to make the switch to hospital operations, or a treasurer needs to learn about managed care finance. In the past, professionals with backgrounds in financial operations had the greatest chances at success in CFO roles. But with the CFO role expanding and diversifying, do any of the roles within the finance team help individuals develop broad skills to eventually assume top jobs?
CFOs to the rescue
The new focus on being a strategic business partner will force future CFOs to think about the next in line and close the gap. The following actions should be considered as ways to build and grow finance teams, aligning future needs with sustainable and logical organizational structures that build succession.
- Combine separate areas, such as managed care and accounting, to broaden skills.
- Develop a new position called vice president of strategic finance or use a general title such as vice president of finance.
- Rotate leaders through different disciplines within finance, building a pipeline of talent that leads to a succession plan.
These options will expose high-potential leaders to the broader areas of finance and give them different experiences that will allow them to make the leap to CFO positions, whether they are within the same organization or outside.
The power of mentoring
CFOs need to emphasize mentoring as well. At some point in our careers, someone took a chance on each of us. There may have been a mentor or boss that took a leap of faith, helping our career progress. Because today’s and future CFOs need to be jacks of all trades, conversant in many areas of finance with a broad skill set, there needs to be more care given to mentoring and developing others on the finance team. The following are a few ways this can be done:
- Scheduling set meetings between the CFO and mentee to discuss current challenges and talk through issues comprehensively and strategically.
- Facilitating individuals’ exposure to and interaction with the board of directors through, for example, presentations or the staffing of committees.
- Allowing up-and-coming finance leaders to take lead roles on system-wide projects such as financial system upgrades, performance improvement, or campus construction projects.
If done with supervision and an eye toward mentoring, these activities can take finance professionals outside of their defined areas and give them broader exposure and new knowledge.
The CFO needs to create new finance roles and responsibilities, partnering with human resources on best practices in building succession plans, and not being afraid to expose leaders to new ideas. By providing the proper support, through formal and informal approaches, CFOs can help close the gap between their roles and the number two, while also building a pipeline of future talent.