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Remuneration special: Age of audacity

The old adage that with age comes wisdom rings as true as ever. According to research by the University of California in San Diego, what is lost in reaction times is made up for in better decision making and greater insight. For finance leaders, particularly those heading the finance function at FTSE-100 companies, there is no substitute for experience.

According to data compiled as part of Financial Director’s 2010 salary survey, some of the most successful and well-remunerated FDs have a wealth of experience behind them.

Well-known finance leaders such as Tim Tookey at Lloyds Banking Group and Malcolm Wyman at SABMiller, aged 68 and 64 respectively, are among some of the best-paid FDs featured in the survey.

Yet a young, hungry and dynamic breed of FD is coming to the fore. Although unlikely to be found at the local skate park, there are FDs of FTSE-100 companies proving that you can reach the top at an ever younger age.

Andrew Griffith, the 39-year-old finance director of BSkyB, Andrew Jenner of services company Serco and Graham Shuttleworth of Randgold Resources – both 41 – have proved age is no barrier to success.

With a salary of just over £1m last year, BSkyB’s Griffith does not fall far short of peers almost 30 years his senior. And he is not alone. According to the survey, Paul Bowtell, the 42-year-old FD of Tui Travel, pulled in a wage of £1.05m.

Mark Freebairn, partner in the CFO practice at headhunter Odgers Berndtson, says age is “completely irrelevant, and has been for quite a while”. In terms of the base salary and short-term benefits, “I don’t care whether you are 39 or 59,” he says. “What you earn will depend on the size and scale of the business.”

Young, gifted and in the black
It is not just the up-and-coming FDs of FTSE-100 companies that can boast such success stories. Finance directors at FTSE-250 companies are also proving they can exceed the remuneration of their elder peers.

Data based on age versus average pay shows that FTSE-250 finance directors aged between 40 and 44 earn an average of £559,470, higher than the average pay of their peers until they reach the age of 60.

According to the survey, FTSE-250 FDs between 45 and 49 earn an average of £549,380; those between 50 and 54 get an average of £506,128; while FDs between 55 and 59 earn an average of £533,716.

It is harder to draw comparisons with the figures for FTSE-100 FDs as BSkyB’s Griffith is the only FTSE-100 FD in his thirties. However, based on his earnings alone, Griffith earns more than the average of FDs until they reach their sixties, exclud­ing those between 45 and 49 years of age.

Neil McConachie, finance director at insurance group Lancashire Holdings and at 37 the third-youngest FD in the survey, agrees that age has become irrelevant.

“It is not that old age is against you but there are certain benefits to being young that may help with the skills a FD needs,” McConachie says.

The remit of finance professionals, both internally for the organisation and as external advisers, has broadened dramatically. The finance function in today’s business environment is no longer comparable with the role only a decade ago.

In a world that is becoming more competitive, complex and regulated, organisations need two types of finance professionals: those who bring deep and specialised finance knowledge to the sector and those who bring a broader commercial experience.

 

“What makes a CFO successful has changed and it is constantly changing. The skills of an FD 30 years ago are no longer the most important skills. Maybe the older generation of FDs have lost the ambition to learn new skills,” says McConachie.

“The traditional role of adding up numbers, reporting them and doing analysis is much more strategic now. What FDs do now is to be consulted for advice on strategy,” McConachie says.

This means that FDs are coming from a very different background than they have in the past.

“The older generation typically came from a heavy financial background. Now FDs come from a much broader background,” says Tom Gunson, partner in the consulting practice at Pricewaterhouse-Coopers (PwC). “Many have now gone to business school and there is an expectation that the pace of change and career progression is more rapid.”

Generation Y
Developments around the background of candidates entering the finance profession are consistent with what the new generation of finance professionals expect from their careers.

According to a joint research paper undertaken between March and June 2010 by Mercer and the Association of Chartered Certified Accountants, Generation Y: Realising the Potential, based on research on finance professionals born between 1980 and 1993, dynamic career progression is at the heart of their expectations in the finance profession.

Sue Filmer, principal consultant in Mercer’s human capital business and an author of the report, says the youngest generation in finance wants a career path that is fluid and quickly evolving.

The generation is divided between those seeking to follow traditional finance career routes and those wishing to embark on much broader career paths outside mainstream finance roles.

“Generation Y have a much more dynamic view to career progression; they are looking for quick velocity,” Filmer tells Financial Director. “In the past the view of career progression has been slow and methodical: Generation Y wants to move on. There is a bottom-up drive for the early recruitment of bright and talented people that have an expectation of getting somewhere quickly.”

According to Mercer’s survey, 40 percent of finance professionals born between 1980 and 1993 wish to pursue a classic finance career, with progression and success indicated by increasing depth of knowledge and expertise. While they remain in finance they may specialise in areas such as tax or audit and define success as ascending the career ladder of the organisation to roles such as FD or audit partner.

However, more than half of those surveyed wish to pursue new pathways, and gain a breadth of experience by following a career path outside traditional finance roles.

“The two things that have been thrown into the mix are the move to business partnering and what that means in terms of the skillset, and the transformation of the finance function as an overall model and what that means in terms of career progression,” says PwC’s Gunson.

Demand for talent
The demand for ambitious and talented individuals with more than the traditional skillset is also being witnessed in the recruitment process.

Caroline Raggett, partner at financial headhunter Russell Reynolds, says:
“When we are asked to recruit finance professionals we try to find someone who could be promoted to a different function. It is about adding diverse capabilities.”

The desire of the next generation of finance leaders to have a steeper, faster career trajectory is helped by FTSE-100 and 250 businesses having a more sophisticated approach to developing career progression within their organisations.

“There is a much more sophisticated approach to talent. Most organisations have a review process,” says Mercer’s Filmer. “With their talent generation teams, FTSE-100 companies spot individuals and move them on quickly.”

According to the figures from the Mercer survey, career development and learning opportunities are the primary factors in deciding to join a particular organisation. Almost three-quarters of respondents to the survey said these are very important.

The perception that career development is the key to attracting the next generation of finance professionals is universally shared with the employers, Filmer says, adding that candidates ask for information on career development during the interview stage, seeking employer support to achieve professional qualifications.

Fundamental implications
The implication for organisations wishing to attract the next generation of FDs is that the career proposition is fundamental.

Joe Lister, the 39-year-old FD at student housing provider Unite Group, says career development has been a real focus at his organisation.

“I joined Unite as a corporate finance manager eight years ago,” he says. “Because it was a growing company it gave me the opportunity to move across the business.
“The skills I learned at Unite complemented the skills I acquired when I was at PwC. There is real focus at Unite to give people the opportunity to move around the business. I wouldn’t describe myself as a technical accountant.”

However, it is not just about career progression, says Gunson. General career progression frameworks have been in place at big corporations for a while. He says it is much more about developing talent.

“What has become the focus is talent management. It is about spotting the superstars, how to keep them, and keep them stimulated,” he says.

Remuneration is a critical element of attracting and retaining the next generation of finance leaders, so it is no surprise how well remunerated many of the younger FDs are in this year’s salary survey. According to Mercer, base salary is identified as the second-most important attraction factor, after career development.

Getting to the top and being well remunerated is self-fulfilling, says Lister.

“If you are an FD of a FTSE-250 company at 35, you will ask ‘what should I be doing at 45?’ , ” he says. “Having got to my position at a relatively young age, it has set my expectation that bit higher.”

To download the full report, click here

To see the salary survey tables in full,  click here

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