The winds of change are blowing, and a new trend is emerging; increasingly, CFOs are being viewed as potential candidates for the coveted role of CEO. This shift in perception is becoming more prevalent, with experts predicting that the trend will only gain momentum in the years to come.
Following the unplanned departure of CEO Brian Krzanich in June 2018, CFO Bob Swan was appointed as Intel’s interim CEO. The hardware giant subsequently launched a CEO search, assessing internal and external candidates for what would be only its seventh leader in 50 years. But in January 2019, Swan accepted a permanent appointment.
Now with such broad and diverse skill sets, the transition from CFO to CEO may seem like a natural career progression for many. And yet, in the past, many businesses have tended to overlook their financial heads for the top job. Until now.
Are they the right fit?
There are risks to transitioning a CFO-to-CEO, namely the perception that they could be too finance-focused and may not give enough attention to other aspects of the business. Skillsets have a huge role to play in this regard.
For much of their career, CFOs will have focused on the day-to-day operations of the finance function – accounting, forecasting, managing spend and monitoring cash flow. Those stepping into the shoes of the CEO will need to manage a much broader range of issues . They should have a good understanding of the company’s financials, operations, and strategy and be able to develop a comprehensive plan that includes all of these areas.
They should also be able to identify potential risks and propose solutions that can be implemented to mitigate them. The person should be able to foster strong relationships with board members, investors, and other stakeholders, and be able to lead the company through difficult situations.
Richard Ashton, a partner at Savannah Group, believes modern-day CFO’s looking to make the transition ,already possess these attributes and should not have to acquire any new skills. “The CFO whose aspiration is to be CEO generally makes the transition into general management earlier in their career,” he says.
Ashton goes on to explain that CFOs enjoy physical facetime with the board of an organisation and are today likely to be the candidate the board feels comfortable with. “If the board decides that its CFO is right to be the CEO of the business, then there is nothing more that they should need, he says. “But I would argue that they should be the type of CFO who can look at the business first and the numbers second,” he says.
Ashton agrees CFOs making the move need to be strategic thinkers and possess strong stakeholder management and influence skills in addition to people leadership – skills they should have developed in their existing role.
Opportunity to disrupt
With the role of CFO evolving from being focused solely on the financials to now encompassing strategy and operations, it is no surprise that more CFOs are being considered for the role of CEO. This shift has been beneficial for many companies, as CFOs bring a fresh perspective to the top job, often leading to fresh ideas and disruptive changes in the business.
CFOs are highly experienced in the financial aspects of the business, and this expertise can help to drive growth and profitability. CFOs are also often creative and innovative thinkers – beneficial in a fast-paced and ever-changing business world.
Chris Ortega, a fractional CFO and CEO of Fresh FP&A, says a strategically minded CFO who has been inside a business, knows how to leverage technology, and has a great empathetic view of people would have a natural path to becoming head of an organisation.
“That is probably the closest transition you can see out of the other roles; perhaps the other role will be a COO; those are one of the two other avenues where you can go and be that CEO because you are involved in the business. That’s another opportunity for us to make an impact,” says Ortega.
Ortega says adopting a fresh perspective on finance meant there was a huge opportunity to disrupt the office of the CEO.
“Typically, historically once you got to the CFO that was the end of the line, that was the top level a finance professional could reach, and you can’t get into that CEO role because many traditional CFOs were very tactically focused, which is important but that is not going to change the game. Future Fresh CFOs are great collaborators, understand the business, future focused and have pulse on the people,” says Ortega.
A growing trend
Like Ortega, Ashton believes more and more CFOs from large businesses will be picked for the top jobs as CEOs exit.
“[CFOs are are] the de-facto number two in the organisation. If you have got a very centralised business where everything runs from the centre, then the only real internal candidate is the CFO,” he explains.
“On balance given CFOs are becoming much better leaders of people, they are becoming much more rounded people; their breadth is so wide, I can only see the trend increasing,” Ashton says.
Matthew Collins, a consultant CFO, echoed Ashton’s sentiments saying CFOs are probably as capable and as competent to take over the position of CEO as any other candidate coming from a marketing or sales background.
“It comes down to the individual and the skill set that they have. As with any CFO, you will get different individuals,” he says. “In any good organisation, my belief is that the CFO and the CEO should be working together as partners collectively driving a strategy forward.”
For Collins, CFOs should act as a “voice on the shoulder” of their CEO, especially with regard to advising on risk mitigation. “But there’s no reason why the CFO couldn’t be that natural successor if they had the right characteristics as a leader,” he says.
Gaining the right skills
The CFO role is an excellent launching pad for the CEO position, but it is not a guarantee for success. CFOs must broaden their skill set, develop leadership and communication skills, and be willing to take calculated risks to become successful CEOs.
A study by Executive search firm, Korn Ferry found CFOs who believe that becoming CEOs is their next logical step may well find the odds are against them.
A strategic mind-set, strong financial acumen, and a close working relationship with the board, although they are characteristics of best-in-class CFOs, will be insufficient to transition successfully to CEO.
Korn Ferry’s research compares the leadership profiles of CEOs and CFOs and finds that while the two have similarities in left-brain technical competencies such as decision-making, strategic thinking, and financial acumen, CEOs outshine CFOs in right-brain competencies such as social leadership, vision, and innovation.
CEOs have more experience in facing adversity, dealing with high-risk situations, and crisis management. They also possess more right-brain leadership strengths, including courage, optimism, and the ability to build and leverage relationships and influence among employees and customers.
As the business landscape continues to evolve, the roles of CFOs have begun to move beyond traditional finance and accounting duties, into more strategic and operational roles. As a result, CFOs look more likely to ascend to the role of CEO. To be successful, CFOs must have the ability to analyse financial data and take strategic business decisions. They must also have a thorough knowledge of the industry, technology, and the global economy.
With this skill set, CFOs can provide insightful advice to their organisations, helping them make informed decisions. They can provide a unique combination of financial acumen and business strategy to the organisation, which can be beneficial in the long run.