Many great CEO’s started out as CFO’s. Any C level Officer can make a great CEO as they are all leadership focused positions. The important thing to note is that the CEO cannot be limited to the knowledge of his earlier role. It’s not that finance experience is irrelevant to the top spot; it’s that in most cases, finance executives have to move beyond the role to prove their versatility.
In fact, most CEO’s had some financial background, but came from broader roles such as division president or COO. That’s because board members want to know that a CFO can cover some of the characteristics with no physical presence that come with being a CEO, like interacting well with customers, motivating employees, and being decisive.
CEO’s are:
- Extroverts and put a bright perspective on things.
- Responsible for driving growth.
- Experts in dealing with a crises.
- Develops strategies.
- Manages finances.
- Well equipped in dealing with ambiguity and complexity.
- Insightful.
- Embrace different approaches.
- Willing to assume accountability and ultimate responsibility, (particularly when things fail).
CFO’s on the other hand are seen as being:
- Balanced and reflective.
- A glorified accountant, (which is so wrong in so many ways.)
- Not defining strategy, but they ingest strategy.
However, financial crisis and corporate scandals have forced the boardroom to view a strong financial background as essential to a strong CEO. In other words, today’s board wants a CEO who can help them decode the built-up presentations coming in from companies, financial institutions, advisers and attorneys. Although CFOs are increasingly the closest partners to CEOs and deeply involved in business operations and strategy, most of those CFOs-turned-CEOs were promoted from within the same company. In those cases, the CFO is often the number two executive after the CEO explaining strategy, explaining capital allocation, and explaining tax utilization within the business. That interaction with both the board and the company’s investors can be a valuable training ground for future CEOs.
How to Make the transition from CFO to CEO
While there’s no shortcut to making the leap from CFO to CEO, finance executives who aspire to the role can certainly better their chances. The first step is to get involved in operations in whatever way possible. The best experience is to become a division CEO, even if you only want to remain a CFO, you should gain the experience of running something. CFOs who make the transition to CEO have managed to develop the strong operational strength of running a business to complement their already competent financial skill set. Perfectly summed up why CFOs are most often moved into an operational role before a CEO promotion is finalized? Because you grow and you learn. You have to learn how to effectively deal with customers, and you learn to inspire others. We can only succeed in context. Sir Winston was great at warmongering but hopeless in peace talks. When we are promoted or move jobs, we can not simply continue with our previous model of success. To survive we have to learn a new set of tricks.
As a career progresses, getting those operational experiences often involves shadowing the CEO you sign up to work with very closely. You can have a deep-seated operating effect from the CFO’s chair if you partner effectively with the CEO, but that means identifying a CEO who will be a mentor to you.
The second critical step is for the CFO to build a close relationship with board members. There are more CFOs who don’t have a strong relationship with their board members than those who do, because in many cases the CEO acts as a gatekeeper to the boardroom relationship. The high-speed rise of the chief financial officer is without equal by any other corporate role. The CFO has access to every angle of the business and now flaunts a level of authority that only chief executives can counter. From the universal influence of financial markets to the growth of data-driven decision-making, the chief financial officer’s skill set has proved uniquely in tune with the times.
