How chief financial officers can be the perfect CEOs
Anders Liu-Lindberg
Leading advisor to senior Finance and FP&A leaders on creating impact through business partnering | Interim | VP Finance | Business Finance
Teaser: How many CFOs end up becoming CEO of their company? The answer might surprise you. And it's going up. In this post, we’ll check out what makes CFO the best preparation for stepping up as CEO.
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What hasn’t changed in the corporate world of work during the past five years?
From the nature of work to technology adoption, and shifts in corporate culture; the only constant seems to have been “change”.
As companies evolve, so does the nature of their leadership positions.
We’ve looked at how the chief financial officer role has evolved most, of all c-suite executive positions.
The CFO position is heir apparent to the CEO, or is it?
Let’s explore the pros and cons of CFOs taking over the job of CEO and how CFOs can prepare themselves for this pivotal shift.
The modern CFO role is like being the brain of the central nervous system of the organization.?
Due to the flexibility and scope of the role, CFOs must develop relationship capital, and partnering skills, and must also be really trusted senior leaders, by the board and workers.?
Some responsibilities overlap while others don’t
Strategy
A CEO role is highly strategic, they rely upon the board and senior leadership close to them to be able to keep an eye always looking up to the big picture.
A CFO, on the other hand, while sometimes a member of the board, is really well positioned to enable the CEO to make the best possible decisions based on their specialist knowledge and ability to interpret financial data in a way that enables strategic insights to be gleaned.
Even better is when the CFO can propose strategically significant information to the board.
For instance, the CEO's responsibilities might include setting the direction for the company and deciding, or at least signing off on, budgets for all departments.
Culture
CEOs also embody and are the figurehead of the culture of the company. They manage the board and, sometimes, shareholder expectations. They are also the right-hand person to be the chairman of the board.
The CFOs remit has broadened and now encompasses many strategic decision-making points outside of the stereotypical specialist remit of a chief financial officer.
While generally looking at a much more operational level, the CFO has a strategic influence as they make recommendations to the CEO for the budgets of each department, areas that are targeted for growth, and the biggest expense on a company's books, its workforce.
In this way, he is also responsible for the culture because the hiring process and the areas of the company that are identified as being strategically important feed into the culture of the organization.
Insights
While the CEO is the right-hand person to the chairman, the CFO, because of general strategic oversight of the company and the ability to manipulate data to make it useful for forecasting, is often the right-hand person to the CEO.
In this way, a CFO may be close enough to the CEO that they have a perfect role model and mentor to learn from when taking a step up to the most senior of positions. It would be like having the CEO as your business partner.
CFOs can build on their unique experience
There are, however, some cons to consider: One of the most significant concerns is that the CFO’s focus on financial performance could narrow their focus and come at the expense of other areas, such as marketing, sales, or operations.?
A CEO must have a broad understanding of the company’s various functions and operations and be able to balance and prioritize competing interests.
The CFO role, when lazily generalized, can be perceived as too risk-averse to be an effective CEO.?
CFOs are often seen as conservative, and focused on cost-cutting, and financial efficiency, while a CEO must balance risk and reward to drive growth and innovation while not forgetting about financial performance.
It’s important to be able to dispel these perceptions with action in areas outside of finance, demonstrating leadership, decision-making, and showcasing successes effectively.?
More CFOs are becoming CEOs of their company, but how many?
While the situation in every company is different, and the reason why the CEO needs to be replaced is also unique, not every one of these situations will be right for every CFO to take over the role. It helps to be ready though.
But just how common is it for CFOs to step up? According to Crist Kolder Associates’ volatility report from 2022 found that 8.1 percent of the 681 Fortune 500 and S&P 500 companies' CEOs were promoted from CFO.
An all-time high according to the report. Less than a decade ago it was only 5.6 percent. Not a coincidence that as the CFO role adapts and evolved that more than double the number of CEOs from a few years ago are now promoted from the chief financial officer role.
That shows it’s possible and even likely.
So, how can you prepare?
CFOS should work closely with the CEO and other executives to develop a deep understanding of the company's strategy and vision.
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Seek out opportunities to develop their leadership and strategic decision-making skills.
CFOs who can balance financial discipline with strategic thinking, innovation, and risk-taking can position themselves as strong candidates for the CEO role.?
More importantly, you can create the conditions to prepare for when the opportune moment arises. We’ve helped CFOs develop just these skills. CFOs have everything it takes to get there.?
Why not leave a comment below if you believe the CFO can be a good fit for the CEO role, or tell us why you disagree?
This was the third article in our new series "Re-branding the CFO". You can read the previous article(s) below.
While you await future articles why don't you check out our most recent series "Future-proofing the finance professional" below?
Also, check out our latest series "The Finance Function of the Future". You can read all the articles below.
Continue reading below for more articles about trends in finance and accounting.
Anders Liu-Lindberg ?is the co-founder and a partner at?Business Partnering Institute ?and the owner of the largest?group dedicated to Finance Business Partnering ?on LinkedIn with more than 11,000 members. I have ten years of experience as a business partner at the global transport and logistics company?Maersk . I am the co-author of the book “Create Value as a Finance Business Partner ” and a?long-time Finance Blogger ?on LinkedIn with 195,000+ followers and more than 250,000 subscribers to my blog. I am also an advisory board member at?Born Capital ?where I help identify and grow the next big thing in?#CFOTech . Finally, I'm a member of the board of directors at?PACE - Profitability Analytics Center of Excellence ?where I support the development of new analytics frameworks that can improve profitability in companies around the world.
Governance | Strategy | Leadership | Culture | Focus | Value
1 年Interesting take, however, CFOs are technical experts while CEOs are generalists. The skill sets required are different.And CFOs most certainly don’t set the company culture as claimed here. Having said so, I had dinner last night with two CFOs , one of which was CEO for a few years (promoted from CFO) and I worked at a company in which the CFO became CEO when it sold. COOs are for me the most likely to transition better into the CEO role.
Business
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1 年Thanks for posting
PA at Hollard Ghana (Hollard Insurance & Hollard Life Assurance) | Accountant in the Making | Choreographer
1 年Thank you
CFO @ ATOM (formerly Telenor) | Financial Planning, Resilience, CPA (Aust.)
1 年Thanks for posting Anders Liu-Lindberg