Is CFO the new pre-CEO?

Lisa is an CFO/FC with over twenty five year’s experience as an accountant and analyst across a range of International blue chips. More recently she has been owned and managed small businesses and currently freelances as a finance writer and analyst.    

FTSE 100 (52%) and Fortune 500 (30%) Chief Executive Officers are increasingly being seen to be former Chief Financial Officers and this trend looks set to continue, as the finance executive becomes a key official with a voice that gets the ear of not only the CEO, but also of investors and other stakeholders.

Where previously the CEO was the most scrutinized executive, the last ten years have seen a dramatic increase in the profile of the CFO. Investors and the financial press are now weighing the CFO as much as any other board member. He/she now needs to be credible and comfortable with not just the traditional facets of the role but also new media tools, such as the webcast, teleconferencing and video presentations so that the face and voice of the CFO is as familiar to stakeholders as the CEO and Chairman.

Why are CFO’s the first choice for the top job?   

The role of the CEO has evolved over the last twenty years; with ever-increasing regulatory issues a strong financial background is essential for a CEO.

In an interview with The Wall Street Journal’s editor in chief, Gerard Baker, Indra K. Nooyi, chairman and chief executive and ex CFO of PepsiCo said “The reason CFOs became considered for CEOs at all is because regulations, Sarbanes-Oxley, confused the hell out of boards and CEOs. And the world has become more complex. Transformations have to be done of companies.”

Changes in the macro-economic environment have also channeled changes for senior management. Cost control, cash management, financial restructuring and raising capital have become the most important activities of a business in recent years, where pre0recession the emphasis was more likely to have been on product/service development, new markets and top-line growth.

The CEO and CFO are increasingly expected to work in tandem to steer the business. Some commentators liken the relationship between the two roles as a marriage: each party is aware of the other’s strengths and weaknesses, they need to have an understanding of the others style and views and are able to communicate as a united voice to stakeholders. With such a noticeable shift in the job profile and function it is little wonder that more and more CFO’s are taking up the baton of the role they support so closely.

The CFO To CEO Trend

This trend is most prevalent in the UK and the USA, where the most common background for a CEO is finance, however Asia and Central and Eastern European companies are starting to follow this bias. Financial talent from the West has also become a principle requisite for organisations in emerging markets as they expand globally.

Do junior accountants have ambitions for the top job?

There are now a few more rungs on the career ladder for ambitious accountants. The CFO role is no longer seen as a career destination but as a stepping stone to the top job of CEO. Keeping this career objective at the forefront of your career plans at an early stage will help you as a candidate gain a more rounded skill set that will carry you to the top.

The Skills You Need

The CFO is no longer exclusively the expert on financial matters, they are now expected to be more involved in running the business, which requires a broader skill sets than his/her predecessor.

Leaders capable of running the whole businesses are the ones who will be promoted. Operational focus and future perspective are valued attributes.

Interviews and polls of ex CFO’s turned CEO’s highlight that it is not an exclusive skill set which is required but certain characteristic traits are also critical tools. For example a master of change management is going to be top of the CEO candidature list, as there is a requirement for a CFO to overcome the metamorphosis of mindset from risk aversion to understanding risk and becoming a business enabler who can influence change.

Start Training For The Top Job

A large proportion of CEO’s who were formerly CFO’s admit to landing the top job by default or by accident, however a new generation of young accountants see the future possibilities forged by these pioneers and want nothings less for themselves. In order to progress up the corporate ladder they must be open to educating themselves on all aspects of the business, roll up their sleeves and get to the coal face from the inception of a career. Those with the broadest operational experience and those that can embrace change and diversity will prevail.

Article References:

52% of CEOs in FTSE 100 companies have strong financial backgrounds, and half of those are chartered accountants. Source: Robert Half CEO tracker survey.

Fortune 500 (30%) Chief Executive Officer’s coming from a Chief Financial Officer role.

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