From CFO to CEO: a natural transition?
For many Finance Directors, the logical and obvious “next step” in their career is to become a Chief Executive Officer. But is it as simple a transition as many might assume? Can it be a case of “be careful what you wish for”?
School for CEOs did research into what it was like to step up into the role of CEO. We asked those who had led businesses as CEO or chair to share their insights. Of those interviewed, 40% had been CFO or finance director prior to making that transition into the top job.
A quarter of those interviewed suggested that preparing for the interactions with “The City” was the greatest challenge – an area where CFOs have a distinct advantage over others – but there are other testing areas to consider. As one CEO put it: “Everything you’ve ever done prepares you for it, but nothing you’ve ever done prepares you for it. All the building bricks you put in place are very important, but the nature of the job is so different from what you’ve done that however well prepared you think you are, you’re not prepared enough.”
Understanding the dynamics of relationships with the board is critical. This is another area where CFOs should have an edge over others, not least because most will be on the board already. However, dealing with external stakeholders other than “The City” is becoming increasingly important. Government, regulators, NGOs and other such bodies have become more and more influential in the last 10 years and need to be managed appropriately. Similarly, getting to grips with the challenge of communicating to everyone in the organisation was something that few were well prepared for, the “man or woman on the shop floor” being every bit as important as the
CEO’s direct reports.
But most surprising to many who found themselves in the role of CEO was that it was incredibly lonely, no matter what their background. “The lack of someone above you in the pecking order to get a final bounce-off for an idea was the biggest single thing that struck me. Suddenly you’re sitting in an office and you’re very lonely,” said one CEO.
So how do you go about preparing for all this? Coaching and mentoring were the top two external developmental initiatives undertaken by aspiring CEOs. Many felt that the breadth and diversity of their own experiences were fundamental to their success in the top job. For those coming from a finance background, gaining experience of running a P&L is very important. CFOs with ambitions to transition to CEO should actively seek out opportunities to run part of their business with full accountability for performance, as well as being responsible for “the numbers”.
As one chairman put it: “If finance directors have never done general management, they really, really need to prepare for the CEO role because it’s a very big ask if you’ve never had to run a team of people with profit and loss responsibilities.”
As many as 77% of the interviewees had also held a non-executive directorship, but these were not always easy to secure and frequently came later in people’s careers. Those with a financial background found themselves in demand for audit committee roles.
The role of the CEO is undoubtedly both challenging and rewarding, and there are no panaceas to prepare for the top job. Perhaps the final word should go to another CEO: “There’s not a playbook of skills you can learn – different people teach you a lot by their strengths and by their weaknesses. So, you learn as much from people doing it wrong as people doing it right.”
David Sole will be discussing the transition from CFO to CEO in a webinar with Sandy Manson, CEO of Johnston Carmichael on Wednesday 6th December from 12-12.45pm (GMT). To join the discussion, sign up.