Archer Mathieson CFO Forum: Moving from CFO to CEO – Growing your leadership skills
11th July 2011
Archer Mathieson’s Finance Practice recently held a business breakfast at One Aldwych, London 
where 11 Senior Finance Leaders discussed developing leadership skills in order to make the transition to become a Chief Executive Officer.
To get the most out of this discussion we asked the Full Potential Group (FPG), a market leading coaching, leadership, high-performance culture specialist to chair the discussion and to focus on the following questions:
1. Do Finance Directors make good Chief Executive Officers?
The global financial crisis has led to a growing interest in the changing roles of the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) and, more specifically, the question as to whether CFOs make good CEOs.
- 49% of serving CEOs in the current FTSE 100 Index have financial backgrounds, compared to only 31% in 2008.
- 9 FTSE 100 CEOs have been appointed over the past year, of which six leaders (65%) have financial backgrounds.
This accelerating trend can also be seen in the Fortune 500. However putting these trends into a broader context, Tappin and Cave in their book ‘The New Secrets of CEOs,’1 underline the fact that “only 57 of the chief executives of UK FTSE250 companies hold accountancy qualifications. That’s less than 23% and very few have actually served as finance directors, with many just picking up the qualification”.
Traditionally we also often view CEOs with a financial background as financial value drivers, using their technical and analytical skills to drive shareholder value, rather than being great leaders demonstrating strategic vision and leadership skills. Occasionally however there are exceptions to this rule – a well-known example being Martin Sorrell, Group CEO of WPP and a respected corporate entrepreneur who was previously Group Financial Director at Saatchi and Saatchi. Nevertheless such CEOs are comparatively rare and finance leaders with CEO ambitions need to be very honest about their own skill sets and those effective CEOs needs to display.
The recession has offered many CFOs the opportunity to assume a higher profile position on the leadership team, spending more time with the CEO whose focus has been increasingly drawn to financial necessities such as working capital, cash management and financial liquidity. This broader exposure has equipped many CFOs with a more holistic view of business operations but the fundamental question for any CFO remains the need to honestly consider ‘do they really want to be a CEO’ and are they ready to face up to the considerable challenges this very different role will bring?
2. The Changing Roles of the CEO and CFO
The volatile economic environment over recent years has placed new demands on all business leaders and impacted on the pre-requisite skill sets required to effectively embrace high-profile strategic positions. Any CFOs contemplating the move to CEO need to consider that the new position will require the ability to handle:
- The growing speed of business transition
- The requirement to make quicker decisions based on incomplete data – bringing higher risks and a greater reliance on ‘gut feel’ rather than hard facts
- The frequent calls for public speaking and the need to enjoy and enthusiastically embrace all opportunities across a variety of media
- The need to encourage and inspire others using ‘softer’ leadership skills, bringing emotional intelligence elements such as self-awareness, self-regulation, motivation, empathy, and social skills
As a CFO, the need to communicate across a wider range of more diverse stakeholders has also grown in recent years, whether it is working with the banks, managing investor relations, presenting to the Board or direct involvement in internal employee communications. The CFO role has become an increasingly visible one, assuming a more central strategic position on the Leadership team, as well as greater direct involvement with employees at all levels. The CFOs remit has also broadened beyond the traditional financial functions, frequently extending to holding responsibility for such areas as pricing models, supply chain efficiency, IT procurement and support etc.
An additional complexity for any CFO aspiring towards the leadership role is the changing nature of the CEO role itself in this current economic climate. According to the Chartered Institute of Management Accountants, today’s CEOs need to address:
- Winning in the unpredictable business world following the global financial crisis and proficiency in handling the capital markets
- Dealing with the onset of ‘hard’ globalization
- Making sense of environmental and social sustainability
- Capitalizing on the third wave of the internet
- Competing in a global world war for talent
3. Personally Making the Leap from CFO to CEO
Having shared these thoughts on the current situation, the attendees were asked to personally consider four questions:
- How has your CFO role changed in the past 2-3 years?
- How has the role of your CEO changed?
- What are the biggest challenges for you when considering a successful transition to a CEO role?
- How do you plan to bridge the gap?
Several attendees expressed the view that the CFO and CEO roles have become intertwined as the CEOs priorities align more closely with the CFO responsibilities – the situation often being that the CFO solves the problem with the CEO acting as spokesman. An effective leadership team often requires a flexible, collective leadership approach – where “senior management cells” with the necessary skill sets are being set up to address organisational needs at a specific time.
The discussion moved to the different types of CEOs that a company might need as it moves through the various business evolution lifecycle stages – whether growing, maturing or contracting, and that different types of CEOs will be employed to carry out the varying strategies. The life expectancy of the average CEO is now somewhere between 30 and 40 months which underlines the need for a more ‘collective’ leadership approach based on the Board operating as a team with overlapping remits and thus able to maintain business momentum in the face of leadership changes. The view was that a CEO position is not a ‘job for life’ and it is imperative that any prospective CEO finds the right organisation, at the right stage in the cycle, to meet their personal skill sets.
An ambitious CFO should also consciously seek out a CEO who is willing to mentor and work with them as part of a succession planning programme. Some CEOs may be protective of their position and less willing to assist a CFO in making this transition or supporting them in developing the necessary skill sets. However, participants shared encouraging stories of working with mature, confident CEOs who proactively mentored their development. Choosing which CEO to work for emerged as an important factor in CFOs assessing new opportunities for the next step in their careers.
An alternative route would be to seek out non-executive roles on PLC Boards to gain the breadth of leadership experience and to develop the self-confidence required to move up the leadership ladder. A number of the business breakfast participants had taken Non-Executive Director roles and confirmed the value of this step in broadening their development. Others promoted the value of a sideways move to take a general management role in the organisation. Through such an appointment CFO’s can develop experience in sales and marketing – an area that is often lacking from their CV’s.
4. Personally ‘bridging the gap’ in the transition to a CEO position
On a personal level, an ambitious CFO needs to be honest about ‘what they really want?’ The role of a CEO can be a lonely frightening place and ultimately as President Truman used to say ‘the buck stops here’. A prospective CEO not only has to worry about being a charismatic, strategic thinker and the inspiring public face for the company but also have the personal strength and self-resilience to navigate the internal political minefield. As well as acknowledging this challenge, some participants saw the responsibility of the CEO role as exciting and motivating – how else would they know that they could lead an organisation unless they took this step and proved to themselves that they could do it!
So a healthy discussion took place with the following being the key thoughts to take away;
- CFOs becoming CEOs is an increasing trend, ambitions of CFO’s should reflect that
- CFO’s should be realistic in their outlook
- the need for excellent communication skills should not be underestimated
- is not an exact science being a CEO
- softer leadership skills are called for
- Globalisation experience will become increasingly key
- Any non-Finance skills you can pick up along the way will make a big difference
- Choose your boss carefully, some CEO’s will make excellent mentors, others won’t
Carole Gaskell and John Blakey from FPG left our audience with a couple of thought provoking quotes;
‘When you move from being a CFO to being a CEO, you have to change the way you think, act and communicate. A CEO must think at a higher level of abstraction – more inductively and less deductively. A CEO must be more willing and able to act on key decisions with fewer facts, relying more on grounded assumptions. And a CEO must be able to communicate effectively to a broader constituency – in particular, he must be far more politically attuned”
John Dasburg, CEO of Burger King, previously CFO of Marriott International
The chief executive who was primarily the cold analyst gazing at the numbers around the boardroom table – that model is going to be more difficult to make work”
Archie Norman, formerly Group Finance Director at Kingfisher and CEO at ex–CEO at ASDA plc, currently Chairman of ITV plc
Attendees:
David Brown, Finance Director, Eurostar
Zillah Byng-Maddick, CFO, Trader Media Group
Simon Carlyon, Group Financial Controller, SEGRO
Shatish Dasani, Finance Director, TT Electronics
Andrew Merriman, CFO, Gieves & Hawkes Plc
Martin Beer, Finance Director, Uniq Plc
Phillip Price, EMEA CFO, Readers Digest
Marcus Roy, Finance Director, Carphone Warehouse UK Ltd
Mazin Sharif, CFO, Colt Telecom Group Plc
Roddy Barrow, European Finance Director, Ingeus Europe Ltd
Michael Watson, VP Finance, HP Enterprise Services
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It was great to see everyone there, thank you all for you contribution – if anyone has any further views to add please feel free to do so.
Richard