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White Paper: From CFO to CEO: How to Rise to the Top
By Stephen P. Konstans
Vice President & CFO Practice Leader
Pearson Partners International
Many aspiring chief financial officers wonder about the combination of skills, experience and knowledge that is necessary to rise to the top in an organization. To help answer that question, Pearson Partners International, a global executive search and leadership development firm, recently surveyed CFOs—from Fortune 1000 multinationals to mid-cap and private companies—about their roles and career paths, supplementing those findings with in-depth interviews of select CFOs who had moved up to become a chief executive officer.
Based on these quantitative and qualitative findings, it is apparent that an organization’s CFO is often considered to be a natural successor for a departing CEO. A CFO’s ability to manage and communicate the financial side of a company—with responsibilities that often extend to compliance, human resources, administration, risk management and information technology—is a key consideration for a board of directors charged with selecting a new chief executive.
However, a CFO must also be able to demonstrate strong people skills to avoid being perceived as just a numbers person. That requires a conscious focus on developing leadership skills that can be applied throughout the organization. Other important factors include having operational or field experience, handling a variety of assignments and being perceived as someone who is willing to take calculated risks when necessary. Additionally, a CFO must have a strong business sense to avoid falling into the trap of making decisions that are strictly based on numbers.
As one CFO who moved up the ladder to the CEO position said in a confidential interview, “I believe the CFO will continue to gain ground as a bona fide CEO candidate in addition to the traditional selection of top executives with operational, sales and marketing backgrounds. But ultimately there is no substitute for effective leadership, which is the most critical attribute of a successful CEO regardless of prior experience.”
CFOs who want to step into the top spot should look closely at the chief executive’s role, review their own experiences, and adopt personalized strategies to position themselves for advancement. As another CFO said in an interview, “Don’t think someone is going to hire you from a straight CFO role to CEO. Look for strategic opportunities in your existing company to take on new assignments and increase your productivity. Also, be sure to let senior executives know that you have a strong interest in ultimately becoming CEO.”
To illustrate these themes, here is a brief history of a CFO who was able to diversify his career experience and ultimately achieve his goal of becoming a CEO. After graduating from a major university in the southwest U.S., this CFO began his career as an accounting professional with a Big Four firm, specializing in its retail practice group. He then spent a number of years with a multi-brand restaurant company in a series of financial positions, moving up to CFO before being named CEO. In addition to his extensive experience with restaurant and retail companies, this CFO-turned-CEO was able to develop a broad-based background working for companies from coast to coast in the United States as well as globally.
“I worked in a high-growth environment that provided many promotional and learning opportunities for me in both finance and operations,” he said. “I was recruited as the CFO of a pre-IPO technology company in California during the tech boom. This was my entrée into CFO roles with greater operational responsibilities in a healthcare, oil and gas, and international logistics. These CFO roles were more like quasi-COO/CEO roles because my CFO role extended deeply into operations, working very closely with the CEO, developing strategy and key business initiatives.”
These expanded roles provided opportunities for this CFO to grow as a businessman and a corporate leader, developing the attitudes, skills and behaviors necessary to guide a fast-paced restaurant company. “One of the lessons I learned that allowed me to become a more effective and successful executive was that building consensus trumps force-feeding decisions,” he said. “When you get buy-in from the team, they will work harder to implement initiatives, change outdated practices, and implement new ideas.”
Surveying the CFOs
Pearson Partners International, in partnership with the University of Texas at Dallas Naveen Jindal School of Management and the Institute for Excellence in Corporate Governance, recently conducted a survey CFOs from a wide range of North American companies ranging in size from $50 million to Fortune 1000 multinationals. The questions covered a wide range of topics relating to their career paths, as well as the key role CFOs play in the C-suite.
Looking at the CFO position, respondents said the most important factors for success were providing accurate financial results, managing risk, and working with the CEO’s agenda. Respondents overwhelmingly said that the CFO’s most important role is company strategy (80%), followed by reliability of the reported numbers (63%) and reliability of budgeting and planning (22%). Regulatory compliance, managing financial relationships and managing cash flow were other important roles cited by respondents. Among large-cap companies, following the CEO’s agenda was considered far more important to success than among respondents from the small-cap companies, who felt providing financial advice to top management was more important to their success.
A significant number of the CFO respondents (72%) were recruited from outside their company, while only 28% were promoted from within. This indicates that companies are seeking CFOs with varied exposures and experiences. The survey also indicated that small companies tend to hire more from outside than large companies.
Respondents agreed that CFO skill set requirements have increased in the last decade, mainly for the following reasons: increased risk management (94%), increased regulation such as Sarbanes-Oxley (91%), and globalization of the economy (92%).
However, less than half (44%) of the Fortune 1000 CFO respondents said they believe today’s U.S. accounting and finance graduates’ formal education adequately prepares them to be a successful C-level officer.
In addition, the majority of Fortune 1000 respondents (75%) believe that a successful CFO of a $100 million company would not be as successful at a company of $5 billion or more. The top three reasons cited were insufficient exposure to multiple functions in a large organization, insufficient years or depth of experience, and insufficient global exposure.
A high percentage (85%) of the Fortune 1000 respondents agreed that the CFO is the logical choice for the successor to the CEO. One reason is that regulations such as Sarbanes-Oxley and Dodd-Frank have brought the roles of the CEO and CFO closer together.
However, when asked if today’s CFOs are adequately equipped to manage organizations in today’s global economy only half of survey respondents said yes. Of those who said no or were unsure, the top reasons cited were:
- Insufficient exposure to the global/political economy
- Insufficient exposure to varied cultural experiences
- Insufficient critical thinking skills
Since this global and cultural expose is a vital component of a CEO’s skill set, a CFO seeking to move to the top of an organization should pay close attention to these elements, and take steps to enhance their qualifications. A note of caution: CFOs should not confuse technical thinking with critical thinking. A CFO must hone the skill of thinking broadly in order to become a successful CEO.
Another key attribute of successful CEOs is a willingness to change jobs when necessary, according to a former CFO from the southwestern U.S. This CFO never expected to become a finance professional, but when he was not accepted into a veterinary college, he switched gears, majored in psychology and entered a bank management trainee program after graduation. In that role, he learned about P&L statements and balance sheets, as well as delivering good customer service.
Desiring to advance his education and add another credential, he went back to school and earned an MBA. That helped him advance his career as he was recruited by a global manufacturer. He then moved up in the organization, becoming division controller and Asia controller, before joining a smaller holding company as CFO. He held that role for several years and then joined a leading distribution company, serving as CFO before being promoted to President and CEO.
“I learned about the importance of being flexible and was able to take advantage of career opportunities when they came along, even though they involved several job changes,” he said. “I believe it’s important to take chances. If you want to become a CEO, you can’t get too comfortable as a CFO and accept the status quo.”
Building leadership skills and attributes
A willingness to take risks is one of the attributes that CFOs need to cultivate if they plan to lead a large-scale organization. That may involve a conscious change in attitudes and behaviors, since accounting and financial professionals’ traditional training focuses on minimizing risks. As one CFO said, “The CFO’s role is usually more tactical. But to be a strategic leader, you need to understand risk and use your intuition as well as your analytic skills. Risk is unavoidable in life, but it is taking risks that hones you to become a CEO.”
But even more important, according to one CFO-turned-CEO interviewed, is the ability to build a strong portfolio of people skills, such as motivating individuals and teams, and strengthening workplace engagement to help the organization achieve its goals and objectives. Among the personal attributes and skills needed to become an effective CEO are:
- Emotional intelligence – being able to recognize the importance of treating people with respect and showing empathy in emotional situations
- Setting a personal example – demonstrating a positive attitude and showing others how to move toward a common goal.
- “Servant leadership” – helping to ensure everyone in the organization has the right tools and support to be successful in their jobs.
- Problem-solving skills – being able to drill down to the key issues in highly complex business situations.
Other chief officers interviewed for this article cite the importance of communication skills in being an effective leader in the C-suite. That usually encompasses the following qualities:
- Distilling concepts and ideas – taking a complicated issue and understanding the key drivers of the issue
- Brainstorming – facilitating an open discussion among team members
- Communicating initiatives and programs – explaining the features and benefits of new proposals and gaining buy-in throughout the organization
- Active listening – learning about the organization and the marketplace by listening carefully to all constituents, asking questions, drawing conclusions and taking action
- Using new media – being able to leverage digital, mobile and social media to advance an organization’s interests, message and vision
In the communications arena, CFOs do have one clear advantage over other contenders for the CEO position: the ability to interpret and explain financial results—in other words, CFOs speak the language of business. Since any new strategic initiative or tactical project or program will include a financial component, being able to convey the reasons for the capital or operational investment and project the potential return (ROI) is one of the fundamental skills of both CFOs and CEOs. But as one executive said, “You have to be able to articulate financial issues in business terms, as well as the accounting or financial activity.”
Diversifying organizational experience
Stepping outside the traditional role of a CFO is one of the best ways to prepare for a CEO position, according to several C-suite executives. Tackling new assignments can help build the “people” and communication skills that are essential for effective organizational leadership.
“I looked for ways to get involved in areas outside my primary scope of responsibility, particularly in operations,” said one CFO/CEO. “In every company, Operations is the heart and soul of the business. So, I asked lots of questions (and still do) to fully understand the underlying rationale for why things were done—or not done—in a certain way.”
That viewpoint was echoed by another CFO who found that building a diversified skill set helped her move to the top position. After earning her bachelor’s, MBA and law degrees, she started her career with a Big Four accounting firm, and soon became manager. She then moved to a privately held company, serving as general counsel and CFO, before joining a leading manufacturer and retailer as general counsel, moving up to be CFO then CEO. “Having varied experience was important to me,” she said. “My background in law and finance allowed me to handle a number of projects, including mergers and acquisitions and debt restructuring. I did not experience prejudice against women, but did feel I had to work harder. I was fortunate to have had had a number of strong mentors along the way who helped with my growth.”
Learning the right lessons
To become an effective CEO, it’s important to understand and be sensitive to the demands, desires and internal dynamics of the organization, the external marketplace and key stakeholders—who may include board members, shareholders, employees, customers and local communities where the company has operations. This balancing act can be both a daunting task and an opportunity to add value to the company. As one CFO said, “Early in my career I thought the CEO was merely a figurehead, somebody who was there to make public statements and run board and shareholder meetings. If it were only that simple! Once in that role, you’ll find that things aren’t as easy as they appear to be from the seat below the CEO.”
Other lessons culled from the CFO interviews that can help financial professionals rise to the top include:
- Be willing to learn from others. “One of the integral factors in preparing me to become a successful CEO was that I learned from every CEO I ever worked for, even the terrible ones. I took the best attributes and emulated them. I saw the worst attributes and avoided them.”
- Be your own person. Don’t try to mimic other executives or duplicate their personality. “I added my own twists to come up with an approach that fit my personal style and would give me the best chance for success.”
- Be candid about your own weaknesses. “Take the time to assess your skills and look for gaps. Then, seek out ways to fill those gaps by taking on new leadership opportunities.”
- Be patient. “It takes time to develop leadership skills. It’s not something that happens overnight.”
- Be a proactive thinker. Don’t wait for a crisis to demonstrate your leadership. “You need to be smart and quick to anticipate new issues.”
- Be willing to coach and mentor others. Nothing develops leadership skills faster than cultivating those qualities in peers and subordinates.
- Be willing to ask questions. “Don’t be afraid to drill down and get the details.”
- Be a change agent. “You need to be a risk taker who is willing to make changes to the organization and its people.”
- Be a leader with integrity. “You must always be honest with yourself and the people around you.”
- Be flexible. “I learned there are many types of CEOs. One size does not fit all, so you have to adjust your style when necessary.”
It’s important to enjoy the CFO role while preparing for the future. As one financial professional said, “You can’t have the CEO goal as the end-all and be-all. It is good to aspire to that goal, but you also have to appreciate your current position. Consider it a journey and take it one step at a time.”
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About the Author
Pearson Partners International helps clients build world-class management teams. A full-service retained executive search and leadership development firm, Pearson Partners secures top talent for some of the most challenging positions in the marketplace, from CEOs and CFOs to CIOs and board members.
An experienced veteran of the retained executive search business, Stephen P. Konstans has spent more than 20 years helping companies secure candidates for critical executive roles. Mr. Konstans specializes in filling high-level finance and accounting positions, such as chief financial officer and controller. For more information, contact him at 214-292-4130 or
Contributors to the development and analysis of the Pearson Partners International CFO Perspective Survey include the following:
Robert L. Pearson
Chief Executive Officer
Pearson Partners International, Inc.
Jill C. Pearson
Pearson Partners International, Inc.
Constantine Konstans, PhD, CPA (Ohio, Inactive), CMA, CIA, CFE
Professor of Accounting and Corporate Governance
Founding Executive Director, Institute for Excellence in Corporate Governance
Naveen Jindal School of Management, The University of Texas at Dallas
Ashbel Smith Professor of Accounting and Research Director
Institute of Excellence in Corporate Governance
Naveen Jindal School of Management, The University of Texas at Dallas
Pelin Muharremoglu, MBA
The University of Texas at Dallas
Gautam Aron, MBA, MS–Management Information Systems
Naveen Jindal School of Management, The University of Texas at Dallas