Look at the shortlisted candidates for a CEO role, and there’s likely to be a head of finance among them.
The path from finance to overall leadership is well-trodden. After all, CFOs are big contributors to the success of an organisation, they often have experience dealing with investors and analysts, and work closely with the CEO. A recent LeadingCompany analysis of the ASX100 found 16% of CEOs had held a CFO role immediately before their promotion. Despite this, and the fact that CFOs are well regarded by headhunters and boards, finance roles aren’t enough to prepare executives for the top job, some of Australia’s leading CEOs told recruitment company, Korn/Ferry.
The recruiter yesterday released a report on how CFOs can make the transition to CEO role. It was based on interviews with some of the leaders of Australia’s largest companies who themselves have successfully managed the shift, including Newcrest Mining’s Greg Robinson, Land Lease’s Steve McCann, and GPT Group’s Michael Cameron.
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The report’s author, Michael Keevy, told LeadingCompany many of the CEOs and directors he interviewed said the CFO role on its own wasn’t enough to prepare them for the top job.
Many moved into operational or head-of-division roles before being promoted. Some of them made a conscious decision to broaden their experience, and some of them were coaxed into such roles by their boards.
Keevy says many boards demand broad experience before promoting a CFO to a CEO role. Being a divisional head gave the CEOs in the report experience managing teams and dealing with customers and suppliers. “At the end of the day, all these things are only a number to the CFO,” Keevy says. This is what prompts the need for broader experience.
Many of the CEOs and directors he interviewed were surprised by what the CEO role actually entailed once they got it, says Keevy.
“These were very experienced people we spoke to,” he said. “Some of them had been in senior finance functions for say, 20 years before they became CEO.
“But when they became the CEO, they were surprised by the amount of people management and strategic leadership that was involved.
“I would have assumed that on the way up, they would have observed that part of the CEO role. But so many of them said they had vastly underestimated just how big a part of the CEO role that was.”
The huge level of scrutiny they were subject to, once they were promoted to the top job, was another aspect many of those interviewed noted.
Chairman and director David Spence told Keevy this could be daunting.
“Every single person knows you and is watching you. The focus on you is quite scary,” he said. “As a CFO I had lunch at my desk but as CEO you are sending a message if you do that. Implicit signals get taken up.”
A strategic checklist: How finance heads can position themselves for the top job
Korn/Ferry asked those interviewed for the report for some advice to CFOs who want to move on to bigger things. Here’s some of what they said:
- The best thing to do is get out of finance and get to the coalface to become accountable for delivering results
- You’ll live or die on whether you understand the business
- The papers you present to the board should be a testament to your effectiveness. Make sure they’re relevant and add value
- You cannot shrink your way to excellence. There is a huge challenge in continuing to drive the business while downsizing. It is easy to cut costs but hard to enable growth. It is very important to think about the impact on the people who remain with the business when you downsize.
- Develop excellent communication skills. Those, combined with a good analytical brain, are your key to success.
The full report can be viewed here (pdf).