Mark Freebairn, Partner and Head of the Board and CFO Practices at Odgers Berndtson, explains what CFOs need to do if they want to become CEOs
For some time now, there’s been a very clear trend in CFOs progressing onto CEOs. It’s a trend that should come as no surprise to executive leaders. With more CEOs under increasing pressure, many CFOs have become the nominal second in command, often taking non-finance related responsibilities off their CEO’s plate.
As result, CFOs have begun playing a more strategic and commercial role which has inevitably broadened their remits beyond the finance function. With many CFOs breaking out of the traditional financial management confines, executive teams and boards have begun to realise that finance and general management are more closely aligned than they previously thought. This has given CFOs more opportunities to gain experience relevant for the CEO position. From owning P&L business units to engaging with external investors, the CFO’s evolving remit is making them likely candidates for the top job.
That’s not to say it’s a done deal for anyone who is currently a CFO. The CEO jobs market is comparatively small, CEO turnover is typically slow, and competition is intense. So below, I’ve outlined the key areas CFOs should gain experience in and the opportunities they should capitalise on if they want to compete for the CEO positions out there.
Take responsibility for P&L business units
Overseeing specific business units is a natural extension of the CFO’s responsibilities. It provides experience of managing products, costs, and revenue generation – all of which are staple requirements for the CEO role. But it also provides operational credibility internally, which will prove advantageous for any CFOs lining themselves up as a succession candidate to their own CEOs.
If possible, CFOs should take on responsibility for turning around a failing business unit. This is the fastest way of gaining commercial experience relevant for a CEO role. Particularly as economies emerge from the pandemic, boards will be looking for leaders who can demonstrate an ability to drive growth and new business despite significant internal and external challenges.
Likewise, CFOs should involve themselves in other business functions. Whether it’s procurement and the supply chain, or facilities and security, CFOs should play a role outside of the finance function in order to gain broader business experience.
Build a highly-autonomous finance team
The CFO’s role within organisations and their ability to easily expose themselves to other P&L units makes them suitable candidates for CEOs. However, CFOs are only as good as the team around them. Building a high-performing finance team that can drive the day-to-day operations of the function will have several outcomes. Firstly, it will free up a CFO to take on more responsibility around the business and gain more time with their CEO. Secondly, it’s a valuable proof point that CFOs can use in any interview to demonstrate their ability to build strong teams – as a CEO, building a strong cadre of trusted executives is crucial for success.
This should be a team that can be trusted to perform autonomously, with a strong second in command that the CFO can rely upon.
Take on a non-executive director (NED) role
While financial management is central to any successful organisation, CFOs still need to develop expertise outside of the function if they are to step up as CEOs. Taking responsibility for P&L business units will provide this, however it won’t provide a CFO with the same board-level perspective that a NED role will.
Taking on a NED role will not only help CFOs to understand what boards expect of CEOs but it will also provide experience of a different kind of leadership; one that is less hands on and more about guidance and mentorship. Within the commercial sector, there are board roles among smaller quoted companies, those backed by private equity, or family owned businesses. Advisory boards and subsidiary boards are also a good option.
On the public sector side, board roles exist within organisations owned by or reporting to government. These include major infrastructure operators, the NHS, regulators, museums and other arts institutions. Likewise, a charity trustee role (while unpaid) is similar and will help to develop both a CFOs network and board skills.
Auditing, budgetary reviewing and balance sheet responsibilities are often sought after skills in non-executive directors, making CFOs ideal for these positions.
Take on internal leadership positions
These types of leadership positions should be separate to the finance function and can include things like internal workstreams, strategic initiatives such as I&D and sustainability, or CSR projects. The benefit of taking on this responsibility is two-fold. It helps build necessary leadership skills and provides leadership experience. But it also showcases a CFO within the business in a leadership capacity outside of finance. The later will be beneficial for any CFOs looking at internal progression onto the CEO position.
Mentoring achieves similar outcomes. This helps build leadership skills and can lead to greater exposure around the business. What’s more, any mentee may later become a useful contact in a CFOs network.
Network outside of the organisation
CFOs often underestimate the power of a personal network. Building relationships with other senior leaders will enable a CFO to generate career opportunities that can lead onto CEO appointments. While professional networks within the CFO community are valuable, networking outside of these types of environments is likely to be the most profitable for career advancement.
Any CFO looking to make the jump to CEO should build relationships with a variety of third parties. These include shareholders and brokers, investors, M&A specialists, bankers, and even lawyers. A CFOs experience and perspective can be incredibly valuable to these types of professionals so getting on their radar shouldn’t be difficult. Making the effort to build a relationship with them will pay dividends in the long run, and may lead to hearing about, or if you’re good enough, even being recommended for a CEO position.
