There is an enduring myth that most CFOs are eyeing up the role of CEO as the next step in their careers. Granted, this is a natural move for many, as demonstrated by the surge in CFO to CEO appointments across the FTSE since 2012, with close to a half of FTSE 100 CEOs now having a financial background.
However, there remains a wide proportion of the corporate CFO population who have no such desire and who view an even broader or higher-profile CFO role as their primary ambition. Indeed, it is the continually expanding scope of the Chief Financial Officer post that provides the high level of fulfilment for those currently incumbent in such positions. Many CFOs will cite that a key measure of the relative success of their role is their own personal contribution to major business initiatives within a company. It is precisely this ability to contribute and the inherent voice that CFOs now have within the boardroom that strengthens the attractiveness of remaining at the helm of financial leadership rather than aspiring to be the number one in an organisation.
It has been observed that many CFO to CEO appointments have occurred in businesses undergoing a period of turnaround, organisational restructure (including post M&A activity/divestments) or with specific financial management issues, particularly with respect to debt positions. Whilst this may be the case, it would be wrong to assume the CFO only makes the grade as CEO due to a present requirement for a financially disciplined approach at the helm. Indeed, the route to the top largely originates from the prior transformation of the CFO from a numbers-focused professional to a value-creating leader. This new breed of CFO then displays the attributes and importantly, has won the internal credibility and sponsorship through the impact of their work, to be selected to be the next Chief Executive Officer. As CFOs find their roles providing more decisive contributions to the key priorities of their CEOs, particularly across business development, so their skills relating to and their understanding of the CEO position expands. This trend across the corporate CFO community is visible and we now typically see their directive influence in all aspects of strategic decision-making. Without this changing dimension to the CFO within the corporate world, the CEO role would still be out of reach, regardless of the business challenges an organisation faces.
With the CFO position morphing further into a role with a core focus on value creation, finance leaders face a number of new challenges, amongst them are the need to adapt their approach, leadership style and perspective to deliver to new demands. The characteristics and demeanour of the CFO must synchronise with the culture of the Board as well as key peers and operational leaders in the organisation, with prioritisation on clear communication skills and the ability to nurture and develop strong internal relationships. A prerequisite to becoming a strategic CFO is to ensure a leadership team is in place underneath them, with the same embedded culture and traits, that is capable of taking responsibility for day-to-day financial management, systems and process. European corporates have been seen to bolster the strength and expertise of their wider finance leadership teams as the CFO works more closely with the CEO. In the United States, this has progressed a step further with many corporate CFOs having no formal accounting qualification. This enhanced finance leadership team capability is integral for the strategically-minded CFO as it is the accuracy of data provided through the reporting and analysis process that will determine the quality of the CFO’s business decision support.
Whilst dictating resource allocation and capital planning, CFOs in the modern era are presented with a challenge of balancing short-term earnings targets and appeasing shareholders whilst also adhering to long-term strategic plans. Often, in more complex organisations, the trick a CFO has to achieve is to weigh the requirements of a portfolio holistically rather than by division, identifying and exercising organisational synergies where possible. These challenges underpin one of the clearest indicators of the step-change in a modern-day CFO’s remit; namely the extended involvement in a company’s growth planning. Arguably this in itself is an area where many CFOs would like to have additional influence but the escalation of CFO input into M&A targeting, organic growth and new market development at the conceptualisation phase is palpable across many corporate boardrooms. For CFOs, the invitation to bring their pragmatic voice to the start of these growth discussions and not just when due diligence or financing is required, is a water-shed moment. Coupled with the additional expectation of managing reputational risk and increasing investor relations leadership, the new corporate CFO is encountering a world with abundant demands, more opportunities and a truly all-encompassing position within an organisation’s hierachy.