When should a CFO take the reins as CEO?
CFOs can bring a fresh perspective to the CEO role, but the move isn't a natural progression, according to a study
Executives like ArcelorMittal CFO Dean Subramanian have taken to the helm with aplomb, but for every finance chief who is offered the helm, there are many who are look over for the position because their perspective is too narrow or averse to the spotlight.
However, this transition is becoming more common with the emergence of charismatic modern financial executives who aren’t content with a backroom function and are taking advantage of opportunities to be one of the faces of the company.
In a McKinsey & Co study, there was evidence to support that CFOs should take on the lead role in one of two scenarios: when financial capabilities serve a company’s present needs or when the CFO question has the broader experience expected of a CEO.
Respondents in the study, who encompassed the full range of stakeholders, agreed that to become a successful CEO, a CFO needs hands-on general-management experience. This entailed the ability to focus on the entire organization, including the task of motivating employees, rather than simply mastering the numbers. CFOs who had worked more than one company and under different CEOs were seen as having an advantage as candidates for the position.
There was a strong perception that CFOs perform well as CEOs when companies are going through situations that require financial discipline and focus, such as attempting a turnaround or implementing mergers, acquisitions, or divestitures.
As such, CEO with experience in the top finance slot “understand key performance indicators and how much they can improve the performance of an acquired business”.
In managing the sometimes precarious transition to the new role, CFOs are advised to relinquish the controlling nature of finance and give their people room to manouevre, delegating responsibility while building a strong network of teams with complementary skills. Most importantly, they should adopt the holistic CEO mindset, which involves going beyond the numbers and delving into operations and stakeholder engagement.