When Indra Nooyi stepped down after 12 years as PepsiCo CEO earlier this month she ended one of the most high profile leaderships in global business. It would be easy therefore to forget she had also been the drinks group’s CFO for five years previously, after joining the company in 1994.
Nooyi may have transitioned well into the CEO role but the path from finance chief to chief executive is not as common as you might think. Analysis in 2015 by headhunting firm Korn Ferry revealed that only 13% of sitting CEOs in the global Forbes 2000 had moved into that position from being CFO.
Often the challenge to making the leap is understanding what new skills are required for taking the top job as well as the new level of responsibility. “As a CEO you’re definitely more on the hook,” says Allison Kirkby who became chief executive of Swedish media giant Tele2 after serving 15 months as CFO.
“I’d always been a very commercial CFO, so I felt it was a natural transition, but it wasn’t a transition that I had prepared for,” says Kirkby who had spent two decades in various roles across consumer goods giant Procter & Gamble (P&G). Kirkby says she found it easy to transition into the CEO role, “once I was given authority” which meant having the right skills and being fully supported by the rest of the senior management team and shareholders.”
The CEO mind set
Executive coaches who specialise in advising CFOs on how to become CEOs often look closely at the ‘mind set’ of finance leaders to suggest whether the move is right for them. John Mckenzie, who spent 20 years in the automotive industry with Ford Motor Company and parts provider Unipart holding roles in production, distribution, marketing and internal business development, considers several differences between the CFO and CEO outlook.
He says it is more common for the CFO to operate in an environment that is shorter term (financial quarter, half year, annual) rather than longer term (strategic, visionary, 3 to 5 years out). It’s also more likely to be rule driven (statutory reporting, accounting standards, audit etc.) rather than “tear up the rule book” (think outside the box, strive to find competitive edge, blue sky thinking).
He says the CFO world view is more likely to be fact-based on the certainty of past numbers and performance rather than “what if” based on the uncertainty of the future, competitor actions, technological shifts and visionary propositions. It’s also risk averse as opposed to entrepreneurial risk taking and embracing stretching challenges and he says CFOs largely enjoy unchallenged supremacy in their domain rather than put under the spotlight by external investors, key stakeholders and key customers.
“That doesn’t make the mind set of the CFO wrong or inappropriate at all – often it is said that the CEO is the vision of the organisation and the CFO is the conscience and the two work together to strike the appropriate balance. That, however, does give some insight into the challenges of transitioning from CFO to CEO.
“Is the CFO a frustrated CEO at heart with the mind set already in place or will the CFO have to make a conscious “shift” in their outlook, thought processes and skills acquisition. This is much harder to achieve, especially if the CFO has come up through the finance and accounting ranks over many years where the mind set has become ingrained,” says Mckenzie, who also spent 11 years in the IT industry, firstly with Armstrong Laing and latterly SAS.
Preparing to switch
Neena Vivash, an executive coach who has held a number of senior finance roles including positions at fashion house Christian Dior and public utility South East Water, says there are two stages for considering how to prepare for a CEO role.
“The first is when you realise that you may want to become CEO and perhaps do not have too much CFO or senior management experience. You can start preparing really as early in your career as possible, picking up skills, observing and so on. When you are ready for the role, i.e. you can see yourself in the role within the 1-2 years then you need to prepare more strategically and calculatedly,” says Vivash, who has also been CEO of performance management consultancy Bellis-Jones, Hill.
Vivash says career wise, everyone is different in terms of when they are ready and opportunities also vary depending on size and culture of organisations. “However, I think an optimum time is 1-3 years in CFO role. It is better to start early than to risk establishing yourself too firmly with the Board as the reliable and capable CFO,” she says.
“CFOs can become stuck in this position if they are not demonstrating CEO behaviour. They make themselves indispensable to the Board as a CFO and the rest of the organisation view them as finance only. So don’t get stuck in a rut is the message,” she adds.
CFOs will know if they have the full skill set when they demonstrate interest in all aspects of performance of the organisation, sales, operations, back office. It’s also when they are willing to network outside of the organisation and understand external factors such as competition, says Vivash.
“They need to be very commercially aware, especially in a sales-led business. They need to be comfortable with leading sales and marketing teams. This means listening, socialising and being comfortable walking the floors,” she adds.
Questions the CFO should ask themselves:
They should answer honestly to gain insights on where skills may be absent or where skills may need to be “polished up, says John Mckenzie:
– Why do I aspire to be a CEO? What is my real motivation to take on that role – ambition? Or am I truly capable of so much more and I want to fulfil my potential?
– Does aspirational vision inspire me?
– Do I thrive on stretching goals?
– Am I one of the first to present creative ideas or solutions?
– Does thinking outside of the box come easily to me?
– Am I comfortable with taking or recommending well-judged business risks and entrepreneurial actions?
– Am I at ease with making decisions with relatively few facts to go on?
– Do I feel confined or constrained in what I do or can contribute today?
– Do I have a good all round understanding of the differing functions and business processes in my organisation and the pressures, challenges and opportunities they present?
– Do I readily identify or appreciate the business application of both current and future technological developments?
– Do I see myself as comfortable leading from the front?
– Am I great at building relationships with others and getting the best from a disparate team?
If the answer is yes to all of these questions then the CFO’s mind set is probably well on the way to that of a CEO’s and in a good state of readiness. If however the answer is no to a number of these, whilst it does not preclude a transition to CEO, it does point to areas where skills, both hard and soft, may be lacking.
Areas where attention may be required to become a CEO:
Many courses and seminars are available aimed at senior management (competence in financial and accounting skills is taken as a given) says John Mckenzie:
– Both Creative and “Blue Sky” thinking
– Problem solving skills
– Root Cause Analytical skills
– Strategic thinking and strategic management skills
– Macroeconomic analysis
– Market and Competitive analysis
– Developments and business applications of technology
– Business application of social media
– Business Analytics
– Business risk analysis (as opposed to financial risk)
– Presentation skills (creating compelling content and achieving compelling delivery)
– Negotiation skills (for both internal and external negotiation purposes
– Team building skills
“This shouldn’t be considered as an exhaustive list, but they are areas where I have found in my own coaching, mentoring and lecturing to finance management, there are frequent gaps in capability,” says Mckenzie.