CFO to CEO – What does Big Data tell us?
By Darren Woods
Much has been written about the changing role of the CFO. Over the course of many assignments, and through daily dialogue with CFOs across all sectors, it is clear the job continues to evolve. The skills required to succeed today are wide ranging, and some incumbents feel they are catapulted into the role with little time to obtain the management and commercial skills needed. Certainly they can learn on the job, but obviously there are risks inherent in this approach.
The CFO role typically involves maintaining financial control, and protecting the integrity of the company, whilst ensuring that systems, procedures and personnel are aligned to the changing needs of the business and the environment it serves. Over recent years the key criteria for success as a CFO is the interplay between the CFO and CEO and the link into the Non Exec Board. This ability to come together to address the key issues on development strategy, investor relationships and stakeholder management has led to the assumption that the CFO is seen as the CEO designate. At Wickland Westcott (WW) we maintain a proprietary database detailing (anonymously) the background and competencies of all the Executives we engage with. This data suggests that, on average, the CFO’s strongest skills are usually in analysis and decision-making, and also commercial appreciation.
Do enough organisations take steps to help the CFO develop these skills, either upon appointment or ideally before-hand? Are there circumstances where the Executive him/herself is uncomfortable asking for training or coaching, as this can perhaps be seen as a reason to overlook them for future progression? In reality, how many Chairs or HR Directors can point to current, fquote1it-for-purpose development plans for their Senior Executives? The answers to these questions suggest that, in my experience, UK plc still tends to favour an ‘appoint and leave them to it’ model.
Turning to CEO succession, it appears that a finance grounding is the favoured CEO career-platform in the UK, with research suggesting approximately half of the FTSE 100 CEOs has such a background (Robert Half study, 2015). The biggest competency development areas for CFOs making this transition are likely to be in the areas of communication and people leadership, according to our database.
But what is the picture in the US? We are often told they prefer to look to the business development functions for their CEOs. Empirical evidence, however, suggests that whilst a fair number (~20%) of Fortune 500 CEOs do have a sales and marketing background, the largest proportion (~30%) spent their early years in finance (Heidrick and Struggles study, 2011).
In both countries, it appears that going straight from CFO to CEO is a relatively rare move (5% to 10%) – rather the step up from a significant operational role is considerably more common. All these permutations have implications for the likely development needs of the new incumbent – those transitioning in from Sales often need to grow their skills in managing change, whilst those moving to CEO from Operations may need to deepen their strategic understanding (WW database, 2016). quote2 Of course, these are general themes and every case will be different, but the message is clear – there are identifiable differences between the skills required at CEO compared to those demanded in many of the classic feeder roles.
This gets back to my original question, which organisations are bold enough to work closely with their Executive and Non-Executive colleagues to define the true succession plan, and undertake a process to allow development needs to be highlighted for the greater good? These are the organisations most likely to build sustainable success.
The Executive Search industry is increasingly alive to the value of offering coaching, assessment and development services alongside their traditional talent-finding capabilities. Wickland Westcott has been providing a fully integrated leadership service for nearly 40 years. In-house occupational psychologists work alongside market-focussed Search professionals to deliver exceptional client service and satisfaction. With extensive experience at ‘C Suite’ level, and half of our top 20 client list featuring in the FTSE 250/NYSE, Wickland Westcott has a clear picture of what makes for leadership success.