Forty per cent of chief financial officers have their eye on the CEO role. The day-to-day life of the average CFO can be an ideal preparation for the top job as it usually involves financial officers in the diverse stakeholder management that is crucial in the CEO role.
Guest panellists, former CFOs who are now in high-profile CEO and leadership team roles, at a Heidrick & Struggles forum at the London Stock Exchange also warned that life at the very top can be lonely, risky and not for everyone.
CFOs and finance executives of FTSE 100 companies quizzed: Logica Chairman David Tyler, the former Finance Director of GUS, Littlewoods Shop Direct Finance Director Steve Makin, former Umbro CFO and CEO and Terra Firma Operating Partner and EMI Music President and Chief Operating Officer Chris Roling, former CFO at ICI Paints, Aventail Corporation, Getty Images and Kellogg (UK and EMEA).
The audience heard that most transitions from CFO to CEO take place when “the agenda becomes financial” such as during periods of financial instability. And most CFOs rise to the top job in their incumbent companies.
“Finding your way to the top is often easier through the finance stream,” EMI’s Roling told the forum. “But if you don’t manage it, you need to consider moving to a different company.” Roling said that he overcame an early reluctance to move from the safe world of numbers into the potentially riskier “people side” of the business.
“But I had a plant manager who told me to get out on to the floor. He said there was life beyond the spreadsheets, which initially I found uncomfortable but which has been proved to be one of the best pieces of advice I received.”
A member of the audience, which was made up of financial officers from a spectrum of sectors – telecommunications, investment banking, financial services, pharmaceuticals, fast-moving consumer goods (FMCG) and manufacturing – told the story of a CFO who rose to CEO and invited his executive team to give him direct feedback.
“He called a meeting of the team and told them: ‘To be honest, numbers speak to me but people don’t and if I and this company are to go anywhere, this has to change’.” He was subsequently given some valuable feedback from his team.
Career by design
Finance officers were advised by the panel to think carefully about their ideal “destination role” and to prepare a plan of action.
At the time of the 2009 forum, in the FTSE 100, 40 CEOs were former CFOs and 30 chairmen are ex-CFOs.
In the poll taken by Heidrick & Struggles, 40 per cent of the executives present said they wanted to be CEO, 30 per cent voted for an “other” role, 27 per cent said they wanted to be an FTSE 100 CFO and 3 per cent wanted to be a chairman.
Discussion largely revolved around what qualities are needed in a CEO role, the importance of operational or non-finance experience and advice on risk management – how to avoid mistakes in the top job.
“You have to be full of self-confidence, able to manage conflict and to be a natural delegator,” said Logica’s Tyler. “CEOs need to ensure that soft people issues do not obscure the rational decisions and ex-CFOs can be good at this.”
Risks needed to be weighed, Tyler warned. “If you as CEO do a good turnaround, you are a hero, but the CEO role is tough and if you fail there may not be a way back to a finance role. In my experience, the difference between success or failure depends on who you have got on the bus. If you reduce your spending on talent you are putting your company at risk.”
Questioned on his career path, Logica’s Tyler said that from an early age at Unilever he was working with cross-functional teams and given the opportunity to help run divisions of the company.
“Early on, I thought I wanted a general manager job and that finance was an easier route up the ladder to general management than others. To succeed, I also knew I needed to be interested in the wider market,” Tyler said.
“Getting a mentor in a formal way is really important when you are younger, but later on it becomes an informal thing. People I used as mentors did not really see themselves as my mentors. They were people I watched and from whom I learned, and to whom I could go and discuss things in a safe environment. You need to have someone with an objective eye.”
The forum concluded that the path from CFO to CEO required planning, courage and possibly moving companies to achieve the goal.
But audience members, as well as those on the panel emphasized that there is no imperative to move from finance if you are not suited.
As Tyler said: “You can destroy your career if you make a mistake in the chief executive suite. And it may be hard to re-emerge in a finance culture. You can have the greatest time by staying in finance.”