Chief Financial Officers rarely make headline news – unless you have been the top bean counter for Google, that is.

So when Patrick Pichette, the CFO of Google, said he was stepping down to travel the world with his wife, it splashed across serious broadsheets and the tabloid press around the world. In his resignation note (posted on Google+, naturally) Pichette observed that he was  a “member of FWIO, the noble Fraternity of Worldwide Insecure Over-achievers” and that his almost seven years as Google’s CFO had been “a whirlwind of truly amazing experiences”.

Few CFOs achieve the kind of prominence – or the almost US$31 million from his Google stock incentives between 2010 and 2013 – enjoyed by Pichette. But I somehow doubt that walking up mountains with his wife will be enough for Pichette in the long term.

Many will try to seduce him back into the corporate world – but Pichette is now too big, too experienced, too obviously multi-skilled, to simply go back to a finance role. The temptations of taking a CEO role, or more likely a Chairmanship, to actually oversee the control of a company, will be great. He has just the right experience and leadership qualities to have innumerable companies, big and small, politely pounding at his door. For he fulfils this brief identified in a study of exceptional CFOs: “Today, success requires the CFO be strategic, operationally savvy and forward-looking. They need the ability to influence a broad group of stakeholders, and to communicate in a straightforward, compelling manner.”

Chairs-in-waiting

How times have changed. Once upon a time, all that was required of the CFO or Financial Director of a company was that they kept a close eye on the numbers and made sure the ship kept to its course. But now they – or at least the really good ones – are expected to do so much more, be so much more; in fact, to be a surrogate CEO. Little wonder, therefore, that many of them have set their sights on the top job – and, indeed, are taking over the top job. Today, the average CEO starts the job at the age of 52, and the average age of a Harvard MBA is 27, so there’s a 25-year preparation time to scale the ladder.

There’s plenty of statistical evidence from around the world that the growing tendency for CFOs to step up to the CEO role is a reality. Take Canada. Back in 2004 only 14 per cent of Canadian CEOs had previously had a senior executive finance position. Ten years later that had grown by more than 57 per cent, to 22 per cent. Perhaps unsurprisingly, given the importance of the natural-resources sector to the Canadian economy, as many as 33 per cent of CEOs in natural resource companies have been in an executive finance position. According to Scott Thomson, CEO of the Canadian company Finning International Incorporated, and who was formerly CFO of Talisman Energy, the switch between the roles of the CFO and the CEO role is striking: “It was interesting how different the CEO role is from [that of] the CFO. As the CEO, most of my time is spent with customers, employees and suppliers.”

Moreover, CFOs are increasingly looked on as excellent Chairs-in-waiting. The good CFO will have a reputation for prudent, patient, low-ego sound judgement – a ‘good pair of hands’, which goes very well with the non-executive role as Chairman/woman. There are fewer examples of CFO-to-Chairman moves than CFO-to-CEO moves, but some notable ones exist, such as that of Andrew Higginson, a long-time finance chief of the well-known UK retailer Tesco. When he left Tesco in 2012 he took on two chairmanships: at N Brown, a listed fashion group, and Poundland, a private equity-owned retailer.

The CFO-CEO marriage

The debate over whether a good CEO comes from an operational rather than a finance background is almost as old as the hills. Back in 2006 McKinsey posed the question “do chief financial officers make desirable CEOs? ... the CFO’s portfolio of skills would seem to serve well as a platform for that final leap to the boss’s suite. Or does it?” Almost a decade ago, about 20 per cent of all CEOs in the UK and the US were once CFOs, dropping to 5-10 per cent in Europe and Asia, according to McKinsey, who conducted a poll of investors, advisers, CFOs, CEOs and Board members, asking whether CFOs make good CEOs. The result was inconclusive: “For every respondent who believed strongly that CFOs make good CEOs, another vehemently opposed the idea.”

But that was almost a decade ago – and pre-crash days. In the post-crash era, companies have one thought uppermost: control the budget. Grow if we can – but at the very least make sure that we don’t go under. Who is better placed to ensure that than the CFO? This in turn has forged an ever-closer alliance between CFO and CEO, and makes the transition from CFO to the top job that much smoother, as Boards want to see that the person at the helm is not just a good leader, but can crunch the numbers with the best of them. No doubt that explains in part why about 25 per cent of CEOs appointed in 2013 to the US’s biggest listed companies were once CFOs. In the UK, around 50 per cent of CEOs appointed in 2012 and 2013 to FTSE 100 companies have a finance background, with more than 10 per cent promoted directly from CFO.
So how might we explain the development of this close – almost symbiotic – relationship between the CFO and the CEO? According to Agah Uğur, who has held the CEO position of the Borusan Group in Turkey since 2001: “Modern CFOs, with a deep commercial understanding and high business insights, on top of their high financial control capabilities, have become a collaborative partner to the CEO.” Borusan is one of Turkey’s leading industrial and service groups, with business interests in steel production, logistics, energy and telecoms. Uğur studied industrial engineering at Birmingham University in England, before going on to qualify as a chartered accountant. He joined Borusan Group in 1989 as CFO, following a few years working as an accountant.

For him, the progression to the top job was a natural one: “Modern CFOs try to understand real obstacles by questioning not only the issues related to market, sector and administrative subjects but also the existing processes, business models, organisational structures and the way of doing business … consequently, focusing on the future of business with a strategic view, [they act] as one half of the CEO’s brain.”
The global financial crisis has encouraged the idea that a risk-mitigation expert is precisely the kind of person who ought to be at the helm of a company. Financial oversight is not – or should not be – separate from the strategic process but central to it. However, there is a tension that has only become heightened as a result of the crash between the risk-mitigation function of the CFO and the risk-taking role of the CEO. The CFO specialises in a data-driven approach to decision-making; the intuitive style of management won’t do any longer in a world where a solid grasp of the importance of data is critical.

Born to lead

Perhaps the key step up from CFO to CEO is that the CEO is, ultimately, called on to provide leadership, covering a wide range of often complex issues across all parts of the business. In the end, leadership arguably comes down to personal character. Leaders need to be driven to succeed; they are hard-working, resilient and self-accepting. They need to be able to live with high stress levels. They need a robust – even overpowering – ego, the kind of self-belief that permits few doubts. And there is evidence to show that the truly great global CFOs have a profile that closely matches those demands.

This is echoed by Phil McCann, Partner with Odgers Berndtson and Head of the Apac CFO and Financial Management Practice. He has been running a series of interviews with CFOs in his region to see what makes them tick. One of the latest was with Evelyn Henry Miller, who was voted by CEO magazine as US CFO of the year for mid-sized public companies, and is currently CFO of Agencies of Change. Miller commented: “The CFO is no longer regarded as the ‘bean counter’. I can count beans, but I am in no way a bean counter. The CFO must be a business strategist and a trusted advisor. There is truly a marriage between me and the CEOs with whom I have partnered.” The CFO is, in the words of Mark Freebairn, Partner and Head of the CFO Practice at Odgers Berndtson in London, “the critical friend, the support, the non-ego-driven confidant that helps the CEO run the business, but is perfectly happy to let the CEO take the glory”.

Odgers Berndtson studied the psychometric profiles of almost 300 top CFOs and finance executives in Canada and found that “the profile for these successful CFOs is more similar to that of business development executives or entrepreneurial CEOs than it is to that of budget- or control-oriented individuals … they have the ability to find innovative solutions to complex business problems … today’s successful CFOs must be able to bridge the gaps between strategy, execution and finding new sources of value for the organisation.”

As Hugh Arnold, Adjunct Professor of Organizational Behaviour and HR Management at Toronto’s Rotman School of Management, says: “While the majority of CFOs require incredible technical expertise, these skills alone do not equip them to be successful … there seems to be an unspoken 80/20 rule in the C-suite. Only 20 per cent of the success of a CFO stems from having strong financial skills. The remaining 80 per cent is a result of leadership skills, which is what our new programme will cultivate in rising finance talent.”

Not just a clever accountant…

Leading CFOs tend to be competitive, ambitious, hard-working and resilient, and possess stronger interpersonal skills than the average executive, and are more willing to take centre stage. They also tend to be less rule-oriented and process-driven than the average executive and more open to new ideas and innovative approaches. According to Ross Woledge, who heads Odgers Berndtson’s CFO and financial officer practice in Canada, traditionally “the CFO would come to the table and report how the company did that quarter, where the variances were – and that’s it. Now CFOs are coming to the table and saying: ‘What about this? Have we tried this? Have we thought about this?’”

CFOs can paint themselves into a corner by being too good at the numbers game. Becoming a CEO requires a wider range of talents and skills than possessed by the typical, old-school accountant. Mark Freebairn argues that CFOs today have a broader role than the conventional view of them suggests. “Those doing the CFO role have become forced to take on a much broader perspective than before, and this has helped develop them into outstanding potential CEOs. Look at Jeremy Darroch, for example: a great CFO of Dixons, and then an equally strong CFO of Sky. He was appointed CEO and the business has continued to expand and develop even more strongly than before,” says Freebairn.

Having a wide experience outside purely financial roles is critical for the CFO who aspires to the CEO function. Many cases testify to the importance of gaining a wide operational understanding. Take the example of Guilherme Loureiro, who is now CEO of Walmart’s operations in Brazil. He joined Unilever after graduation, and worked there for 25 years. In 2000-2003 he was CFO for Unilever Brazil and followed that with various ever-more-senior operational jobs with Unilever, until he joined Walmart in 2012 in his current role. As a CFO he recalls facing tough times with a very volatile Brazilian economy up to 2004: “We had inflation above 2,000 per cent per year, various currency devaluations and so on. Managing during inflation time is tough. The other main issue is the tax system, which is very complex – we have to do lots of tax planning. Given the volatility and complexity of the country, CFOs in Brazil are highly regarded and always play a key role as a business partner. That’s the main reason they are always a good candidate to become CEO.”

Loureiro’s job as a CEO of a big retail operation is “very different – more dynamic, much lower margin, less time to think and plan – very action-driven.

In retail there is a daily battle: if you miss sales today, it is very difficult to recover tomorrow.

It is a volume battle. You also work with a much higher turnover, and a much bigger number of associates working in multiple locations. I have found it much more complex to manage. The CEO role is very different from the CFO – first of all because you do need to have a much better understanding of your customers, your business, your suppliers and all the stakeholders. Second because you are the ultimate decision maker – you cannot delegate it.”

In other words – the CEO is required to lead from the front.

…but a bit of an extrovert

Freebairn argues that the CFO personality basically breaks down into old-school and  new: “There is a new way of delivering the finance role – the commercial, strategic and forward-looking way. There is also the older-school way of delivering the role – technical, financially oriented and focusing on actual and historical information. It will come as no great surprise that the majority of people doing the former are more extroverted, outgoing, confident in front of crowds … while an old-school CFO is less likely to have the traits needed to be a CEO, a newer-school CFO may well have the traits to be a great CEO in any situation – growth or decline … The more involved they have been in the front line of the business, the more they have become commercially aware. This has greatly broadened their outlook, their business acumen and, coincidentally, their personality. Finance directors sit at the board table as true participants in the business now, and their opinion on the commercial and strategic aspects of business performance is valued as highly as their technical skills ever were.”

In Germany, Shaun Mills is currently CEO of Alpha Trains, Europe’s biggest and most diversified specialist train leasing company, providing in excess of €2.1 billion in new-build rolling stock to public and private operators in a dozen European countries. Mills has a classical CFO background – a degree in finance and accounting followed by almost a decade with KPMG and then a stint with British Aerospace, where he was managing director of a subsidiary, Heckler & Koch, best known for firearms production. It was, he says, a “turning point” in his career, “controlling and running and overseeing” a business preparatory to its sale to a set of private investors. It gave him a taste of what it might be like to be a CEO: “I have always been commercially minded,” he says.

Leaving finance behind

Mills then spent a period with Eurofighter in Munich and then as Finance Director of GNER, the UK train-operating company. He then took over as CEO of Nederlandse Spoorwegen, the principal passenger railway operator in the Netherlands, an experience that convinced him he would “never go back to pure finance”. In September 2010 he got the call to see if he might like to lead Alpha Trains.

“For me there is a big sense of achievement in becoming a CEO. The impact you have on the business is much greater; I like the sense of ‘the buck stops here’. My experience in my last two roles as a CEO and ex-CFO is that the companies want someone financially astute because it gives a really good understanding of the financial aspects of the business. A balance of skills is needed today as a CEO, and financial stewardship is a very important aspect of the CEO’s job, I think. It’s a very lonely place sometimes, and you need real strength of personality. You have to juggle several balls at once but, above all, inspire people, lead from the front. You have also got to be a good talent spotter – you have got to be able to assemble the right team around you and make quick, sometimes hard, decisions.”

Brian MacDonald is now CEO of Hertz USA’s equipment rental division, which supplies construction equipment, but his background was within finance. After his MBA he spent 13 years with General Motors in various finance jobs in Brussels, Paris and Tokyo before joining Dell as Treasurer, where he gained useful Board exposure. He then moved to Sunoco, the diversified energy company, where he was CFO of the chemical side of the business. He oversaw a large restructuring and was promoted to CEO and handled the sale of the subsidiary, and took up his current role in June 2014. He says: “In my case it was a natural evolution from CFO to CEO. The best CFOs end up figuring out the day-to-day running of the business.”

For MacDonald the leap higher requires a “different leadership dynamic. The issue is that everyone wants to see the CEO – who is the effective ‘prime minister’ of the company. Becoming CEO is a huge step – how people regard you is very different from the CFO role. In any other job, you have a boss. Of course the CEO also has a boss – the Board – but you have a very different environment, it’s a little bit lonelier. You get a lot more ‘filtered’ information; you often get just the tip of the iceberg. So you have to weed out what you need to know.”

He stresses that as CEO “you have to be very curious about things, you have to talk to everyone to get a good idea about how the company is doing, talk to the mechanics and truck drivers, working informally. But a lot of what I do in my current role as CEO is what I did as CFO, but the big difference is that I spent around 50 per cent of my time focused on sales, although I have never been a salesman.”

MacDonald says that he has a ‘leadership adage’: “Your biggest strength becomes your biggest weakness. In my case it was finance. I can, as CEO, skate in and out of finance issues, but I realised I had to let go of finance to do the CEO job properly. When people come out of finance roles they can focus on containing risks, not seeking growth – you have to recognise that in yourself. Controlling costs can also have a boomerang effect. We live in a world where there is definitely more short-termism, and while CFOs understand the dynamics of capital markets, CEOs have to drive Boards to be more concerned with long-term growth.”

All rise: here’s the new CEO

Hüseyin Geliş is CEO and President for Siemens Turkey. He’s been with Siemens for 39 years and has been a CFO with the group in Canada and India, prior to taking over the Turkish CEO role in 2007. In 2005 he was nominated by Business Today as one of the top 10 CFOs of the Fortune 500 companies in India. The background of an international career, together with deep and lengthy experience of Siemens as a global company, clearly meant that he fully understood both the business and the people before he took the top role in Turkey.

“I have had a very broad portfolio as a CFO, in-depth involvement in all kinds of business activities. I think it’s important that a CFO should  be from a purely accounting background, but from an operational perspective too. In the last 20 years there has evolved a heavy emphasis on process efficiency, and that typically involves a good CFO. The CEO has, in the end, overall responsibility for the business, but the CFO is in a key supporting role. It’s the CEO who needs to understand the soul of the company. I have always enjoyed the processes of the company in their entirety, not just a single function – after all, we are all involved, it’s more like a chain. As a CEO you have to motivate people, you have to understand the market and the customer. I think that creative innovation was always my strength.”

Burak Başarir is CEO of Coca-Cola Içecek (CCI) in Turkey, the fifth-largest bottler in Coca-Cola in terms of sales volume. He started his professional career conventionally enough, as an auditor with Arthur Andersen, before joining CCI in the finance department. He leads a workforce of 10,000 and oversees 23 plants. He took over as CFO with CCI in 2005 and was appointed CEO in January 2014. He says that he was “very lucky during my tenure as CFO [because] we did the IPO of CCI, where I played an integral role. This kind of experience is very rare, not many CFOs have such an opportunity.” He agrees with many of those interviewed here, that a CFO who eyes the CEO role needs broad experience: “If I hadn’t spent a considerable amount of time on the commercial side of our business, I might not have been a good fit to lead our largest operation, Turkey, and thus probably wouldn’t be at the helm of the company as I am now.” For him, “a CEO should have a high level of energy and strive for continuous development”.

At the start of the millennium a series of corporate scandals – in which billions of dollars were lost – took place, in which a combination of fraud and greed on the parts of CEOs, CFOs and other senior executives aroused ire among the general public and policymakers. New regulations were passed, including the Sarbanes-Oxley Act (passed by the US Government in 2002 and which set new or enhanced standards for all US public company boards, management and public accounting firms.), which brought the CFO firmly into the boardroom. In so doing it created a much more even balance of power between CEO and CFO. This evolution is happening so fast that the available evidence usually has a significant time lag. For example, a survey published by the Harvard Business Review in Jan-Feb 2010 on the ‘Best-Performing CEOs in the World’ contained the surprising fact that none of the top 20 CEOs was previously the CFO of the company. That is likely to change; perhaps it is already changing.

The reason why we are confident that more and more CFOs are going to make it to the top-dog position in the future is that the objective nature of the way 21st-century companies need to operate is likely to dictate that. The CFO today is at the epicentre of corporate life as never before. Ross Woledge, Principal, CFO Practice Leader with Odgers Berndtson in Canada, says: “Diversity of experience can often make the difference if you are a CFO coveting the CEO chair. It’s clear that the CFO is expected to play much more of a commercial role today. It’s no longer acceptable to be cooped up in your office. You need to be a visible presence both inside and outside the organisation.”

This necessary breadth of experience is highlighted in The Chief Financial Officer: What CFOs do, the influence they have, and why it matters4, published by The Economist, where author Jason Karaian makes the point that the evolution in the CFO role is symbiotic; it’s not just the CFO function that has expanded and is far more influential today than ever before; this is also reshaping the way companies work. Companies increasingly rely on big data to determine all manner of things, and the CFO occupies the commanding heights of data. The CFO is charged with interpreting this ever-expanding data and is assumed to have all the answers. This gives them a much higher profile, both on the Board and beyond. This is perhaps the perfect background to mount a challenge for the CEO position. Exceptional listening, talking and communication skills are today a sine qua non, as is a capacity for building strong teams, calling for a talent for collaboration and empathy; both ‘soft’ (emotional intelligence) and ‘hard’ (understanding of IT and data, not just numbers) skills are increasingly expected from the CEO.

Don’t be afraid to improvise

In June last year the Wall Street Journal interviewed Indra K. Nooyi, Chair and CEO of PepsiCo, who was formerly the company’s CFO. Her interview both explained why CFOs have become more attractive to Boards for the CEO role, and the challenges that lie ahead for anyone contemplating the step up: “The reason CFOs became considered for CEOs at all is because regulations, Sarbanes-Oxley, confused the hell out of boards and CEOs. And the world has become more complex; transformations have to be done of companies. People have often said being a CEO is like conducting a symphony orchestra. The problem is that CEOs don’t have music that’s given to them with a set structure; we have to make up music as we go along. In many ways, being a CEO is like leading a jazz orchestra. You improvise … CFOs tend to be good at a [structured role, like playing in a traditional symphony], and when [CFOs become CEOs] you move to a jazz structure.”

From bean counter to jazz aficionado – what could be easier?

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