In 1970, the roles and responsibilities of CFOs increased started when strategic planning and information management became an important part of a company’s competitive advantage. This move opened a lot of opportunities for CFOs to move into the CEO positions. In 2000, a Financial Executive survey revealed that 33 per cent of CEOs of companies earning more than $500 million came from finance department (Favaro, 2001). Success stories of CFOs turned CEOs would lead us to believe that the finance department is a good catapult for aspiring CEOs, however, this may not always be the case.
This is not to say that the experiences that CFOs face will not bear weight in the CEO position; this simply means that for every CFO who is aspiring to be a CEO, wide knowledge in finance is not the only key to be part of the success statistics. Chief Financial Officer’s main responsibilities are to oversee financial planning, formulate corporate strategic plans, and control company cash flow (Keown, Martin, Petty & Scott, 2005, p.
10). As a future decision maker, these skills will help the CFO make sound decisions to strategically position the company.
One of the important things though, that aspiring CEOs should remember is that these skills do not guarantee that their aspired change in position will be a success story. In the article “Making the Leap from CFO to CEO”, Thomas Nuff, U. S. Chairman of Spencer Stuart, an executive search firm said that despite their wide knowledge in the field of finance, CFO turned CEO often find it difficult to face new sets of challenges (Favaro, 2001).
In an interview conducted by CEO Forum Group, David Moffat, former CEO of GE Australia and New Zealand and now CFO of Telstra, on the other hand offers one solution to this problem. According to him, having the benefit of hindsight, both positions require common skills and are “roles of execution”. What differs between the two roles is the weighting for each of the skills. He explains that it is just a matter of emphasizing and focusing on skills that are more needed for the position. (CEO Forum Group, 2006) The advent of change in the roles of a CFO opened a gateway for promotion.
Successful CFOs turned CEOs learned how to take advantage of the opportunities that their previous position offered to them. According to Don Durfee of CFO Magazine, some of the trends that brought in promotion opportunities for CFOs are board member’s increased emphasis of finance – since they feel that strong finance background will help lessen the blow of industry meltdowns and occurrence of corporate scandals and the fact that the change in role exposed CFOs to strategic planning and operations (Durfee, 2005).
Majority of CFO turned CEO stories presented in Paul Favaro’s article “Making the leap from CFO to CEO” showed that many of them recognized and took advantage of opportunities to gain experience in other fields that would further help them as CEOs (Favaro, 2001). The bottom line is, aspiring CEOs should not be too focused on financial concerns and isolate themselves in the realm of finance, rather, they should also make sure that they have enough experience outside this department that would prepare them for their responsibilities in the future as CEOs.
In conclusion, the finance department may not necessarily be a good breeding ground for future CEOs. Although statistics show that more CFOs become CEOs compared to their marketing and operations counterpart, having a past in the finance department is not a guarantee that the CFO will be able to function well as a CEO since this position will offer a wider and newer sets of challenges. When choosing future CEOs, the less important question is which department of the company he last belonged to rather, the more important question is does he have enough all around experience that will help him fulfill bigger responsibilities.
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