In its February 13, 2023 edition, Fortune magazine highlighted a significant new trend: more and more CFOs are advancing to become CEOs. In fact, the Fortune piece noted that the CFO role is now often a primary conduit to an offer to serve as CEO. Over the first six months of 2022, looking at S&P 500 and Fortune 500 companies, more than 8 percent of almost 700 CFOs achieved promotions to CEO. That’s a sharp increase from the approximately 5.6 percent about 10 years previously. And in some industries, finance for example, the proportion of those making the jump is far higher.
The confidence a company may have in its existing CFO is often largely based on his or her institutional knowledge, strategic abilities, and balance-sheet expertise. But there’s more involved in making the move to CEO successfully, and that difference lies in the soft skills.
In their first few business cycles in their new jobs, CFO-to-CEO executives tend to keep moving the profitability needle up. After a while, however, many find themselves outperformed by people who took on the responsibilities of CEO from other pipelines, notably those who were previously in junior-level CEO positions. This is particularly true in terms of top-line performance items like total revenue versus bottom-line net profitability.
Most CFOs transitioning to CEO will need to build skills in the areas of communication and leadership. They will need to understand how to work constructively with a board of directors, manage disagreements, and identify and nurture talent. A top-performing CEO also shows that they can innovate and can convey a strong vision that the team will want to get behind.
There’s no reason a successful CFO can’t become an equally successful CEO, provided they put in the thoughtful work it takes to become a leader of people along with being a master of the balance sheet.
