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CFOs rarely move directly into the CEO role and a lack of operational experience is the main culprit.
A 2015 Korn Ferry analysis of sitting CEOs in the global Forbes 2000 found that only 13% of CEOs moved into their position from a CFO role.
The move to an operational role is a common segue for many CFOs seeking the top spot.
“What seems to be happening is that a lot of CFOs are now being given operational responsibilities,” said David Axson, managing director of the CFO & enterprise value practice at Accenture Strategy. “So they are moving out of the CFO suite and heading a line of business that is complementing their CFO skill set with a business leadership skill set. That move allows them to become a candidate for CEO succession.”
Axson says that CFOs who make the transition to CEO have managed to develop the strong “operational strength of running a business to complement their already competent financial skill set.” He admits that the career path from CFO to CEO is “becoming a lot clearer in that aspect.”
A combination of finance and people skills
On the changes in regulations and the need for more transparency, Axson says, “You want CFOs who have profit and loss (P&L) accountability. Not just the responsibility for creating the P&L but ownership of the numbers that exist in the P&L. That combination can be very potent when you are looking at CEO transitions.”
Axson says the ability to “manage the investor-communication process” has become increasingly important because of the rise in activist investors and the demand for greater transparency being made available to shareholders.
Of course, some CFOs do make it straight to the CEO role. In those cases, “the CFO is often the number two executive after the CEO in explaining strategy, explaining capital allocation, explaining tax utilization within the business,” Axson says. “That interaction with both the board and the company’s investors can be a valuable training ground for future CEOs.”
The right-brain gap
Korn Ferry CEO Gary Burnison was one of the lucky CFOs who jumped right into the CEO role. He told Business Insider, “There’s a huge gap, and that gap is centered around the right brain. If you think about the left brain as very clinical, analytical, and decision-making based, CFOs have those traits. What they are often lacking is focused on the other side – there is a big right-brain gap.”
“One of the reasons you move a CFO to a line position is not only to get that experience with customers but to develop the right-brain skills that are needed to manage people,” Kerry said. “To expand their leadership, CFOs must become more agile and comfortable making decisions when there are no black and white answers.”
Burnison perfectly sums up why CFOs are most often moved into an operational role before a CEO promotion is finalized: “You grow and you learn. You have to learn how to effectively deal with customers, and you learn to inspire others.”