5 Moves That Turn a CFO Into a Real CEO Contender

Boards are taking a look at their CFOs otherwise than they used to.

Russell Reynolds Associates’ 2024 Global CFO Turnover Index discovered that 34% of CFOs who left their roles moved right into a President or CEO place, up from 20% the yr earlier than. Around the identical time, a Boston Consulting Group survey of roughly 500 chief executives discovered that greater than 1 / 4 of them see their very own CFO as the largest risk to their job, forward of each different function within the C-suite.

Two numbers, similar story from reverse ends — the CFO seat has stopped being a purely monetary perform and was a proving floor for the highest job.

The finance observe report will get you into the dialog for the CEO seat. Winning the seat takes extra. I say that as somebody who joined Dreamix in mid-2022 as its first CFO, after a decade in company banking, and have become its CEO in September this yr.

In between, there was a buy-side acquisition, a sell-side acquisition, a Deputy CEO function and an EY CFO of the Year award, however none of it could have mattered with out the 5 issues under. What follows is written from the within, within the order I’d do it once more if I had been a CFO at present who needed the highest job.

1. Make progress a part of your job earlier than anybody asks you to

Protecting margins is the pure CFO intuition, and it’s the intuition that may maintain you a CFO. Chasing progress will not be pure for a finance chief, which is strictly why it’s the very first thing I’d change. In my expertise, that meant main a buy-side acquisition that accounted for half of our progress that yr, bringing new purchasers via my very own community and doing the unglamorous work of discovering out whether or not gross sales or advertising and marketing really moved income, in order that the price range adopted the outcomes.

The information behind that is uncomfortable for our career. Spencer Stuart’s analysis on CEO efficiency discovered that former CFOs are on common slower to drive top-line progress than CEOs from different backgrounds, and that solely 8% of CEOs promoted from the CFO function take their firm into the highest quartile for income progress.

Boards know this, and it’s the objection you’ll have to disprove with proof slightly than reassurance. A CFO who solely talks about spend will all the time sound like a CFO, irrespective of how good the numbers are. Arrive with a progress thesis.

2. Act like an proprietor of the entire enterprise

Most CFOs weigh in as soon as a call has already taken form, checking whether or not the corporate can afford it. What adjustments every part is being within the dialog whereas the choice continues to be forming, sitting subsequent to the CEO on the primary draft of an thought slightly than the ultimate model. You cease reacting to technique and begin constructing it, and that could be a totally different job from the one most finance leaders had been educated for.

At Dreamix, I began doing this effectively earlier than I had any title that justified it, and it’s price saying that I wasn’t a shareholder. Behaving like an proprietor is a alternative about the place you place your consideration, regardless of the cap desk says, and the individuals who will resolve your future discover it lengthy earlier than they might clarify why. McKinsey discovered that greater than 90% of CFOs who turned CEOs had been promoted from inside, which suggests the board had years of watching you with a purpose to resolve whether or not you had been working the finance perform or enthusiastic about the entire firm. Russell Reynolds places it one other approach: in lots of firms the CFO has already develop into the de facto COO, with IT, authorized, amenities and extra reporting in. If that’s true of your function, run it like a COO and let individuals see you doing it.

3. Run one thing that isn’t finance, and get identified outdoors it

A CFO who is simply seen to the finance workforce, irrespective of how good the numbers look, will all the time be seen as a specialist. The treatment is to run one thing that isn’t finance, whether or not a division, a area, an integration or a serious transformation with full cross-functional accountability, so that you’ve got been finally chargeable for an end result that goes past reporting. The acquisition and the sale had been my variations of that as a result of a transaction touches each perform within the firm and somebody has to personal the outcome.

McKinsey discovered that three-quarters of the previous CFOs promoted to CEO within the FTSE 250 had frolicked outdoors the finance perform, and the previous CFOs interviewed by Spencer Stuart say the identical factor in blunter phrases: get away from the spreadsheets, get in entrance of consumers, sit within the industrial negotiations.

Getting identified outdoors finance means understanding what gross sales, advertising and marketing and engineering are attempting to realize effectively sufficient to be helpful to them, with out pretending to be certainly one of them. The credibility comes from years of sitting in challenge critiques and pricing proposals, watching which groups delivered on margin and which didn’t, and from being helpful to the engineering management on their issues whereas leaving the experience to them.

4. Stop reporting the previous and put your view of the long run in writing

Financial reporting appears to be like backward by design: what occurred final month, final quarter, final yr. As a CFO, I might inform you that we had taken income from €7.25 million to €25 million and EBITDA margin from 11.2% to 18.8%, and I might clarify each motion in each. That account was correct, and by itself it mentioned nothing about the place the corporate ought to go subsequent.

The CFO asks what the info tells us. The CEO has to resolve what the corporate believes due to it, decide to a plan of action and carry the results personally. The most seen distinction between a CFO and a reputable CEO candidate is an opinion concerning the future, defended in entrance of people that have identified the enterprise far longer.

My first actual take a look at got here just a few months after I joined. In 2022, with central banks elevating charges, I argued that our startup purchasers, then greater than 40% of income, would battle to boost cash, and that we must always transfer towards enterprise purchasers. It modified how gross sales, advertising and marketing, supply and hiring labored. By the tip of 2024, startups had been 18% of our income, and over the following two years I watched software program firms that had stayed closely uncovered to startups battle with falling income and late funds.

So write the one-page view of the place the corporate must be in three years and share it together with your CEO earlier than anybody asks for it. Take technique to the board together with the outcomes. You shall be flawed about components of it, and that’s the level: a CFO who has by no means been flawed in public has by no means dedicated to something.

This can be the place a finance background pays off as soon as you might be within the seat. McKinsey discovered that former CFOs had been nearly twice as possible as the typical CEO to run a strategic evaluation of their first two years. The analytical behavior is already there. You solely have so as to add the dedication.

5. Build belief with the individuals who resolve, years earlier than they resolve

Whoever picks the following CEO has to already know and belief you by the point that call comes up, and that belief is constructed years earlier, within the strange conversations the place you present up as somebody enthusiastic about the place the corporate is headed.

In my case, the individuals who would resolve modified midway via. The 2024 sale to Synechron introduced new shareholders, and the belief that led to the CEO function two years later was constructed on the negotiating desk, representing Dreamix’s pursuits to the individuals who would later personal it. Russell Reynolds’ CFO turnover report notes that boards are more and more appointing CFOs as CEOs-in-waiting, and that what they need is somebody who can current the corporate, maintain their very own with buyers and act as a thought accomplice to the CEO. So deal with each board assembly and each shareholder dialog as a management platform, as a result of that’s how the individuals throughout the desk are already treating it.

To wrap up

None of this occurs in a single challenge or in a single yr. It is constructed by selecting, again and again, to work barely outdoors the perimeters of the job description you had been employed for, till the individuals round you cease noticing that the perimeters had been ever there. The title will get you the seat. What you do with the additional scope determines whether or not you get the following one.

It issues past the CFO group too. When a shopper decides whom to belief with a software program partnership, they’re additionally betting on the judgment of whoever leads that firm. Someone who has discovered to personal outcomes will deal with your challenge the identical approach, as one thing they’re personally chargeable for.

Boards are taking a look at their CFOs otherwise than they used to.

Russell Reynolds Associates’ 2024 Global CFO Turnover Index discovered that 34% of CFOs who left their roles moved right into a President or CEO place, up from 20% the yr earlier than. Around the identical time, a Boston Consulting Group survey of roughly 500 chief executives discovered that greater than 1 / 4 of them see their very own CFO as the largest risk to their job, forward of each different function within the C-suite.

Two numbers, similar story from reverse ends — the CFO seat has stopped being a purely monetary perform and was a proving floor for the highest job.