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CFO to CEO in an Improving Economic Climate
The return to a stronger economic climate means lower unemployment rates, discussions around increased interest rates, a housing market recovery, heightening consumer confidence and business investment reviews. Will these changes impact the style and background of new CEO appointments in the near future?
Does the CFO make a good CEO?
Over the past five years, more CFOs have been promoted into CEO positions within the FTSE 100 (currently sitting at 44%) than ever before. A third of those with a finance background who have been promoted into the CEO role were promoted from the main board CFO position (mostly internally), the rest were promoted after gaining further line management experience.
The increase is due to both the economic uncertainty and the dominant market focus around skills which naturally sit within the stereotypical profile of a good CFO. These skills include preferences for intense data-driven decision-making, insight-based forecasting capability, corporate governance skills, risk management prowess and the ability to stand up to intense shareholder/stakeholder scrutiny on revenue and profitability performance.
There are other personal qualities which have recently held CFOs in good stead during the selection process for the role of CEO during tougher economic climates. Their balanced and reflective analytical minds; their tough, logical decision-making and their belief that merging the commercial and strategic goals of a business is crucial in order to reach the primary financial results, have all contributed.
Impact of economic positivity
Traditional charismatic, swashbuckling, boom-time CEOs are dinosaurs of a bygone era. But will a more positive economic environment mean that there will no longer be a place in the future for the current reflective and risk adverse ex-CFO CEO?
The role of CEO is evolving with the market changes. There seems to be more of a focus on long-term integration of an increasing volume of acquisitions, nimble innovation around market offerings, locations and growth enablement in general and encouraging increased investment in new business models/acquisitions. Future CEOs might also have to make room for failure within the leadership team in order to foster a culture of renewed creativity and more calculated risk-taking than in recent years. These changes in the role may change both the attraction of the CFO to the role of CEO and their potential suitability to the roles.
A final word of warning for CEOs
If the economic climate continues to improve, one of the greatest challenges ahead for CEOs (irrelevant of their background or training) will be holding onto their current CFOs in the face of increased appetite and demand for future-focused CFOs in an improving economic environment.
Get in touch with Lucia Knight, from Page Executive’s CFO practice, to find out more about senior level finance trends.