In February, Barry McCarthy was promoted from CFO to CEO of US sporting company Peloton Interactive. Closer to home, David Pfaff went from CFO to CEO of Tyme Group in May. We think the pathway from CFO to CEO will become increasingly common for these three reasons.
1. CFOs are no longer just number crunchers
The evolving role of the CFO is often discussed in our CFOTalks podcasts. From our numerous interviews with CFOs, it is clear that the position is no longer simply to produce the monthly management accounts and the financial statements.
“We’ve clearly seen a move away from accounting as the entry point for being a CFO. It takes years to develop into a CFO and that requires business knowledge, operational knowledge, strategic knowledge, HR and IT, and it takes a unique personality to combine all of those into this new role of CFO,” says Nicolaas van Wyk, CEO of the South African Institute of Business Accountants.
This is opposed to the 2000s, when Mckinsey reported that CFOs are often perceived as “much too narrow ever to become CEOs”.
Lynette Mutsekwe, a CFO of Europ-Assistance and an African business specialist, says, “We (CFOs) have become the custodians of the structure and the sustainability of the organisation. Always making sure that your product offering guarantees sustainability in the long term. There’s a lot of talent development through communication with the talent in the business. Then there’s a lot of regulation, so you’re also the custodian of compliance and governance. So (it’s) quite a move from your technical accountant, who was more interested in just the financials, your debit and credit, it’s now a CFO who’s really embedded in the strategy of the business.”
2. CFOs are seen as ‘Deputy CEOs’
Alyse Bodine, partner at Heidrick & Struggles – a business that has tracked CEO succession – found that the CFO to CEO path is common. “Many of the CFO searches that I conduct are very explicitly CEO succession planning engagements. In many instances, organisations view CFOs as almost deputy CEOs. Besides finance, the CFO often has responsibilities in other areas of the business. If you look at what’s expected of a CFO, the bar just continues to kind of rise.”
Jordaan Burger, a vice president at Sage, says CFOs are “on par with CEOs… they are now some of the most influential leaders and figureheads, armed with technology-enabled insights to tell the story of their company’s financial health. They are firmly in the driving seat of business transformation.”
3. CEOs depend increasingly on CFOs
Steve Gallucci, national managing partner of the global and U.S. CFO Program at Deloitte LLP, says that at a time when companies are asked to transform at a pace never seen before in modern business, the strategic partnership between CFO and CEO is more vital than ever.
Gallucci says, “As I reflect on the last 24 months, the CEO has really looked to the CFO even more. CFOs have their hands on the pulse of the business in the midst of having to pivot at a much quicker pace.”