Skip to content

Making the transition from Finance Director to CEO

An increasing number of FDs are successfully making the transition to CEO. In fact, 58% of current FTSE 100 CEOs have a background in finance and accountancy. As such, it has never been a better time to be a finance-function head.

As a specialist finance recruitment consultancy, we can testify to the trend being mirrored in private companies across the UK, too. So, what’s driving it and what are the key factors for an FD to consider in taking the next step in their career development?

Is it a functional appointment driven by business priorities?

Reasonably and possibly. It would make sense if a former CFO was appointed to address immediate business challenges – like lead cost-reduction or M&A-growth initiatives, say. But if functional-head expertise alone made you a safe bet then, with digital transformation currently a C-suite priority for most organisations, one would expect more CTOs, CIOs or CSOs being appointed to the top job.

Is the Bottom Line the bottom line?

Traditionally, when times are tough, FDs rise to the top and, since 2008, there is no doubt, things have been tough. Against a backdrop of inflation, geopolitical conflict, supply chain disruption, talent gaps, the energy and cost-of-living crises, it remains tough.

In a high-cost, low-growth environment, with an insolvency rate at its highest since 2008, cashflow and cost control have become crucial. As such, organisations are inevitably looking to the finance function to take the lead.

Because of the macroeconomic environment, in most businesses, the CFO or FD is already a trusted advisor to the CEO, helping pilot them through the turbulence and disruption. Often working with the board at a strategic level, there is no doubt that the finance function is increasing its influence. And this is the arena in which key relationships are forged and relevant experience is gained.

Get your experience where you can

Dig a little deeper than the headline figures, and research shows that a higher percentage of FDs appointed to CEO have headed up the finance function in more than one company, suggesting that, beyond the functional expertise itself, it is this wider board-level experience that is enabling many to make the transition. (You don’t necessarily have to leave your current job to gain it, either. Although easier said than achieved, a position as a NED in a different organisation offers excellent opportunities to gain wider experience.)

Masters of the strategic drivers across the whole of an organisation

Today’s CFOs are more than just experts in their own field, they are becoming masters of the other strategic drivers across their organisations, too. The best not only devise the strategy, they execute it, too. This inevitably means guiding and collaborating with other areas of the business.

With increased automation and the leveraging of deep insight data analytics, the finance function has already taken the digital lead. As such, roles and responsibilities are becoming increasingly blurred. CFOs are now expected to own not only the financial sphere but to help build an intelligent enterprise with technical fluency. Speaking digital and understanding how best to leverage the latest technologies will be increasingly important for any aspiring CEO (see above).

As early adopters of the digital revolution, the function has not only had a head start, but its leaders have benefitted from its time-saving advancements. They have been freed up to focus on the strategic and visionary elements of their role, their data analytics proving vital for organisational decision making. 

So, what’s the best route in?

Whilst research suggests a roughly equal split between promoting from within and bringing in fresh talent, the majority of organisations we’re working with are focused on succession planning and appointing internally, where possible, especially where the culture is strong.

During a period of slow growth overshadowed by economic and political uncertainty, cost control is a priority. Organisations are inevitably cautious and individuals with a finance background are viewed as a ‘safe’ pair of hands. As such, we are seeing a significant number of FDs making a direct transition. That said, whether being directly promoted or arriving in the top spot by a more circuitous route, wider senior strategic and operations experience is, without doubt, advantageous.

Douglas Flint, who made the move from group FD to Chairman at HSBC Holdings, argues that beyond the current political and economic climate and the growing influence of the finance function across most organisations, inherent in the role itself is a necessary accumulation of ‘business leadership and followership skills’ that put FDs firmly in the frame.

Are you right to make the transition?

There are already a plethora of articles out there listing the must-have skills to make the transition successfully. And you may well tick a good number of those boxes. But, in answering the ‘are you right?’ question, executive coach John Mckenzie highlights the importance of developing the necessary mindset. He suggests that a finance background can be both a blessing and a curse. Where a finance mindset has become ingrained, over many years, the transition may not be a straightforward one.

For example, he writes:

‘It is more common for the CFO to operate in an environment that is shorter term (financial quarter, half year, annual) rather than longer term (strategic, visionary, 3 to 5 years out). It is also more likely to be rule driven (statutory reporting, accounting standards, audit etc.) rather than “tear up the rule book” (think outside the box, strive to find competitive edge, blue sky thinking).’

You will be moving from fact-based, past-performance decision-making to that which is “what if?” and future-orientated. In an uncertain business environment, can you handle the pressure of making big decisions based on imperfect knowledge when the buck stops with you?

Are you a technocrat or a leader?

When asked: ‘What does it take to move from a career in finance to the top job?’, the majority response of the business leaders we’ve spoken to is ‘bravery’! None of us can see the future and there will be times when you must stick your neck out and follow the courage of your convictions. For an FD, this more instinctive, intuitive way of decision-making isn’t always a natural fit. Of the senior leaders we’ve poled, with hindsight, the thing they’ve regretted most was being too cautious. Most finance functions tend to be risk-averse, yet the CEO needs to be visionary and entrepreneurial.

Crucially, Mckenzie highlights the fact that CFOs largely enjoy unchallenged supremacy in their domains. As the CEO, you will be answerable to external investors, key stakeholders and major customers. And, from a role which demands significant control, you will be moving to one where a lighter touch is required. Richard Stone, from Share PLC, in describing his first year after moving from FD to CEO, highlights this by using a nautical analogy: ‘As CEO you are steering, nudging the tiller’. 

The gender problem

Whilst it is well documented that to develop creative, innovative cultures, difference and diversity is a necessary force in the corporate mix, the top, top jobs remain the prerogative of white middle-aged men. In FTSE100 companies only 9 women are CFOs and only 10 are CEOs. Whilst things are better further down the food chain (45% of chartered and certified accountants are female, for example) women are not being promoted to more senior roles. While there isn't space here to explore why, it would suggest the old-boys' network is still pretty powerful in finance.

(Ethnic minorities are entering the finance profession in positively over-representative numbers. Again, those numbers aren’t following through into senior positions. However, that 12, current FTSE100 CEOs are from ethnic minority backgrounds, does represent progress.)

In brief

Whether it is to lead streamlining and restructuring, expansion into new markets, the roll out of new products and services, mergers and acquisitions or the adoption of new technologies, boards are looking for nimble, operationally focused, strategic thinkers who can collaborate across the whole of an organisation. These individuals will also have the creativity, vision and communication skills to drive change and transformation. Today’s FDs are more than just experts in their own field, they are becoming masters of the other strategic drivers across their organisations, too.

More often than not, for the top, top jobs, the successful applicants have moved nimbly between finance, administration, general management and operations, quite often in several different organisations, before being appointed.

Finance without strategy is just numbers, but strategy without finance is just dreaming

As we’ve seen, to make the transition, the right mindset is crucial. Steven Giles – in his ACCA CPD article How to attain the corporate summit – writes: ‘Certain aspects of the CEO’s role cannot be learned – for example, entrepreneurial spirit and a strong appetite for risk-taking… Many FDs are by inclination and training more cautious. For them, a more comfortable transition would be a move to chairman.

In a climate where many organisations are looking to promote from within, beyond developing a strategic and commercial mindset, he goes on to encourage aspiring CEOs to build networks and contacts across the business, again, as we’ve seen, particularly at board level.

For those who do have the right mindset, we would recommend making a plan, one that includes personal and professional development through coaching, mentoring and, where appropriate, gaining wider business qualifications.

Against a backdrop of uncertainty, financial fundamentals are key. As such, this is your time to shine. A strategist, fluent in finance and already working with the board, your stars are aligning. If you have the right mindset, a good network of contacts and a breadth of business experience then, as an FD, there’s never been a better time to go after the top job.

i Lawrie Holmes, Skilling Up: CFO to CEO, Financial Director, 21st August 2018, https://www.financialdirector.co.uk/2018/08/21/skilling-up-cfo-to-ceo/

ii Richard Stone, Guest Column: My year as FD-turned-CEO, Financial Director, 28th January 2015, https://www.financialdirector.co.uk/2015/01/28/guest-column-my-year-as-fd-turned-ceo/

iii https://www.accaglobal.com/sg/en/member/discover/cpd-articles/leadership-management/ceosept18-cpd.html

Simon Lowe

A West Midlands-based senior finance and executive search and selection specialist, with over 20 years’ experience, Simon has a proven track record of delivering successful interim and permanent talent solutions for corporates and owner-managed or PE-backed SMEs and start-ups.

About the author >

Further insights

Mergers & Acquisitions: HR is integral to success

Whether you are considering a merger, acquisition, or divestiture, because it will involve people, and change, as the people function, HR will be critical for its success.

More

Strategies for successful organisational restructures

Although challenging, in a high-cost, low-growth economic environment, organisational restructures can offer businesses the opportunity to reset and go again.

More

An exceptional Logistics Manager for a global engineering business

Even a leading, global, precision engineering company is not immune to the challenges of post-pandemic supply chain uncertainty and post-Brexit export complexity. Having the right leaders in place is key.

More
All articles

We know what great looks like

Whether through permanent and interim recruitment or project consultancy and solution delivery, we are people experts who work with expert people to support, develop, and guide our clients’ organisations.

Contact us today
Web development by Bluelinemedia