The CFO's Evolving Roles.It's been many years since a CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. was widely assumed to be little more than the ultimate bean counter bean counter
A person, such as an accountant or financial officer, who is concerned with quantification, especially to the exclusion of other matters: . While schooled in finance, many executives on a CEO track -- or in that seat themselves -- have business administration degrees or considerable operating experience that has prepared them for a very real strategic role, frequently as the chief executive's right-hand person.
The following articles examine the CEO role from several angles: as a potential springboard to the CEO chair; the skills that recruiters look for in placing top candidates; and from top financial executives themselves in their oversight of chief information or technology officers. Unquestionably un·ques·tion·a·ble
Beyond question or doubt. See Synonyms at authentic.
un·question·a·bil , the CEO role at many companies is more complex and demanding than ever -- but also potentially more rewarding, and not just financially.
"There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things."
--Niccolo Machiavelli, The Prince
In his famous advice to Renaissance statesmen 500 years ago, Machiavelli articulated one of the perennial truths of leadership -- that taking the reins of power can be one of the most "perilous" and "uncertain" things a person can do. For any CFO See Chief Financial Officer. with designs on a CEO position, this is advice well worth heeding. The more complex role of chief executive requires that most CFOs learn a new set of skills to help them tolerate and manage ambiguity and nuance. While CEOs often have top-notch analytical skills, making the transition to the leadership role of CEO can have career-ending consequences.
The track record of CFOs graduating to a CEO post is mixed. Some of the better-known CFO-turned-CEOs from the past had difficult tenures, including Robert Allen Robert Allen may refer to:
Malcom Douglas Ivester was born in New Holland, Georgia. at Coca-Cola Inc. But several ex-CFOs currently in the hot seat are getting high marks, including Edward Liddy at Allstate Insurance Co., Henry McKinnell Henry A. McKinnell, Jr. (born February 23 1943) is the former chief executive officer and former chairman of the board of directors of Pfizer Inc. He is also a director of ExxonMobil and Moody's.
He was born in Victoria, British Columbia, Canada. at Pfizer Inc. and John Dasburg John H. Dasburg was born in Queens, New York in 1943. He grew up in Miami, Florida and served in the United States Navy during the Vietnam War. He attended the University of Florida for college, and used the GI Bill to get his MBA also from UF. at Burger King Corp. What separates the winners from the losers?
"What is most surprising is that when a CFO moves into the company's CEO position, they often find themselves unprepared to deal with an altogether different set of challenges -- having less to do with financial know-how and more to do with the intangibles of leadership," says Thomas Neff, U.S. Chairman of executive search firm Spencer Stuart, who has placed many executives into CFO and CEO positions. "CFOs who are successful as CEOs have often ventured well outside their traditional financial oversight role and learned all aspects of the business -- from building a relationship with the board to line management."
Two questions are often asked by CFOs who aspire to aspire to
verb aim for, desire, pursue, hope for, long for, crave, seek out, wish for, dream about, yearn for, hunger for, hanker after, be eager for, set your heart on, set your sights on, be ambitious for the CEO job and seek to avoid rising too far, too fast. First, what are the key skills required for the CEO slot that are different from those typically possessed by a CFO? Second, what can CFOs do now to help themselves prepare to make the leap successfully? The transition to CEO can be quite manageable -- as long as the CFO has taken the time to build experience in the right areas.
The Rise of the CFO
Of course, even to be considered for a CEO post, a CFO must have already developed an impressive array of abilities. In addition to having superior financial and accounting management skills, today's CFO must advise the CEO on strategy development, lead the company s information management efforts, act as the day-to-day manager of relationships with the investment community and provide leadership on managing internal processes and initiatives. This trend toward broadening the CEO role, which began the 1970s with the advent of formal strategic planning Strategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy, including its capital and people. and the emphasis on information management as a source of competitive advantage, has resulted in many CFOs having a range of responsibilities almost as broad as the CEO.
Because of these changes, the CFO is no longer viewed as a mere functional specialist, but as one of a company's future leaders Future Leaders is a UK schools-led charitable organisation that aims to widen the pool of talented leaders especially for urban challenging secondary schools. It was founded in March 2006 by Nat Wei, a former founder of Teach First. . A Financial Executive survey last year of companies with revenues greater than $500 million revealed that 33 percent of responding CEOs had risen through the finance ranks, while only 26 percent had reached the top from operations and 21 percent from sales and marketing. And a 1999 survey of Fortune 1,000 CEOs by the executive search firm Heldrick & Struggles found that 36 percent of CEOs were grooming their CFOs for a general management position, and 33 percent were usually considered CEO candidates. In turn, most of the Fortune 1,000 CFOs (72 percent of those surveyed) were grooming a successor to take over the finance function in anticipation of their own advancement.
One man who successfully made the transition from CFO to CEO is John Dasburg, CEO of Burger King. Dasburg was the CFO of Marriott International Marriott International, Inc. (NYSE: MAR) is a worldwide operator and franchisor of a range of value and luxury hotels and related lodging facilities. Marriott currently has 2,300 accommodation properties in North America alone. Inc. during a period of enormous change and growth in the 1980s, when much of its value creation came from a complete restructuring of the way it developed and managed its properties. He was also CEO of Northwest Airlines through its very rocky 1990s, which included rancorous ran·cor
Bitter, long-lasting resentment; deep-seated ill will. See Synonyms at enmity.
[Middle English, from Old French, from Late Latin, rancid smell, from Latin labor negotiations, a barely averted bankruptcy filing and, in 1999, a late-night call from a plane full of irate, stranded passengers on a snow-covered Detroit runway. Having been through periods of enormous change in both positions, Dasburg is quite clear on the different demands of the two jobs.
"When you move from being a GFO GFO GEOSAT (Geophysical/Geodetic Satellite) Follow-On
GFO Granular Ferric Oxide
GFO Grant Funding Order
GFO Gain From Operations
GFO GameFan Online
GFO Gulf, Mobile, and Ohio Railroad Company
GFO GPS Field Office to being a CEO, you have to change the way you think, act and communicate," he said recently. "A CEO must think at a higher level of abstraction The level of complexity by which a system is viewed. The higher the level, the less detail. The lower the level, the more detail. The highest level of abstraction is the single system itself. -- more inductively and less deductively de·duc·tive
1. Of or based on deduction.
2. Involving or using deduction in reasoning.
de·ductive·ly adv. . A CEO must be more willing and able to act on key decisions with fewer facts, relying more on grounded assumptions. And a CEO must be able to communicate effectively to a broader constituency -- in particular, he must be far more politically attuned at·tune
tr.v. at·tuned, at·tun·ing, at·tunes
1. To bring into a harmonious or responsive relationship: an industry that is not attuned to market demands.
Certainly, many of the basic skill requirements are the same in the two positions, most important among them having strong people management and communications skills, strategic vision and analytical acumen. But it is the pace and inherent uncertainty surrounding most of the decisions that CEOs must make, the burden of accountability associated with those decisions and the need to win over multiple constituencies to support decisions that make the top job so different.
First, the newly appointed CEO must apply his or her skills in a much faster-paced -- and less controlled -- context. A study conducted almost 30 years ago by management theorist Henry Mintzberg Professor Henry Mintzberg, OC , OQ , Ph.D. , D.h.c. , FRSC (born September 2, 1939) is an internationally renowned academic and author on business and management. He is currently the Cleghorn Professor of Management Studies at the Desautels Faculty of Management of McGill found that the median time spent by a CEO on any one issue was less than nine minutes. If anything, that time has shortened in today's wired world. CEOs have to gather facts, consult colleagues, make assumptions, consider alternatives, make decisions and move on to the next issue in a disciplined and sometimes ruthless way.
Often, the greatest challenges come when highly visible issues arise unexpectedly. James Burke James Burke may refer to:
In recent years, one of the most remarkable stories of an ex-CFO taking fast and decisive action as CEO involves Allstate Insurance's Edward Liddy. Formerly CFO at Sears, Roebuck & Co., Liddy took over the top job at Allstate in early 1999 at a time when the company -- and the insurance industry -- were changing rapidly. Deregulation Deregulation
The reduction or elimination of government power in a particular industry, usually enacted to create more competition within the industry.
Traditional areas that have been deregulated are the telephone and airline industries. , which allowed large, well-financed financial services The examples and perspective in this article or section may not represent a worldwide view of the subject.
Please [ improve this article] or discuss the issue on the talk page. companies to enter the market, and the rise of Internet insurance sales -- which introduced a whole new set of start-ups -- transformed a sleepy industry into one in which only the quick and nimble would survive. After taking the helm, Liddy picked up the pace: he laid off the company's 6,000 employed insurance agents and offered to rehire Re`hire´
v. t. 1. To hire again. them as independent agents. He also fired 4,000 other employees, expanded the company's product line and invested heavily in online and direct sales of Allstate insurance.
In his words, the changes were driven by a need "to understand where the marketplace was moving and get in front." Wall Street has taken notice, driving the company stock price up sharply. In summing up the effort, Liddy said the key issue was, "How do you, as CEO, overcome internal resistance to change?"
Accountability and Motivation
The second distinctive characteristic of the CEO job is the fact that, as Harry Truman liked to say, "the buck stops here." CEOs are accountable for action and results, more so than any other position in the company. At the same time, because of the complexity and urgency of their decisions, they are least likely to be able to predict outcomes. It is rare that any decision having a major impact on a company -- be it a strategy shift or a reorganization -- can be made with full knowledge of its likelihood of success.
This may be one of the hardest lessons for analytically oriented ex-CFOs to learn: that it is not always possible to wait for all of the data before making an important decision. Just ask Gary L. Tooker Gary L. Tooker was the CEO of Motorola from 1993 to 1995. He became CEO after Robert Galvin retired from the position while remaining chairman of the executive committee of the board. Prior to becoming CEO, Tooker was president and chief operating officer. , former CEO of Motorola Inc., who in 1995 backed his management team's fateful decision not to make the leap from analog to digital mobile phone technology. Since then, Motorola has lost its lead in wireless phones, slipping to a 13 percent share of the market to Nokia's 35 percent.
The third skills challenge for the CFO-turned-CEO is in the area of motivation. It's not that CFOs don't need to motivate, but that for CEOs, it's a bigger part of the job. CEOs must be able, through strong leadership, to build consensus across a broad set of constituencies. For example, Andrew Grove
Dr. Andrew Stephen Grove (born 1936-09-02) is a Hungarian-American businessman. He participated in the founding of Intel and was key to the company's success. is widely lauded for recognizing a major inflection point Inflection Point
An event that changes the way we think and act.
-Andy Grove, Founder of Intel.
For example, the fall of the Berlin Wall was an inflection point in global politics and the commercialization of the Internet was an inflection point in technology. in the chip market in the mid-1980s and making the fateful decision to refocus Intel Corp.'s business from memory chips to microprocessors, thus setting the company on a roughly 15-year run of breathtaking growth and profitability. Yet, perhaps his greatest achievement was not the decision itself, but motivating the organization to pursue its dramatically new and highly risky strategy. In his 1996 bestseller, Only the Paranoid Survive, he talks about the importance of communicating to an organization that is traversing the "valley of death" to a new order of things, what that new order is going to look like and how it will be achieved.
In sum, CFOs must take a hard look at themselves and decide whether they have not only the skills but the character to meet the heightened challenges of pace, accountability and leadership demanded by the CEO role. Remember: A CEO's key responsibilities are making critical strategic decisions and creating conditions for those to be well-executed. A mediocre strategy executed swiftly and effectively has a higher chance of success than a brilliant strategy implemented tentatively.
Great CEOs are made, not born. There is, in fact, much that CFO aspirants can do to make themselves attractive candidates.
First, they should increase contacts with the different aspects of the organization that they hope to lead some day. This includes information technology and human resources The fancy word for "people." The human resources department within an organization, years ago known as the "personnel department," manages the administrative aspects of the employees. management, investor relations Investor relations
The process by which the corporation communicates with its investors. , strategic planning and regulatory issues. For example, Merck & Co.'s CEO, Raymond V. Gilmartin, has praised his CFO, Judy Lewent Judith C. Lewent was, until July 2007, the Executive Vice President and Chief Financial Officer (CFO) of Merck, one of the largest pharmaceutical companies in the world. She received her high school diploma at Hunter College High School, her B.S. , for her ability to tackle some of the biggest challenges the drug developer faces. Lewent has been active in product development, seeking out acquisition candidates and creating product franchises and licensing agreements.
What's particularly noteworthy about Lewent's role is her involvement in the creation of joint ventures, which are central to Merck's growth strategy. Unlike other acquisition-driven drug companies, Merck has opted to team up with other drug companies in therapeutic areas in which it wants to participate. After the creation of the joint venture, Lewent joins a counterpart from the other venture partner to form a two-person "executive committee" that oversees the work of the joint venture's CEO. The result is that as CFO, Lewent plays a key role in maintaining Merck's revenue growth, which, in turn, helps "fuel our independence," says Gilmartin.
Second, CFOs should try to get as much line management experience as possible, either before or after their tenure as CFO. Leading a company successfully is a challenge too great for those without experience running a profit-and-loss business. Even the most qualified CFOs will move "horizontally" to get line experience and position themselves for the top job. Jack Greenberg Jack Greenberg may refer to:
Similarly, after serving two years as CEO at Sears, Roebuck & Co, Alan Lacy managed two major divisions at Sears between 1997 and 2000 before being promoted to CEO. (He had previously been in senior finance positions at Kraft Foods Kraft Foods Inc. (NYSE: KFT) is the largest food and beverage company headquartered in North America and the second largest in the world after Nestlé SA.
The Philip Morris Company (now known as Altria Group), a company that produces tobacco products, acquired Kraft for Inc. and Phillip Morris Inc.) His experience managing the two divisions -- Sears Credit and the company's services division, which includes service contracts and response marketing -- gave him a solid foundation to act swiftly and decisively as CEO. Within eight months of becoming CEO, Lacy was widely praised for making swift decisions on a number of key fronts, including: the closure of 83 underperforming Sears hardware stores and National Tire and Battery stores; the announcement of a hiring freeze Noun 1. hiring freeze - a freeze on hiring
freeze - fixing (of prices or wages etc) at a particular level; "a freeze on hiring" ; and elimination of some of the company's "hard" product lines, such as appliances and home improvement products.
Courting the Board
Lastly, CFOs should get experience serving on a board of directors, preferably with their own company, but also with other companies. Failing that, he or she still needs to learn to cultivate ties with board members. At Delta Airlines in the late 1980s, former CFO Thomas Roeck Jr. was considered a protege pro·té·gé
One whose welfare, training, or career is promoted by an influential person.
[French, from past participle of protéger, to protect, from Old French, from Latin of then-CEO Ronald Allen
Ronald Allen (December 16, 1934 - (some sources say 1930) in Reading, Berkshire — June 18, 1991) was an established English character actor. . Their skills complemented each other: Roeck was seen as a financial whiz, and Allen had come up through personnel and was said to excel at Verb 1. excel at - be good at; "She shines at math"
excel, surpass, stand out - distinguish oneself; "She excelled in math" the "soft" issues of running the company.
When their relationship began to sour, it was unclear who would survive, especially after Allen allegedly hired a search firm to replace Roeck. But over the years, Roeck had won the trust of the board, both because of his substantive presentations on complex financial topics and his candid approach. The result? The board voted to let CEO Allen go and keep Roeck. Although Roeck subsequently left Delta to become CEO of an Atlanta health care company, the lesson is the same: Close board relations and active board participation are key to a CFO's future.
Those that have successfully moved from CFO to CEO have demonstrated an ability to go beyond the methodical decision-making process learned in their years in finance without compromising the quality of that decision-making. They are unafraid to take risks, and have used sharp leadership and communications skills to build consensus and motivate diverse constituencies. They have also taken steps in their own professional development to put themselves in line for the top spot, including working in as many disciplines within the company as possible, seeking out line management experience and participating on boards of directors. Armed with such a background, most CFOs on their way to the top should be able to navigate to that ultimate destination.
Paul Favaro is a managing partner in the Chicago office of Marakon Associates (www. marakon.com), an international strategy consulting firm Noun 1. consulting firm - a firm of experts providing professional advice to an organization for a fee
business firm, firm, house - the members of a business organization that owns or operates one or more establishments; "he worked for a focused on managing for value. He can be reached at email@example.com.