When Peloton Interactive and Hertz appointed former CFOs to CEO positions, they were following a trend. According to the Crist|Kolder Associates Volatility 2021 Report, 7.9% of the chief executive officers appointed in 2021 came from the CFO seat – up from 5.6% in 2012.
However, unlike some financial executives who have risen to the top, both Peloton CEO Barry McCarthy and Hertz’s new CEO, Stephen Scherr, were hired from outside. That was counter to the trend. In 2021, only 22% of CEOs were hired from outside the company. According to McKinsey & Company data from 2017, 90% of CFOs who became CEOs were promoted from within. Their deep knowledge of the organization and its operation gives them an advantage that outsiders lack.
The switch from the financial function to the broader leadership team takes intentionality. If becoming a CEO is something that you have thought of, you may want to consider the following advice from recruiters and CFOs-turned-CEOs promoted internally to help make the transition from the finance world a little easier.
Broaden your experience and knowledge.
Obviously, as CFO you’re responsible for the finance function – but if you want to become a CEO, you need to be actively engaged with the other areas of the business as well, and have a complete understanding of the business as a whole. In addition to broadening your knowledge base, you’ll want to take the next step and seek out opportunities to take on responsibilities outside of finance.
“When pursuing a career in finance, you have a greater chance of becoming CEO if you a step out of finance and take an operator role,” said Jim Lawson, managing director and co-global leader of the financial officers’ practice at Russell Reynolds Associates.
David Meniane, CEO of CarParts.com, made sure he had operations experience. Before being appointed chief executive in April 2022, he took on a dual chief financial officer/chief operations officer job when he joined the omnichannel retailer in 2019. “We have a very complex business that has a lot of moving parts. I’ve been deep in operations for three years and know the business better than anyone,” Meniane said.
Meniane advised other CFOs who wanted to advance to use this method. “Look for opportunities to get exposed to different business areas by meeting people, traveling, and being involved in the day-to-day operations,” he said.
Laura Francis, CEO of medical device company SI-BONE, also added the title of chief operations officer while serving as the company’s CFO, but she also took another important step to gather more experience: she joined the board of an outside company.
“I had gotten quite a bit of operating and general management experience before stepping into the CEO role, but I wouldn’t underplay that I was sitting on a public company board for two years before being promoted to CEO. It gives you that broad, high-level view,” Francis.
Consider the context.
You may be well qualified for the position of CEO, but you must also bring the talents required for the current situation. Otherwise, warns Rob Painter, CEO of industrial technology provider Trimble and a 16-year company veteran, you won’t be the top candidate. He claims he got promoted to CEO from finance chief because he was in the right place at the right time.
“Leadership is situational, so it’s important to understand the company’s current context. Is it steady as she goes or a turnaround situation? Are there big technology shifts happening or go-to-market shifts? Does the company need a major transformation? Context is important because that’s when you map the skills and experiences you need to be CEO, being intentional about the path you want to take,” Painter said.
Long-tenured CFOs move into the CEO role more often. Specific events, such as an unexpected CEO exit or a sudden need for financial rigor to drive stability, can also benefit some.
Devise a plan.
Organizational succession planning, in conjunction with professional development for CEO candidates, assists the CFO in preparing. Lawson advises creating a development plan for internal applicants. The plan should include advice from a leadership coach, a past CEO, and a CEO who previously served as CFO.
Painter and other internal candidates at Trimble were on development paths as part of the company’s succession plan. Before being designated CFO in 2016, he worked in corporate development, general management, and as vice president of the building construction software segment. He was appointed finance chief because then-CEO Steven Berglund knew Painter needed finance experience.
“Being named CFO was a gift. We’re a public company, and I got to understand the capital markets and capital allocation, an even broader cross-section of the business, board dynamics, and governance. You get that as a CFO but not as an operator, so that was an important experience,” Painter said.
The company’s succession plan for Francis included adding chief operation officer responsibilities. She had her sights set on the CEO role. “Becoming COO was a definite sign to both public markets and employees that the next step was likely to be CEO,” she said.
It is critical to plan for the next stage in your career. However, Meniane advises CFOs to keep focused on their current tasks. “Too many executives are distracted by what’s next. I’ve always been focused on doing my best in my current role,” he said.
Become a better leader.
Russell Reynolds’ Lawson warns that a leadership style that works with a financial team might not work with other departments. “The CEO needs to develop a different leadership approach for different [kinds] of people,” he said.
Francis recognized this and accepted — and listened to — input from colleagues. “When a couple of people suggested there were ways to motivate and inspire people that would require a change in communication, I asked them to help me do that,” she said.
“If you don’t index high on leadership [skills], you need to work to improve that,” added Painter.
Focus on self-awareness.
Mindful that she doesn’t have all the answers — and shouldn’t be expected to — Francis continually creates connections so she has an internal and external network to tap. “Besides creating the mission, vision, value, and strategy for the company, one of the most important things I did during my first 12 months as CEO was build relationships,” she said.
“Ask yourself where you have gaps and how you need to grow as a leader. And if you don’t think you have gaps, you’re not the right person for the job, because you do have them” says Rob Painter, CEO of Trimble.
CFOs should assess why they want to be CEO and what they need to learn to make that a reality, according to Painter. “Ask yourself where you have gaps and how you need to grow as a leader. And if you don’t think you have gaps, you’re not the right person for the job because you do have them,” he said.
Loosen up.
CFOs are typically more cautious and conservative than their C-Suite counterparts, which can work against them when it comes to becoming CEO candidates. That is why Lawson often advises a change in mindset. He claims that candidates that are more forward-thinking, optimistic, and strategic may rise beyond the financial day-to-day and gain credibility with the board and investors.
“When being assessed and under the lens, you have to demonstrate optimism. You have to make that pivot from being a cynical gatekeeper to leaning in and getting away from being linear and risk-averse,” he said.
Show your passion, too. Both Francis and Painter used that word to describe their path to the CEO position. “I do what I do because I’m passionate about helping our patients and supporting our surgeons, employees, and investors,” said Francis.
“You have to make that pivot from being a cynical gatekeeper to leaning in and getting away from being linear and risk-averse” said Jim Lawson, managing director, Russell Reynolds.
It’s all about the company for Painter. “I’m a true believer in Trimble and what we do. It’s profoundly meaningful for me to do more with Trimble because of that,” he said.
Meniane is enthusiastic about the opportunity to make a difference in the highly competitive auto parts industry. “There’s a huge opportunity to disrupt the space, and being the guy to lead that disruption is exciting,” he said.
And what if a CFO has done all this, been appointed CEO, and things don’t go well?
“When CFOs ask me what happens if it doesn’t work out, I tell them if they have a world-class CFO reputation, there’s an opportunity to become CFO again. We always need strong CFOs,” Lawson said.
