In Part I and Part II of this series, I shared some surprising benefits of a finance degree. In Part III, I want to challenge a long-held belief that the Chief Financial Officer (CFO) is the pinnacle of a corporate finance career. As recent as a few decades ago, moving beyond CFO to Chief Operating Office (COO) or Chief Executive Officer (CEO) was unheard of. The prevailing mindset was the financial folks didn’t have the right skillset to be effective CEOs, that numbers crunchers lacked the leadership and charisma necessary to be effective in the lead role.
One commentary from Insight, an e-magazine by the Chartered Institute of Management Accountants, suggested, “The CEO has to be an extrovert and put a bright perspective on things. The CFO by contrast, has to be more balanced and reflective.” This sort of thinking impacts financial careers in many ways. In fact, there are several studies outlining the significant pay gap between CFO and CEO, with CFOs making half of their CEO counterparts.
However, that old mindset is shifting. The first important trend is the elimination of the COO role in many companies. Typically the COO runs the operation while the CEO is the front man. Twitter, Tiffany & Co., Ford Motor Company, PetSmart and GrubHub all chose not to fill their COO positions in 2014. In these cases, most of the COO responsibilities shifted to the CFO. This is an important step in CFO career development and opportunity. Imagine the opportunity to go beyond financial analysis and decisions to the development and implementation of corporate strategy. That looks great on a résumé.
"Imagine the opportunity to go beyond financial analysis and decisions to the development and implementation of corporate strategy."
Oh, and the tangible results of this trend? Of those five companies I listed, at two of them the CFO was the highest compensated employee in 2014. Think about that for a second ... CFOs earning more than the extroverted CEOs. Now, to be fair, these are exceptions. But they are exceptions that did not exist 20 years ago.
The other important trend is the increasing promotion of CFOs to CEOs. Historically, the track record of CFOs jumping into the CEO role has mixed results. There are some success stories but also some noted failures. The trend toward promoting CFOs into the lead role is connected to the first trend I noted above. That CFOs are given the opportunity to broaden their skillset beyond numbers is an important aspect of their access to the CEO role.
The two skills cited as necessary for effective CEOs and not often learned by CFOs are:
- Pace: Studies conclude CEOs spend an average of nine minutes on an issue. CEOs work in a fast-paced environment and are pressed to make quick, good decisions. CFOs tend to work in a more orderly fashion.
- Analysis: In those nine minutes, CEOs will not have the data or time to make a complete analysis of the outcomes. They must rely on their experience and intuition to make decision. CFOs typically rely on a thorough analysis before making decisions.
So, what does this all mean? Well, corporate financial careers offer more opportunity today than ever. The opportunity to learn a broader skillset, which may lead to greater career opportunities.
It’s been said that CEOs are dreamers and thinkers, and CFOs are the watchers of the purse strings. So, if you are a dreamer, perhaps the best way to make those dreams a reality is to watch the purse strings for a while.