In the early 2000s, the COO role was the most common steppingstone to becoming a CEO. Today, with rising interest rates, inflation, and tight margins at the forefront for most organizations, CFOs have embraced more strategic responsibilities and are well positioned for the corner office. In fact, eight percent of 681 CFOs at Fortune 500 and S&P 500 companies surveyed in the first half of 2022 were promoted to the role of CEO. That’s a modest increase from roughly 5 percent a decade ago, but the numbers have steadily increased, and the trend is clear.
When CFOs become CEOs, it’s usually an internal promotion. Board and peer relationships are paramount to secure the role, and often the most influential voice is the very person you are hoping to replace.
To become a top finance partner to the CEO and demonstrate that you are a worthy successor, here are five best practices and skills to develop.
Strengthen your business acumen
A successful business leader is someone who can provide strategic insights to guide decision making, increase productivity, and bolster the bottom line. This requires both financial savviness and business acumen.
To prove your leadership abilities, look beyond the numbers. As a CFO, it’s important to collaborate with cross-functional teams and build strategy into your financial responsibilities including budgeting and forecasting.
CFOs that can demonstrate they have a holistic view of the business including a deep knowledge of the business’ customers, competitors, and market will not only make better decisions, but will earn the respect of their leaders and peers. “Demonstrate” is the key word is here as CFOs seeking to become a CEO need to develop their storytelling skills. CFOs are guiding the ship that is the future of the business and being able to effectively communicate major decisions regarding investments or cutbacks in a succinct, compelling way will go a long way in showcasing they are ready for the top job.
Knowing your numbers is important. Understanding your business landscape that influences the numbers and being able to tell the story of how that impacts the financial strategy you are charting is critical.
Expand your sphere of influence
A CEO has the responsibility to oversee a range of functional departments including sales, marketing, operations, human resources, and legal. To prepare for this role, it’s important to have increased visibility and influence in every area of the business.
CFOs are expected to analyze data and clearly explain complex concepts to employees, internal stakeholders, and investors. However, recent research shows non-finance executives rate CFOs’ communication skills about 20 percent lower than their own. To improve communication and collaboration, use your ability to analyze numbers and distill the facts of new initiatives and business challenges. By offering objective truths, you can then listen to stakeholders, ask questions, and help build consensus on a course of action that makes sense for the business’ long-term goals.
Effective communication abilities are also important for fostering strong relationships, especially with internal leadership and board members that are influential in promotion decisions. As a CFO, it’s your responsibility to be a trusted advisor who provides impartial advice and helps “tell the hard truths.”
Sharpen your tech-savviness
As organizations invest in new technology to increase productivity and efficiency, it’s important that CFOs work closely with CIOs to ensure investments make sense. CFOs don’t need to become technologists, but they are expected to offer discernment and avoid overspending on isolated point solutions.
An enterprise resource planning (ERP) system can provide a solid technology foundation by centralizing data across departments and automating manual processes. An ERP can also benefit CFOs by providing a single source of truth with real-time insights across business operations. This allows CFOs to gain control of the business, understand its performance to clearly communicate to stakeholders and board members, and ultimately make better decisions.
In addition, staying up to date on the advancements in technology such as AI, data privacy, and security and understanding how these technologies can be best leveraged for the success of the business will go a long way in demonstrating you’re ready for the corner office.
With a greater understanding of technology possibilities and trends, CFOs can help ensure technology investments are bolstering the business’ bottom line and enabling a culture of innovation.
Strengthen your ability to be proactive and flexible
A forward-thinking mindset is key for a successful CFO and future business leader. While growth is important, it’s also critical to have the foresight to anticipate and prepare for possible financial setbacks. Recent economic and industry challenges including inflation, rising interest rates, and supply chain disruptions have proven the need for flexibility to adapt to rapid changes.
For a CFO, regular cash flow analysis helps understand the amount of working capital available to manage business operations. When challenges arise, an understanding of cash flow can help quickly identify ways to reduce expenses and improve margins. Cash flow visibility can also help improve real-time financial forecasting and inform scenario planning.
As CFOs prepare to advance in their careers, it’s important to help ensure the business is strongly positioned for the future with proper plans in place to safeguard continued operations and ensure long-term viability.
Understand calculated risks to drive growth
As stewards of an organization’s financial health, CFOs are often very cautious. As a CEO, you will be expected to drive growth, which will often require taking moderate risks. To develop a CEO growth mindset, try being more solutions oriented.
Risk assessment will require internal visibility, deep knowledge of your customers and their pain points, and a mastery of your business’ competitive advantage and place in the market. This will help you understand potential challenges and develop plans to mitigate risks and capitalize on new opportunities.
For CFO’s that have successfully transitioned into CEO roles, they have proven that they can drive success across the entire organization by demonstrating initiative beyond their formal title. During challenging economic times, financial management is increasingly important and offers opportunities for CFOs to expand their influence among the c-suite to position themselves to be next in line.
Ranga Bodla is Vice President of field engagement and marketing at Oracle NetSuite