Story by Cameron Cooper

Photography by Jenny Evans/Stringer

 

The role of chief financial officer is transforming at warp speed, as organisations respond to disruptive change on many fronts and the need to innovate quickly.

In turn, the evolving skill set of CFOs means they can be well placed to assume CEO roles, according to Jean Chiswick, who leads the financial officer practice across Asia-Pacific for global executive search firm Spencer Stuart.

She says stereotypes portraying CFOs as being overly “risk-averse” or merely a “safe pair of hands” because of their financial focus are obsolete (or should be).

“That’s really outdated,” Chiswick says. “The CFO-to-CEO transition is becoming more prevalent in some markets, especially Australia. That fact talks to not just organisations really valuing the breadth and the contribution of the CFO role, but also the CFO role becoming far more strategic and the remit being a lot broader.”

Far from being the stewards of financial information, and little else, Chiswick says it is increasingly common for CFOs to “shape and impact the course of an organisation” through tasks related to transformation, technology, procurement and corporate governance.

Spencer Stuart research in Australia supports the view that the position of CFO creates a solid succession platform into a CEO role, with 30% of ASX100 CEOs having held a “meaningful finance role” during their careers. The firm’s latest data also shows that 19 ASX100 CEOs have come directly from a CFO role, up from 14 in 2022.

Rising through the ranks

The ascension of CFOs to the top job has ramped up in the past two decades, with celebrated cases including the esteemed Indra Nooyi taking the reins at PepsiCo in 2006 and changing the face of the food and beverages giant.

Last year, one of the most notable CFO transitions involved Alphabet and Google CFO Ruth Porat taking on a newly created role as president and chief investment officer of the business.

Analysis of leading US companies in CristKolder Associates’ Volatility Report 2023 underlines the trend. Among the 674 companies comprising the Fortune 500 and S&P 500 entities, 8.4% of vacant CEO positions have been filled by CFOs, up from 5.8% in 2013 (the first year of available data for the annual report).

Australasian companies are following suit, as more CFOs graduate to CEO positions. In Australia, the list includes Vanessa Hudson at Qantas, Vicki Brady CA at Telstra and Leah Weckert at Coles, while in New Zealand, David Walsh CA at NZ Post, Jolie Hodson CA at Spark, and Neal Barclay CA at Meridian Energy have also risen from CFO to CEO.

Megan Alexander CA, managing director at recruitment agency Robert Half New Zealand, says there are certain skills and experiences that are fundamental to success as a CEO.

“Obviously, business acumen is incredibly important, and I think a lot of CFOs – but not all – naturally have that attribute,” says Alexander, who adds that strategic thinking and great interpersonal skills are other must-have qualities.

She says the specific industry or market cycle can determine the desired executive skill sets for a hire. For example, finance-focused CFOs without a sales background may not be the best choice to lead a retail operation. By contrast, a CEO with strong financial acumen may be the right choice during an economic downturn, or if the business is in capital-raising mode.

“So, the economic cycle can change the skill set required for an organisation,” Alexander says.

Winning over shareholders

With many CFOs standing side by side with their CEOs at investor roadshows these days, their communication, forecasting and scenario-building skills have come to the fore. That is a far cry from days past when their focus was often only on capturing, recording and reporting financial data.

Rachel Waterhouse, CEO of the Australian Shareholders’ Association, says investors welcome executive leaders who can execute strategy effectively, manage cyber and data risks, and foster a positive and resilient culture.

“They really want someone they can trust as an authentic leader and who can implement the strategy and produce good returns to investors,” she says.

Increasingly, culture is linked to financial performance, according to Waterhouse. In this regard, she says CFOs are typically “very well placed” to deliver as leaders on the back of their finance, risk-mitigation and ethical training.

“They’re often the logical successor to a CEO, or someone who jumps in when a crisis happens, or a CEO leaves. So, they’re often seen as the right choice to step up to the CEO position.”

The CristKorder research indicates that internal hires are the main pathway to CEO roles in the US, with chief operating officers, presidents and CFOs leading the charge.

Chiswick notes that today’s CFOs often have a similar stakeholder cohort to the CEO. “That gives the CFO the chance to not just get to know the stakeholder base, but also to showcase themselves as a leader in a much more strategic fashion than what you might have seen historically.”

Waterhouse agrees that CFOs’ frequent interaction with the board of directors and markets engenders confidence in their ability to assume higher roles.

“The board has seen how they perform.”

A compelling case

In a world of geopolitical tensions and budget pressures, it would seem safe to assume that CFOs are very likely to be in increasing demand for CEO positions in coming years.

Alexander has no doubt that “well-rounded CFOs” make excellent corporate leaders because of their wide remit, on top of their governance and compliance skills. “This makes for a very compelling story and gives people confidence at the board table.”

She adds that a chartered accountant designation is a great platform for people with future leadership aspirations.

“A CA qualification isn’t just about being an accountant, it’s about being in business. And you can take your [career] wherever you want to because you’ve laid great foundations.”

Chiswick urges finance executives to be cognisant of the fact that boards and investors want CEOs who can demonstrate strong executive intelligence in three areas: critical and conceptual thinking (breaking down and solving problems, while also thinking strategically); social and interpersonal awareness (including managing stakeholders); and self-awareness and adjustment (enabling them to make well-informed decisions).

“This talks to an executive’s ability to learn and not just take the information in, but to do something with it.”

Chiswick believes combining analytical thinking with strategic problem solving, there has never been a more exciting time to be in a finance career, especially a CFO.

“The CFO role is now a highly coveted role, not just because you’re leading finance, but because you’re an enterprise leader and playing a really strategic role for an organisation,” Chiswick says. “Long may it continue because we are seeing some extraordinary CEOs come from a CFO background.”

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Keep calm and carry on in a crisis

The appointment late last year of Qantas CFO Vanessa Hudson to lead the under-fire airline has reignited the notion that women leaders are often brought in to solve a crisis – only to be replaced when the business rebounds.

Rachel Waterhouse, CEO of the Australian Shareholders’ Association, says there does sometimes seem to be “a correlation between companies being in crisis and a female stepping up” to fix problems. Gender conspiracy theories aside, she believes the key for any leader – male or female – is to acquire a diverse range of skills and experiences that can be drawn on to lead people, drive the business and maximise profitability.

At the same time, Waterhouse is adamant that more female CEOs are needed in Australia, citing the Chief Executive Women Senior Executive Census, which shows only 9% of ASX300 companies have female CEOs. “There’s still just not enough women in senior roles.”

Spencer Stuart’s Jean Chiswick is reluctant to suggest that women are parachuted in as corporate saviours, stating that all CEOs – regardless of gender – must be problem-solvers.

“We have some extraordinary women CEOs and CFOs leading some of our largest organisations,” she says. “All CEOs are brought on to solve some form of a crisis, or to maximise an opportunity. So, I don’t think it’s as simplistic as to say that putting in a wonderful woman will solve a crisis.”