Director: Corporate-911
I think we have all encountered a situation as turnaround professionals where the board of a company that is facing financial distressed needs to be replaced. The questions that then need to be focused on are whether there needs to be a total clean out or can the company be saved by replacing one or two executives?
More often than not, distressed companies need new leadership in the form of a new CEO. A fresh eye on an existing problem can bring about the innovation that is needed to save a company. When replacing a CEO, I often look at the company’s CFO. Not only do they have intimate financial knowledge of the company, and a detailed account of the financial distress that the company faces, they have their own ideas about how to address the challenges that the company faces.
However, we cannot make the mistake that a CFO can seamlessly take over from a CEO. As a recent Forbes article points out, certain boxes need to be ticked.
Deepen your understanding of the CEO’s role — and how the CEO collaborates with the board
The Forbes article points out that you may have a solid working relationship with your CEO, but do you truly understand what the CEO’s job entails, what expectations they need to meet and pressures they face, and how they make decisions? Good leaders learn from the successes and missteps of other leaders and develop their own leadership style based on those observations.
So, think of yourself as an understudy for the CEO role, and take notice of how your company’s chief executive approaches their position and responsibilities. Also, compare and contrast your CEO’s methods with how other CEOs in your industry and at top-performing companies operate in their roles.
The Forbes article points out that CFOs should pay special attention to how the CEO manages the board. You’re already in the boardroom, but as a financial expert who is there to share and answer questions about “the numbers.” You may even help the CEO set the agenda for board meetings. If you become CEO, your role on the board is one of authority, and your relationship with the board will take on new meaning because you will report to the board. You need to be prepared to make that shift seamlessly when the time comes.
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Learn to become a communications expert
The article points out that strong communication skills are a must for CEOs who are responsible for outlining the company’s vision and goals and building support for both. Communication versatility is particularly critical for chief executives, who often need to adapt their leadership style to “suit the room.” They apply various communication techniques to motivate and inspire different audiences, from the sales department to the boardroom to the investor community.
A recent Oracle NetSuite survey of executives and managers found that more than half of finance leaders (57%) are spending significant time meeting with other executives outside of the finance department as their influence and visibility grows. However, in that same survey, 40% of non-finance executives and managers said they don’t believe their company’s CFO is an expert communicator.
A starting point for improvement? The article adds that active listening, which includes asking questions of audiences (including the CEO) to surface concerns and identify pain points. As Justin Cowan, group vice president of strategy at Oracle NetSuite, underscored in an article for Financial Executives International (FEI) about the aforementioned survey: “Through active listening, CFOs are more equipped to offer practical solutions, options, and actions. While strong communication skills don’t happen overnight, with practice and an open mind, more CFOs can become expert communicators.”
Broaden your business acumen through internal and external activities
The article points out that preparing for the CEO role requires CFOs to proactively grow their knowledge of how the business operates and innovates, and there’s no better way to do that than by gaining firsthand experience.
Look for opportunities to engage directly in digital transformation initiatives and other major change initiatives for the business, like transitioning to a hybrid work model, if you aren’t engaged in them already. (Many CFOs are on the front lines of these efforts as they seek to evolve into chief future officers and help their company become more agile and future ready.)
Also, consider whether you could become more of an operational CFO for your organization. That would allow you to explore different functional areas of the business like IT, procurement or even the factory floor, so you can learn how their processes and systems impact the company’s bottom line.
The article adds that you can also broaden your business acumen, gain valuable experience and raise your profile as a financial executive through board service at organizations within or outside of your industry, including in the nonprofit sector. Financial expertise is essential for any board’s audit committee.
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Develop your human capital management expertise
The article points out that many CFOs today are tasked with overseeing various human resources (HR) functions and helping to guide their company’s investments in human capital. Not all finance leaders have welcomed this responsibility warmly, though, seeing it as one more thing to manage on an already-overflowing plate. CFOs with this mindset also have a lot of work to do to improve their level of cooperation and collaboration with the company’s chief human resources officer (CHRO).
The article adds that investors and other stakeholders are paying more attention to how organizations manage their human capital. Also, human capital is critical to an organization’s environmental, social and governance success. And in many organizations, the CEO is taking the lead on human capital strategy. Thus, CFOs who want to become CEOs need to fully embrace their human capital management responsibilities — and not just because of any regulatory pressure related to human capital reporting.
As for the importance of improving the CFO-CHRO relationship, consider this: More companies are promoting HR executives to the CEO role. As explained in a recent article about this trend, “the growing CHRO-to-CEO pipeline signals that human capital has become one of the most important investments, and boards believe future success rests on talent and a winning culture.”
So, as you work to become a more well-rounded leader, prioritize developing your expertise in human capital management — even if it’s not among your core responsibilities today. You’ll need this knowledge if you become a CEO. And more than likely, you’ll need it sooner than later as a CFO, too.
Robin Nicholson is the Director of Corporate-911 and is a Senior Business Rescue Practitioner
