From CFO to CEO: The benefits of having someone in finance at the top

In the current unpredictable business landscape, taking risks and experimenting with traditional processes can create advantages for organisations. One such unusual move is appointing the chief financial officer (CFO) to the chief executive officer (CEO) position.

There have been reports in recent years of a lack of skilled CEOs. By branching out and considering leaders from different backgrounds, you’re diversifying and amplifying leadership potential.

According to Karen Frenkiel, senior manager at Pitcher Partners Melbourne, the benefits of appointing a CFO to the top position are:

• Financial acumen – having a finance professional leading the charge can support a business both financially and strategically through turbulent economic times.
• Business knowledge meets technical expertise – business knowledge is retained while applying a fresh, financially capable lens to strategic planning, offering a fresh perspective and diversity of thought.
• Progression supports the bottom line – it helps to create a career pathway, demonstrating a smart retention strategy, and saves time and money compared to hiring externally.
• Retaining business knowledge – a lateral hire secures historical business knowledge, context and way of working as well as intellectual property.

Nick Warren is one CFO who made the transition to the chief executive role. Mr Warren is the current CFO of Scanlon Capital Group, but earlier in his career, he made the move from CFO to CEO at Latitude 37.

Mr Warren provided five key takeaways from his experience:

1. Partnership with the CEO

Building trust between the CEO and CFO is necessary in the transition. The foundations must be set to allow for a proper knowledge transfer. Otherwise, you run the risk of it all falling short.

“Moving into the CEO role from CFO, building trust and understanding with the founder, who was also the former CEO, was critical – they’re obviously so invested in the outcomes of their business. But the reality is that almost all key business elements connect to finance,” said Mr Warren.

“Coming from a CFO background, you have a good foundation to be a CEO from a business understanding perspective and can balance decisions that are operationally focused, with financial considerations.”

2. Trusting your team

Teams are crucial in ensuring processes continue to run smoothly. People shouldn’t be wary of leaning on the expertise of others. In fact, it should be encouraged.

Mr Warren continued: “I was not naïve in what I didn’t know, and I learned a lot from the experts around me. Surround yourself with people [who] are experts in their patch and lean on them to inform your decision. Ultimately, you’ll be accountable, but their capability can support the business in achieving strategic goals.”

3. Ability to influence

Relationship building is key in leadership. The CFO and CEO are not exempt from this: “Someone brand new to the business doesn’t often work as well. If promoting from within, you’re a known quantity to the team, the board and other stakeholders. While the way you engage might change to a degree, you’ll already have relationships which will give you a head start,” said Mr Warren.

4. Diversity of experience

Understanding how a business operates is paramount before stepping into a CEO role.

“In an SME business, there’s the office function, legal, HR, and a breadth of other things you’ve got to pick up, as well as finance. It was a gradual transition for me, and my responsibilities slowly grew to encompass more parts of the business,” Mr Warren commented.

“Experiencing what’s involved in those business functions firsthand offers foundational knowledge to help you as CEO, and that holistic understanding helps to make strategically balanced decisions.”

5. Ability to make the final call

CEOs have a huge responsibility placed upon them, and the people in these positions must be equipped to make tough decisions.

“I’m proud of all the roles I’ve had; each experience gave me something beneficial for my next role. I eventually left my CEO role with Latitude, but the CEO of my next organisation hired me in part because he knew I could step into the CFO or CEO role of future businesses. My previous experience shows that I can step into a breadth of roles and make decisions appropriately, taking a strategic, holistic view beyond my finance background,” Mr Warren concluded.