As the pace of technological change and consumer behaviours continue to evolve, the role of the CFO has expanded to include a wider sphere of responsibilities such as strategy planning, environmental, social and governance (ESG) and digital transformation. 

This broadening remit of the modern CFO may well be better equipping finance chiefs to become CEOs. Increasingly, CEOs want their CFO to demonstrate these strengths and abilities, making the transition to CEO less of a leap than in previous decades.

Trends suggest CEOs are increasingly looking for CFOs with greater leadership and communication skills, capable of assisting them on an expanding range of responsibilities, according to research by Russell Reynolds Associates.

Reassuringly for CFOs looking to step up to the CEO role, executive search firm Heidrick & Struggles says that 40% of all global CEOs stepped into the role directly from being either a CFO, COO or head of division. Its Route to the Top data also shows that the proportion of CFOs becoming CEOs in the UK has increased to 30% in 2023 from 21% in 2019. And roughly 15% of current FTSE 100 CEOs stepped up to the top job directly from a CFO position, against a global average of 8%.

Through the ranks

Moreover, there is a growing trend for new CEO appointments to be internal candidates, with 25% coming from a CFO background, according to research from Deloitte. On average, FTSE 350 CFOs have two board roles which provides valuable experience for the transition to CEO. 

In the UK, a substantial 69% of CEOs are internal appointments, says Russell Reynolds Associates. Recent examples are the appointments of Marc Ronchetti, who moved from CFO to CEO at Halma, a group of life-saving technology companies, and Chris O’Shea, who joined Centrica in 2018 as group CFO and was appointed CEO in 2020. And apart from its current CFO, British Land’s chair, CEO and head of the audit committee are all former CFOs.

“In today’s world, the role of the CEO demands the most extraordinary range of abilities and knowledge. And this is where people can fail in leadership because they forget leadership is a team sport,” says Philip Beddows, executive business coach and mentor and founding partner of The Silk Road Partnership.

“For a CFO moving into the CEO role, keeping this in mind is absolutely critical. The relationship between the chair and the CEO, and actually the whole team relationship is vital.”

All-rounders

Traditionally, CFOs were viewed as more technical and introverted, while CEOs were seen as extroverts. However, over the past decade the role of CFO has changed so much that many are now just as comfortable presenting to key stakeholders around the world as dealing with M&A detail. Many will have already overseen major transformation projects, so are ready to make the shift from finance to focusing on people and wider innovation.

Beddows, who has more than 30 years’ experience mentoring executives, says trust and the ability to delegate are critical to an effective transition. “Having been CFO and then becoming CEO, you’ve got to be able to hand over that role to your successor and not meddle. You’ve got to trust and believe in the capabilities of your team. 

“The critical thing is that you won’t have any strategic headspace unless you trust others and are able to delegate to them.” 

Ride to the top: two practical steps for CFOs

Take board positions

External exposure to other industry sectors through positions as non-executive directors (NEDs) is crucial. According to leadership advisory firm Egon Zehnder, CFOs who also serve as NEDs on boards (80%) were more likely to believe they were ready to be CEO now, compared to 67% of non-NEDs, and multi-time CFOs (77%) were more likely to say they are ready now than first-time CFOs (67%). 

Develop people skills 

Sarah Walker-Smith, ACA and CEO of leading UK law firm Shakespeare Martineau, says: “There’s no surprise that many CFOs become CEOs, especially if they’ve got that people bit right. That’s probably the thing I’d be saying to a CFO: if your aspiration is to move into general management, understand the importance of the people and how that leads to the numbers. Not the other way around.”