When the Chief Executive Officer is looking to fill a senior operating or strategy position it is common to consider the possibility of promoting the Chief Financial Officer into that role. After all CFO’s are senior executives who typically exhibit sound judgment and are used to being charged with great levels of corporate and fiscal responsibility.
From the CFO’s side of the equation, their only potential to move up in the corporate hierarchy is to move out of finance and into operations or strategy. For those CFO’s looking to advance their career this typically means taking on the title of President, Chief Operating Officer, Chief Investment Officer or Chief Strategy Officer.
As you can see from the text above it is only natural to consider the possibility of filling vacant C-suite operating and strategy positions by advancing the CFO. The problem lies in the fact that what seems like an obvious win-win move rarely works as seamlessly as all parties would like to think.
Case in point Most of us has observed the scenario where a CFO with little or no operating or non-financial strategy experience gets promoted to President or COO and have in turn witnessed the corresponding chaos that inevitably follows. The story usually unfolds like this:
1. The CFO in their new operating role and increased position of authority decides to reduce commitments to business development. After all, what do all those people do except travel and spend money? It certainly is an easy way to cut costs
2. MarComm; it just doesn’t seem prudent to make such heavy expenditures on marketing, communications, advertising, and public relations And oh those events and trade show that are so frivolous; I’ll reduce those commitments as well.
3. Now that some surplus funds have come back into the budget, I’ll increase commitments to IT, accounting, HR and let’s not forget legal…and so the story goes.
By the way, the changes noted above usually take place with very little communication which causes a sense of uncertainty across the enterprise and a corresponding rapid downturn in morale. What the finance savvy CFO has just done in his/her first few acts as a President or COO is disrupt the entire culture, increase cost centers and decrease profit centers, but boy is this operation lean and mean.
The reality is that the near term funnel will not likely be impacted, but when revenue starts to evaporate in forthcoming quarters because customers are not being serviced and new deals are not being added to the pipeline due to salespeople leaving the company and the corporate brand losing visibility things start to get a little tense. You see there is no substitute for operating experience. The most brilliant CFO if void of operating experience will make similar mistakes to those mentioned above when taking over the executive level operating or strategic positions.
At this point in time, you may be saying to yourself the author really doesn’t like CFO’s. Quite to the contrary, at one point in my career, I served as a CFO and I understand better than most that CFO’s play a critical role in the success of any business. In fact one of my first recommendations to any client is to hire the best CFO they can afford. One of my next recommendations is to start mentoring the CFO in the non-financial aspects of a business. After all, if the Chairman or CEO appoints the CFO to an operating or strategy role without the experience necessary to pull it off, the resulting chaos isn’t really the fault of the CFO, but rather it belongs to the Chairman/CEO that set him or her up for failure.
Accountants rarely have training or experience in sales, marketing, advertising, public relations, non-financial strategy, and tactics, and usually have little experience in terms of market knowledge from a competitive, production or operating perspective. Accountants are trained in debits and credits, assets and liabilities, and other matters pertaining to the balance sheet and profit and loss statements. They are masters of retroactive analysis as their job is to document and report on historical events.
Let it be noted that I am a strong advocate of sound financial governance and best practices in cost containment. However not when applied in a vacuum irrespective of the ripple effect across the enterprise. An enterprise can have all the cost containment in the world, but without revenue what does it matter? At the President or COO level, the executive has a broader sphere of influence and will have many more points of critical contact both internally and externally than will the typical CFO. Therefore having experience across a broad range of skill sets and competencies is mission-critical for a company’s executive operating and strategy talent.
The moral of this story is simply to hire/promote the most experienced and discerning people possible into executive operating positions. This can and often does include a former CFO that has been properly trained and mentored.
