In recent years, the trend to find new CEOs from the financial background is growing to be stronger. In fact, nowadays the share of the former CFOs among the present CEOs is increasing, and in the future, the perspectives of CFOs becoming CEOs is getting to be more probably than ever before. Apparently, it is necessary to find a logical explanation for such a trend and adequately evaluate the effect such a direction can produce on companies and management.
First of all, this trend has started to prevail in recent years, notably in last decade. The reason for such a shift in the employment of CEO with financial background may be found in the growing complexity of the modern economy at large and business of a company particular.
Nowadays CEOs should possess a wide range of knowledge, skills, and abilities to manage the company efficiently. Apparently, it is quite problematic for a CEO with a non-financial background to immediately get used to an extremely complicated work of a CEO who has to be a real professional in management as well as finance. The increasing role of the financial background at the present days may be easily explained by the fact that corporate takeovers, mergers, acquisitions, leveraged buyouts, etc. have become a norm of the modern business and many companies have to evolve and adapt to new conditions of work regularly. It is why purely managerial skills and abilities are not sufficient, but it is also necessary to possess a profound financial knowledge, skills, and skills, to be able to forecast the perspectives of complicated operations such as a merger, or takeover in economic terms. It is evident that CEO with a technical background, for instance, cannot correctly analyze the financial outcomes of such operations, while ex-CFOs can take into consideration both financial and non-financial benefits and potential threats the company may face in the result of such activities.
Furthermore, traditionally, CFOs are well informed about the financial position of the company and can find the most efficient ways to improve the economic situation of the company. It is, undoubtedly, imperative in the modern world, especially when the functioning of organizations is getting to be more virtualized and shifted to the financial domain.
Nonetheless, it does not necessarily mean that CEOs with the financial background are always the best choice the administration of a company can make while looking for a new CEO candidates. Apparently, business skills and knowledge are critical nowadays but, in actuality, they cannot fully predetermine the satisfactory results of the work of a CEO with the financial background. In other words, ex-CFO is not necessarily a good and successful CEO. There are several reasons which prevent CFOs from being ideal candidates to CEOs’ position.
First of all, often CEOs need to have a profound knowledge concerning the operation and production processes as well as technological aspects of the functioning of a company.
Obviously, CFOs lack all of them. Consequently, in a highly technical business where the most sophisticated equipment is used, and highly technological products are produced CFOs will not always succeed. In fact, they can hardly correctly manage the company which is technologically advanced and is focused on the production process. In such a situation, CFOs knowledge, skills and abilities will be useful but not sufficient that implies that such CEOs will need a substantial support from the part of other CEOs with a different background.
Finally, employing ex-CFOs as CEOs, a company risks to gradually transform in organizations where financial results are more important than productive ones. CEOs with an economic background can focus on fiscal stabilization of a group, for instance, paying little attention to the production process, ignoring the implementation of innovations, which may be financially costly, and minimizing expenditures reducing personnel, for example, that exposes the company to the risk of losing highly professional staff.
Thus, taking into account all above mentioned, it is possible to conclude that the current trend to employ former CFOs as CEOs is growing stronger. To a significant extent, this pattern is justified by the current needs of the modern economy but, on the other hand, it also exposes companies to a risk that ex-CFOs will be unable to deal with non-financial problems that are particularly important for highly technological enterprises. It is why the employment of CFOs as CEOs should be carefully planned and its consequences for the company should be taken into consideration.
- This article is willingly provided by Anna Curtis, an academic expert and blogger. Currently she is employed by Write My Paper Hub research writing company. Anna is fond of writing research reports, article reviews and essays for students.