By Robin Lynam
Top-notch analytical skills and a strong strategic mind-set are well-known characteristics of a chief financial officer, which are also important attributes for those who are looking to become chief executive officer. Robin Lynam talks to some successful CFO turned- CEOs about their career development paths to find out what more is needed to become the final decision-maker.
PAs do not become chief financial officers by accident. Clearly to rise to the top financial position in a successful company requires both ambition and application – advanced business skills and rigorous discipline. For an executive who has succeeded in climbing to that rung on the corporate ladder, what would he or she need to become the next chief executive officer?
A look at the Korn Ferry Institute analysis of sitting CEOs in the Forbes Global 2000 in 2015 shows that not many CEOs have a finance background: only 13 percent moved into that position from being the CFO of the same company, and only 18 percent had held a senior level financial officer’s position at any point in their careers before assuming their present roles. These numbers are virtually the same overall for 2013 through 2015, and improve only slightly among Forbes 500 CEOs.
So what are the secrets of those who do succeed in rising to the top after serving as CFOs? “The main difference between being CFO and going into the role of CEO is people engagement,” says Antonio Manuel G de Rosas, CEO of Pru Life U.K., a leading life insurance company in the Philippines, and a member of the Hong Kong Institute of CPAs.
“As a CFO you are the head of a large team but you are still somewhat of ‘a doer’ to perform the finance function. But when you get to become CEO, while you have to understand the business very well and have the tools to drive it, the main element is people management.”
Before joining Pru Life as CFO in 2007, de Rosas had served in the same position for 10 years with Nippon Life in the Philippines, and before that for two years with the Asia Commercial Bank [now the Public Bank] in Hong Kong. After spending 15 years as a CFO, he says he had made a few adjustments when he was appointed CEO in 2010.
“You train as an accountant and you are very analytical. When you become finance director you really have to understand every aspect of the business, but it’s very easy to be caught up in numbers and the technical aspects,” he says.
For a CEO, developing more competencies in people-oriented “right-brain” areas and not just his or her technical left-brain skills is crucial. “It’s all about your people. You have to get the best team, and as you progress in the role, you have to learn not to micromanage. That was the transition I had to make from being CFO to CEO,” de Rosas says. “If you are a CFO in line for a CEO’s position, you will have already been identified as very technically competent to run the business. My advice would be to develop people skills. It’s really about the ability to influence. That is a skill you must try to acquire.”
A new perspective
In 2014, when Institute member Tommy Kwok Yuen-keung became CEO of Casablanca Group – a leading supplier of branded bedding products to the Greater China region – he brought with him experience in a number of different business sectors.
He had served for three years as a CFO before establishing his own consultancy business, and was a consultant to the Casablanca Group on corporate restructuring, business development and financial modelling before being invited to join them as CEO.
“I had exposure from my early career to manufacturing, then infrastructure, corporate finance, IT and real estate, so the majority of industries, except for this one – a CEO role that is more to do with retail. That’s kind of challenging, but it is much smaller scale than what I have handled in the past,” he says.
Kwok believes his financial background equipped him with many of the skills a CEO requires, but says he worked hard to extend his scope.
“When I was a CFO I had to emphasize the finance perspective, but now I have to balance different perspectives, and look at things from a macro point of view down to micro. One thing that made me different from a normal CFO is that I have training in Blue Ocean Strategy [a theory of business building based on alternatives to traditional marketplace competition]. I can put myself in different positions and see things in different perspectives,” he says. “This role is more challenging, but I find it interesting.”
Institute member and CEO China for the Publicis Groupe, Eric Cheung, had been CFO China for JCDecaux for two and a half years before joining his present employer in 2009, originally as managing director.
“After three years I was promoted to CEO, so for me the route was through different companies,” he says. “What I do here is very different from what I used to do when I was a CFO. I don’t have a background in procurement, or in human resources or law, and now I have a legal director, an IT director, and an HR director reporting to me. So in order to adjust to this new role I had to learn very fast.”
Although it is generally agreed that successful organizations require close cooperation between CEO and CFO, it is often assumed that the two roles impose essentially different perspectives on the business. A CFO’s cost control priorities, for example, may conflict with a CEO’s aggressive business development plans.
Cheung, however, believes that the roles have more common ground than is sometimes supposed. “I don’t believe the ways of thinking are very different for a CFO and a CEO. The ways in which you resolve issues are quite similar. If a problem arises you have to look at different scenarios and options and do a pros and cons analysis before you come up with a solution,” he says.
He adds, however, that there is a need to develop more detailed knowledge and understanding of the key functions within the company – “sales, marketing, IT, legal and so on, because as a CEO you will be managing the senior people and you have to understand what the other functions are doing, and the key issues that they have, and how you can help resolve them.”
“Also, after being in this role for seven years [including the managing director phase] it seems to me that a difference is that when you are in the number one position in the company you need to have a more long-term view,” he says. “As a CFO the mission was to deliver that year’s profit targets, but when you take up the CEO’s position you have to consider longer-term impacts. Of course, you have to achieve the profit targets for the year, but you also need to have a vision for the next five or 10 years – and a clear plan.”
Another essential quality for a CEO, he stresses, is an ability to communicate effectively, both within the organization and with a wider public, including other stakeholders in the business. “There are many opportunities for a CEO to represent the organization, so communication skills are very important. Some CFOs may not be very gifted in communication and presentation skills, but they have to improve them,” he says.
Being the voice
George Hongchoy, Institute member, joined Link Asset Management Limited as CFO in January 2009, and made the step up to CEO in 2010. Link Asset Management manages Link Reit – a publicly listed real estate investment trust that has extensive holdings in retail and car parking space in Hong Kong and China. He says he initially found the exposure to public scrutiny his new role involved a challenge.
“One difficulty in particular was becoming a diplomat and the public face of Link overnight. The role of CEO places me as the ‘voice’ of the company, which is a skill that all new CEOs have to learn,” he says. “Being the CEO of Link, I have to lead and work with a far bigger team. Our stakeholder base is very broad, comprising investors, shoppers, tenants, and the community at large. Maintaining effective communication internally with staff and externally with our stakeholders is a priority in my role as CEO. On the positive side, my transition to CEO was easier as both offices are demanding in terms of one’s ability to prioritize, make sound decisions and to think out of the box.”
“Read different types of books,” suggests Hongchoy. “They do not necessarily have to be related to your job and career choice, but rather they can help you be more inspired in your work. Be inspiring and motivating. Don’t be afraid to make mistakes and create what is needed to advance the business mission. Learn from others. Study real-life cases of business successes and failures, not just companies in your industry, but also those unrelated to your business.”
Preparing the mindset is also important. “Successful business management takes leadership, which requires a broad inter-disciplinary perspective to set the right goals for our teams and to inspire colleagues to deliver them. A financial background readies one for the daily business challenges by covering the different aspects of business management, including business strategy, corporate finance, the legal environment, risk management and corporate governance, to name a few,” adds Hongchoy.
As de Rosas at Pru Life points out, the odds are not always against CFOs looking to make that next logical career step. “Business is all about calculated risk, and one of the advantages you have as an accountant is that you know how to measure risk. Other disciplines may not have trained you to make that calculation. It’s easier for us to make a decision on whether to pursue an opportunity or not.”
This article was originally published in the January 2016 edition of A Plus. You can also read the digital edition of this article.