Do you think the finance department of a company is the best place to train a future Chief Executive Officer?

There are a lot of advantages and disadvantages in a company moving the Chief Financial Officer into the Chief Executive Officer’s position. I would like to take a look at each job, what the responsibilities of that job are, and what skills a person in that job needs to be successful.

The responsibilities of the Chief Finance Officer of a company are extremely important and encompass all aspects of a company’s financial standing. The CFO has to ensure compliance with all GAAP (generally accepted accounting principles) and SEC (securities and exchange commissions) regulations. They put together the company’s capital structure and are responsible for communicating all plans to the investment community and the board of directors. The person who holds such a high position has to be very conscientious and accurate with all numbers. The CFO has to have developed his or her communication skills in order to help investors and the board of directors understands his financial plans. They have to have a strong accounting background and know how to use their knowledge of the company’s numbers to backup their financial ideas. The CFO must be able to manage all other financial managers in the company and their perspective duties. The CFO manages the comptrollers, cash managers, insurance managers, credit managers and many other tasks under there direct supervision.

The responsibilities of the Chief Executive Officer are they should be able to communicate well, be able to manager personnel, have strong leadership skills, intimately know and understand the company’s products, be versed in the company operations, provide guidance, set goals and inspire the company to meet those goals. The CEO must understand how to get an idea off the drawing board and onto the production line with support from his employees and if applicable the board. The CEO has most likely learned these skills from previous CEOs and has worked his way up through the company. The CEO must have the ability to envision the direction he wants the company to go, assess the risk he is putting on the company, and make the decisions that are tough. Along with these tasks the CEO must keep his fingers on the pulse of the company and always be informed of what is going on.

There are several pros for promoting a CFO to CEO. According to Ian Butcher “Part of the reason for the trend towards recruiting the CFO who can behave as strategic partners is that the investor community looks much more critically at the business performance and management strengths and weaknesses of corporate.” and “The two most visible people in the company to the investor community are the chief executive and the finance director.” The pros of promoting the CFO to CEO will definitely be his financial background. The CFO has intimate details of how current projects are financed and an accurate picture of the money required to run the company operations on a daily basis. The CFO would already know financially which departments needed to be revamped and which ones where performing satisfactory. The CFO also has the advantage that they have already dealt with the board’s members and the investors.

There are several cons to promoting the CFO as well though. The CFO traditionally has no production experience and has only served in the financial department knowing only other departments by what their numbers look like. While the CFO is a company leader in the financial realm he may lack the communications skills to speak marketing to the marketing department, production talk to the production people, when they all speak in a language their own. The CFO is a manager and while his skills are important to the company, he has not really had a chance to demonstrate leadership skills that are required as the CEO. “A competent chief executive must have an understanding of numbers, that doesn’t mean that an understanding of the numbers is all it takes to make a good CEO. If finance is the only skill a person brings to the executive suite, in fact, the result can be disappointing.” according to Ida Parker.

In conclusion, do you think finance departments are the best place to train future CEO’s, I don’t believe we have clear answer. Even industry leaders have a hard time deciding if the finance department is where the next leader should come from. My personal belief is that it come downs to one thing, who is the person in question for the job. I believe that some people are born leaders who adapt well and would accept the position with ease while others may flounder until the board relieved them.