This is the first in a two part series on how to set your sights on the top job in your company – taken from research with many top CEOs around the world. By Andrew Cave, co-author of ‘The new secrets of CEOs’.
The road to becoming a chief executive used to start with an economics degree and an accountancy qualification. Then it meandered across country lanes, picking up speed in treasury and finance departments.
Sometimes there were diversions such as divisional or geographical directorships. But, generally, performing well in the co-driver’s seat as finance director was what propelled corporate travellers into chief executive positions, particularly when previous incumbents were unseated by potholes.
Now, this route is in question. For example, only 57 of the chief executives of UK FTSE250 companies hold accountancy qualifications. That’s less than 23% and very few have actually served as finance directors, with many just picking up the qualification.
Professional managers
So do finance directors still make good chief executives, particularly during tough economic times? The answer depends on what type of chief executives finance directors want to be. For our book ‘The new secrets of CEOs’, Steve Tappin and I interviewed more than 200 chief executives in the UK, US, Europe, China and India.
We found that about 60% of CEOs could be most accurately described as professional managers, rather than driving personal leaders. Of the remainder, five main types stood out:
- commercial executors, like Sir Terry Leahy at Tesco and Andrea Jung at Avon Products, with a driving focus on achieving the best industry results and a relentless eye for detail
- financial value drivers, like Kraft Foods’ Irene Rosenfeld and Mick Davis of mining group Xstrata, who aggressively pursue shareholder value through value-enhancing corporate transactions
- corporate entrepreneurs, like Sir Martin Sorrell of WPP, and Michael Spencer, CEO of money broker Icap, who disrupt industries because they believe in a better way of doing things
- corporate ambassadors like former BP CEO, Lord Browne, and Anglo American and National Grid chairman, Sir John Parker, who have a worldwide vision with a broad societal impact
- global missionaries like Cisco Systems’ CEO, John Chambers, and Zhang Ruimin, chief executive of Chinese conglomerate Haier, who have engaged on missions to make a significant difference.
Generally, we found that CEOs who were formerly finance directors are more likely to be in the top two categories, where their technical and analytical skills are invaluable. Davis - the former BHP Billiton CFO who transformed Xstrata from a start up into one of the world’s leading minerals groups through mergers and acquisitions - is an obvious example.
But this doesn’t mean that former finance directors don’t have the strategic vision and leadership skills needed to grow companies: Sorrell, formerly finance director at advertising group Saatchi & Saatchi, is proof of that.
However, such CEOs are comparatively rare and finance executives who set that goal would do well to recognise their ambition early and start developing these skills.
Changing role of the CEO
That task is compounded by the changing nature of the CEO role itself. Five challenges are: winning in the reset business world after the financial crisis; dealing with the onset of ‘hard’ globalisation; making sense of environmental and social sustainability; surfing the third wave of the internet; and competing in a global world war for talent. These challenges are pulling chief executives in different directions. The CEO role is now too big for just one person.
Instead, CEOs need to operate in a tightknit ‘fellowship’ of three or four executives who share the burden and support a CEO who is much more collaborative in operating style.
‘Command and control is dead,’ says Ben Verwaayen, chief executive of telecoms group Alcatel-Lucent. ‘Management in the classical sense is dead. That will be very scary to boards.’
Redefining the role of the CEO
Other leading executives agree. ‘The chief executive who was primarily the cold analyst gazing at the numbers around the boardroom table - that model is going to be more difficult to make work,’ states ITV chairman and former Asda chief executive, Archie Norman.
Cris Conde, chief executive of US software group, SunGard, advises: ‘Redefine the role of the CEO. If different employees can share information with each other, they do not need to rely on bosses to do that. The imperial CEO needs to disappear.’
Problems exist here for aspiring finance executives, whose analytical skills may no longer solve all the issues facing today’s CEOs.
Yet this development also plays to finance directors’ strengths because they are much more used to working in a team than some other executive types.
Finance directors’ jobs are evolving too. Their current focus may be on bank covenants, going-concern tests and risk management issues but they now require broader skillsets and closer relationship with other operations than in the past.
This in turn equips future CEOs with some of the experience and abilities they will need. The road signs may be harder to read but the journey will still be worthwhile for many who persevere.
Next month Andrew Cave will examine the future roles of CEOs and finance directors.
Links
From FD to chair - congratulations Mr Flint (Gillian Lees blog)
CFO to CEO? I don’t think so
How management accounting prepared me for senior management
Women in leadership
Finance transformation
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