The number of FTSE 100 companies led by former chief financial officers has shot up by more than half in the past half-decade. We find out why it’s happening and whether the transition from leading finance to heading the whole company is a natural step or a huge leap

Words: Ryan Herman

In March of this year, the Financial Times ran a story headlined “Why more CFOs are becoming CEOs”. Among the many enlightening statistics from the piece, it stated that a third of FTSE 100 CEOs had previously served as CFOs, according to data from executive search firm Heidrick & Struggles. That’s up from 21% in just five years.

In bygone times, the CFO might have been casually dismissed as the company “bean counter”. But the role has evolved significantly in recent years, broadening out to cover business-critical responsibilities such as cybersecurity. And that remit will expand further if, as many anticipate, sustainability reporting for businesses and organisations becomes mandatory in the UK.

We speak to the experts to hear how the role has changed, what the future holds and why being CFO is increasingly viewed as a natural stepping stone towards becoming CEO.

What qualities do you need to be a CFO?
Bruce Pritchard CA, CEO (and former CFO), Liminal Biosciences; ICAS Past President: Although one could never claim the CA qualification teaches you to become a CFO, what it did for me is train me to be curious. You start to explore things which are not necessarily core to your role. And that curiosity leads to opportunities opening up. The other aspect is rigour. There’s a very rigorous thought process and a work habit that gets built in by becoming a CA.

Alison Cornwell CA, CFO, Vue International; ICAS President:
Communication for me is number one, number two and number three. You also have to be very curious, to think strategically, to be rigorous  and be good at prioritisation. Above all you have to act with integrity.

You need to be able to explain to people what you’re trying to achieve. Don’t just give them tasks. Get people engaged and enthusiastic about what you’re aiming for. And explain what you’re doing and why, because maybe somebody in your team has a great idea as to how that could be achieved more effectively.

Also, we spend so much of our lives at work, so one should aim to make it enjoyable and fulfilling for everybody, too.

When and why did the role expand?
BP: I first became a CFO in 2004. At that point, it was very much at the financial reporting, systems, processes and procedures end of the spectrum, with a little bit of financial planning and analysis.

“The chain of command became deeper because the CFO became more engaged in areas like risk management and cybersecurity”

BRUCE PRITCHARD CA, CEO, LIMINAL BIOSCIENCES

I was working at a Canadian company and things started to expand in the wake of the Sarbanes-Oxley Act that was introduced in 2002 to protect investors. Things like HR and IT got swept up because you became the go-to senior exec for all of the enabling functions within the business.

The chain of command became deeper because the CFO became more engaged in areas like risk management and cybersecurity, which was becoming a greater priority around that time. So there were all these external influences, from the capital markets in particular.

But also, from a personal perspective, my role expanded partly as a consequence of the skills that I brought to the table, and those skills being seen as useful.

How has the role changed?
AC: The scope of my role is enormous and touches every aspect of the business, which  makes it a very exciting position to be in. There’s a momentum for speed and efficiency and an ever-increasing focus on strategy and value creation.

The area where I’ve seen the biggest change is sustainability, and not only in terms of what companies are obliged to report. The really big change has been the CFO taking on a leading role – being the person who drives that agenda for the good of the value of the business, its customers and  employees, and the wave of new reporting that the business is going through.

Then there’s technology. To give an example, we’ve been using an AI scheduling (AIS) tool for around six years which we developed and is unique to our business. We take all the films available to us and AIS determines the optimal schedule for every screen, at every time of day in every cinema. So if it’s Sheffield on a Tuesday afternoon, what should we be screening in screen five, relative to what is on the other screens, in order to maximise profitability? It does all that automatically from a wealth of data. It’s an incredible tool to have and provides Vue with a unique advantage. I love being a CFO.

As a CFO, how does the relationship with the CEO work?
AC: I have always really enjoyed the partnership between the CEO and CFO. I have worked as a CFO with a CEO in four businesses and each relationship has had similarities in terms of my core responsibilities being down to me to fulfil, where building trust early on in terms of rigour and no surprises is key. Each of the relationships has also differed depending on the areas that the CEO wants to handle personally and where they value the support that I can deliver.

Could I be a CEO? Without sounding immodest, yes. I think being CFO means you have that commercial, numerical and business acumen that is the perfect stepping stone to becoming a CEO. What we do is so wide ranging  and it’s the one role that touches almost all areas of the business. But personally I love being a CFO.

What are the key attributes for making the step up to CEO?
BP: Not every CFO is cut out to be a CEO. I think what being CFO does is give you this insight into all the workings of the business. As the Americans say, we have that full “under the hood” access to look at the inner workings of the motor.

“Being CFO means you have that commercial, numerical and business acumen that is the perfect stepping stone to becoming a CEO”

ALISON CORNWELL CA, CFO, VUE INTERNATIONAL

You need to be prepared to be mentored, to take advice and to expose yourself to multiple other businesses, so you can see how things are done elsewhere.

To help make that step up, I deliberately took on other non-exec roles and chaired audit committees. It gives you that broader perspective about organisational management.

Sometimes you have to be prepared to make the tough calls with members of your team who were your colleagues. It’s about keeping enough of a distance but also making it collegiate, so there is that sense of one team, one goal, one purpose.

Good CEOs have all the good stuff that a CFO can bring to the table – maybe not the finance skills, but that rigour of thought and process. You can get the IQ part if you like, but you need a healthy dollop of EQ [emotional intelligence] as CEO.

A lot of what a company wants in its CEO today is driven by the major investors in the business. Do they just want the safe pair of hands for the day-to-day work? Or do they want someone who’s going to bring a different set of perspectives and change direction? When you take all those things into consideration, it’s not a slam dunk that you’ll be the right person just because you’re a good CFO, but you’ll have a firm first foot on the ladder.