The Role of the Financial Manager, Essay Example

Do you think finance department are the best place to train future CEOs?

During the recent ten years strong tendency has emerged in the corporate world, when around 25% of CEOs positions are taken by the former CFOs. This tendency has quite clear explanation: success of the company is at large determined by successful operation of financial department, and the person in charge of this has insider’s knowledge and general understanding of how to improve financial performance. However, when already a CEO only half of the CFOs succeed in the position. The contra arguments against hiring a CFO as CEO are the following:

Firstly, many finance oriented people lack “real-world operating experience”. A good CEO has a hands-on understanding of the essence of his company’s product and production processes, which allow him to improve the internal structure and processes, not just financial indicators. Many CFOs are too carried away by the numbers and reports, being far away from the real situation and thus lack understanding how the situation can be improved other than by financial operations.

A financially educated person tends to have an analytical set of mind and see the world through numbers only, while people coming from marketing or other human sciences backgrounds are more open minded and flexible in their strategic vision and resulting decisions. However, nowadays the system of basic financial education changed to provide a broader scope of knowledge. Obviously, self education and interest in other aspects of business only add to the CFOs general experience. Besides, in recent years the business world requirements of financial transparency, participation in corporate governance processes and compliance with companies’ general strategy have brought CFOs closer to real business situation and closer interaction with other aspects of company’s activities. They often have to execute not only financial functions but commercial and strategic as well. Most of the CFOs occupying CEOs positions have gone through working in other than financial departments before taking up the big job. Thus, financial experience is a strong plus but not necessary a guarantee of success in CEO position.

Another aspect of the CEO´s personal characteristics is so called “emotional intelligence”, a term introduced by Goleman in 1995. In his article “What makes a leader” he suggested that knowledge and experience are necessary but insufficient traits of a good leader. A person taking up CEO position needs also have certain soft skills and characteristics such as self awareness, self regulation, motivation, empathy and social skills. These traits are not taught neither in financial departments nor in business schools, so at the bottom line, the professional and educational background do not constitute and predetermine the success of a candidate at CEO´s position but the combination of his experience and personal characteristics.

Works Cited

Picker, Ida. Do CFOs Really Make Good CEOs. Institutional Investor; New York; Aug 1989.

Janine Brewis. How a CFO can graduate to CEO. Corporate Finance; London; Jun 1999.

Goleman, D. (1998) What makes a leader? Harvard Business Review, 76(6), 93-102.