How to prepare for the CFO role

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Personal Development, Leading & Managing Section | 1

How to prepare for the CFO role

By Ankur Agrawal et al., | McKinsey & Company | April 1, 2024

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The courage to take career risks is necessary for anyone who aspires to lead the finance function at a major company today. CFOs must possess experience and skills that go well beyond traditional expertise in budgeting, planning, and risk mitigation. CFOs now serve as board advisers and CEO consiglieri on organizational priorities and strategy, as performance challengers and innovation champions, as leaders of major investments and transactions, and as convenors of cross-enterprise initiatives.

In today’s volatile business environment, CFOs must also weigh the potential impact of geopolitical tensions, technological advances, macroeconomic disruptions, and climate risks. 

CFO hopefuls should embrace the following five priorities: 

1. Formulate a distinctive vision for the CFO role.  The CFO’s job has two core dimensions: overseeing the finance function and ensuring the high performance of the organization as a whole. Financial professionals who hope to become CFOs thus need to have a view of how they would realize both parts of their mandate. You should be able to articulate how you would build on the work of your predecessor and what would differentiate you from other candidates.  To gain this perspective, experts recommend developing an independent, outside-in view of the company—its assets, its industry position, and its opportunities and risks.  It’s important that your thesis cover how you would allocate resources toward new growth opportunities. Candidates who understand the key business drivers, industry dynamics, and value creation trends that will matter most for the company’s next phase will have an edge over rivals. Since the relationship between the CFO and CEO is critical to successful corporate leadership, you should also consider how you would complement the chief executive. 
2. Find diverse sponsors with organizational clout.  Most of the former CFOs we spoke with found mentors and sponsors essential to their rise. “At every step, there are at least a dozen other folks who are equally competent, and often more competent, than you are, and only one can get the big break,” says Nayar, who had several sponsors before becoming the CFO of Tyco International. To get the right guidance, however, you need to actively seek out individuals who will not only encourage you and highlight your blind spots but whose opinion carries weight in the organization.
3. Strengthen skills most critical to the enterprise now.  While few individuals possess deep knowledge of accounting, capital markets, and operational experience, a CFO has to be conversant in each one. “No CFO checks every box,”. Candidates should try to “check as many as they can, but focus on the big, important boxes, the ones that matter most to that organization—both within finance and beyond.  Just as with CEOs, the success of CFOs often rests on whether they possess the attributes the enterprise needs at a given time.  CFO needs to have strategic know-how and understand the key drivers of the business: financial, operational, and commercial.  Beyond that, CFO skills and experience in two areas are particularly prized today: technology and sustainability.
4. Lead an initiative that really matters.  One of the best ways to demonstrate readiness for the CFO role is to successfully steer an initiative that creates significant value for the enterprise, particularly if it involves collaboration with business units.  Ultimately, CFO hopefuls need to be known for something.
5. Find opportunities to engage with the CEO and the board.  Let’s face it: to have a shot at the CFO job, you need to be on the CEO’s and the board’s radar. Leading a financial planning and analysis (FP&A) team is one of the better finance positions to get that visibility because it’s closely aligned to the business.  Having a specialized set of skills can make you the go-to person for company leaders on specific issues.

3 key takeaways from the article

1. The courage to take career risks is necessary for anyone who aspires to lead the finance function at a major company today. CFOs must possess experience and skills that go well beyond traditional expertise in budgeting, planning, and risk mitigation. CFOs now serve as board advisers and CEO consiglieri on organizational priorities and strategy, as performance challengers and innovation champions, as leaders of major investments and transactions, and as convenors of cross-enterprise initiatives.
2. In today’s volatile business environment, CFOs must also weigh the potential impact of geopolitical tensions, technological advances, macroeconomic disruptions, and climate risks. 
3. Executives can become high-potential candidates for the role should embrace the following five priorities: formulating a unique vision for the role, finding the right set of sponsors, bolstering skills in the areas that matter most to the organization, taking professional risks to broaden experience, and seeking opportunities to engage with the board.

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Topics:  Leadership, Chief Financial Officer, Chief Exeuctive Officer, Board Member, Succession, Training, Risk Taking, Vision, Skills Development, Risk, Opportunities