It’s a good time to be a chief financial officer with designs on upward mobility.
During the first half of 2022, approximately 8.1% of 681 CFOs among both Fortune 500 and S&P 500 companies were promoted to the role of CEO—an all-time high, according to executive search firm Crist Kolder Associates’ volatility report. A decade ago, that number was just 5.6%.
That increase, while impressive, may not come a shock. After all, companies promote from within to ensure their next leader is someone with an existing, deep knowledge of the organization who knows where the problem areas are and where the strengths lie. But knowing the finances inside and out is just the first step and hardly qualifies someone for the role of CEO.
“What CFOs do on a regular basis is an aspect of what CEOs do,” says Richard Berlin, associate professor in the practice of organization and management at Emory University’s Goizueta Business School. “They bring financial expertise, whether via budgeting or analysis, and they can also be strategic. But it’s a challenge, because there are so many soft skills that are necessary to be a CEO.”
CFOs who lead a large department of people are more likely to have some of those soft skills. They’ve learned how to energize their workers and focus them as necessary. And they’ve also learned to delegate responsibilities, which could make them even more attractive to the board of directors.
A lot of it also depends on your industry. The Crist Kolder report found that CFOs in the financial sector are most likely to be promoted (with 25.5% making the jump), while those in the retail sector struggle to make the jump (with just 3.6% doing so). Industrial, services, and consumer sectors all see promotion rates of 16.4%.
Tenure time is a factor, but it’s not a determining one. While financial sector CFOs average approximately 5.4 years, those in retail tend to stay in the job fractionally longer. What’s more important, oftentimes, is as odd as it might sound: self-awareness.
“If you’re a CFO who is considering taking things to a higher level, you have to do an honest self-reflection,” says Berlin. “Who am I? Am I able to pivot? What challenges am I likely to face? I do a lot of coaching with executives, and when people advance in their careers, it’s not because they are technically skilled. It’s because they have some strong emotional quotient…More than 80% of CEOs are viewed as very optimistic. By contrast, when you think about a CFO, they’re more about being realistic and looking at the numbers. It’s a much different outlook.”
To put it another way, to paraphrase Marshall Goldsmith, just because you had the skills to succeed at the CFO level doesn’t guarantee those are the skills for success in the CEO role.
In fact, a Spencer Stuart report, released in July, found that just 8% of CFOs-turned-CEOs took their companies to the top quartile of performance. By contrast, “leapfrog” CEOs—those promoted from two or more levels down—and divisional CEOs had far higher odds of outperformance.
While promoted CFOs achieve higher levels of profitability during their early years in the job, too many fail to shift their focus beyond the bottom line and eventually lag behind people who came from other roles.
“Where CFOs are most comfortable is in the cost end of the business, not driving the top line,” one anonymous CFO-turned-CEO told consulting firm Spencer Stuart in its report. “They may not be close enough to sales and marketing as they should be. A lot of times, people want to save their way to prosperity by focusing on costs and efficiency instead of driving the top line.”
Any promotion requires some relearning, though. And there are several successful CEOs who formerly occupied the CFO office. Here’s a look at some of the most notable:
The former CEO of PepsiCo joined the company in 1994, working her way up the ladder until she became CFO in 2000. Before taking that office, she led the acquisition of Tropicana in 1998, as well as the merger with Quaker Oats. A regular on Most Powerful Women in Business lists, she was named CEO in 2006 and held the position until 2018. Under her leadership, the company’s sales grew 80%.
In January 2021, Spade joined AMC Networks as executive vice president and CFO. Eleven months later, she was promoted to the dual role of CFO and chief operating officer. Then, last August, she was named CEO, succeeding Matt Blank, who held the role on an interim basis for a year. “My curious approach to finance prepared me best for CEO,” she said at the time. “I like to look at the finances of a company to drive value for the long-term…If you simply cut costs to meet a number, it will be very tough to create value with that approach on a longer-term basis.”
Dasburg held the CFO role at a couple of notable companies before taking the reins as CEO. A onetime CFO at Marriott, he later transferred to the same job at Northwest Airlines, where he became CEO in 1990. He was largely credited with saving the carrier from bankruptcy and later went on to serve as CEO of Burger King and DHL Airways.
Donald Allan Jr.
Last July, Allan swapped his CFO position at Stanley Black & Decker, which he’d held since 1999, for that of CEO. Part of his ascension came from taking on the role of a strategic partner to his predecessor. “When one individual goes through that process on their own, there’s no way it can be as good,” he told Fortune shortly before his promotion. “What I try to [say] is, ‘Let’s work together to try and figure it out.’”
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