Making the Leap: From CFO to CEO

With Finance playing an increasingly crucial role in corporate strategy and many CFOs serving as the right-hand to their CEOs, Finance Heads are often the most eligible contenders for the ‘pole position’. Yet, this does not always happen – for various reasons. At an India CFO Forum session, we hosted Sanjay Jain, Group CEO of PDS Limited, one of the world’s largest design-driven sourcing, manufacturing and supply-chain platforms. Mr Jain has three decades of experience leading transformation across several companies, including as the former CEO of Future Retail and, before that, Group CFO of Future Group. He reflected on his journey across Finance roles leading ultimately to his taking on the ‘top job’. In the process, he offered lessons and highlighted likely pitfalls that Finance leaders may encounter as they move into higher leadership roles.

Transitioning from CFO to CEO  

To reach the CXO level, leaders must already possess multiple skills. However, getting to the ‘top job’ usually means honing a few specific ones. At root, the transition from CFO to CEO involves becoming an ‘enabler of the ecosystem’ while managing several additional facets within the organisation.

70% EQ and 30% IQ

CEOs must work with people across functions, including sales and HR, and this demands a creative, people-centric approach. This might be best described as ‘70% EQ and 30% IQ’. By contrast, CFOs tend to be right-brain people who, partly because of the nature of their function, follow an analytical/mechanical approach. To transition upwards, many CFOs will need to hone their EQ skills. This might include, for instance, not trying to be the smartest person in the room but rather, bringing together the right people to solve a given problem or deliver the required results. Moreover, to achieve balance within the leadership team, strong CEOs will look to onboard leaders who complement their skill sets, compensating for any of their own shortcomings.

Migrating from ‘controller’ to ‘facilitator’

The CFO’s controllership role demands a strong hold on what ‘can’ or ‘cannot’ happen within the organisation. Over time, however, this can breed rigidity. In comparison, the CEO role is about acting as a facilitator who enables innovation. In order to successfully transition, it is therefore important for the CFO to identify a successor who can take on this controllership role, allowing themselves the bandwidth to start acting as facilitators.

Have a 30,000-ft view but understand the ground realities

Strong CEOs know the art of looking at the larger picture, making their teams believe in it, while also keeping their eye on the ground realities. Once a strategy is laid out and objectives are chosen, it is crucial to build a rigorous review mechanism which gets monitored, reviewed and fed back into the system. This is where the CFO’s skills and training can add value.

Identify low-hanging fruits and solve for them

In certain situations, transitioning CFOs can leverage their Finance skill-sets to solve even the toughest problems, thereby establishing their leadership credentials.  In his new role as CEO of PDS Multinational Fashions, Mr Jain used the skills he had acquired as CFO to solve a manufacturing challenge at the company’s largest unit, in Bangladesh. He transformed a Rs 100-crore loss into a Rs 30-crore profit in just 12-15 months. This was a low-hanging fruit that yielded solid results, fast.

Know your stakeholders

Listening and connecting with people

CEOs must continuously engage and connect with their people. At the minus-1 level, CXOs understand the problems their individual functions face, as well as the possible solutions. On the other hand, CEOs must rely on their grit, decision-making and risk-taking abilities to determine the best possible solution to high-level problems. They must also be able to work with leaders from across the board, allowing them to shine in their individual capacity.

Mapping key stakeholders

Stakeholder mapping is at the core of the CEO role. The imperative is to identify stakeholders who hold decision-making powers or are important from a business-continuity perspective, map their interests and manage them accordingly. In this regard, the CEO must also play a custodian role, balancing the interests of key stakeholders. For instance, at PDS, Mr Jain has strived to bring eminent independent directors to the Board, thus shoring up the company’s governance structure and investor confidence. In promoter-driven companies, promoters are the biggest stakeholders, and the CEO must be on the same page as them. To that end, Mr Jain has, in his current position, struck a deal with the promoters aligning their economic interests with those of the firm’s top management. Termed as a ‘Value Creation Incentive’, this is a public agreement which states that, whenever the promoters sell, say, 15% of their shares, 15% of that amount will be distributed to the CEO and his/her team.

Promoters versus Professionals

Conflicts will inevitably arise between stakeholders – such as promoters on one side, and professional managers on the other. In such situations, proactive stakeholder mapping can help gauge the interests of each stakeholder and better manage the situation. CEOs must also look to leverage the ecosystem, such as by identifying people the promoters trust, building a connection with them, and routing their messaging through them. In some situations, this can help shore up the CEO’s credibility with the promoters.

Heavy Is the Head…

It is lonely at the top and one will inevitably feel a sense of personal turmoil while dealing with diverse groups and situations. The key is to work on one’s mental and physical well-being because ultimately, that is what allows CEOs to keep absorbing the many blows they will face. It is vital to identify mentors who can support a rising CFO in making the CEO transition. Most transitioning CFOs will already possess many of the attributes they need for the top job. Indeed, strong analytical abilities and functional expertise will continue to serve them in good stead as CEO. That said, certain skills may need to be honed, other discarded, and still others learned afresh. In many situations, transitioning to the CEO role means taking a different approach to the same problems that one may have faced as CFO. What helps smoothen this process is to be open and transparent with the main stakeholders, thereby winning their support.