Room at the Top

What does it take to ascend from CFO to CEO? Think leadership and operations skills. The trick is for CFOs to expand their
functional domain and get out of the office into employee and customer environments.

The value of the CPA designation, financial reporting mastery and internal controls knowledge has soared as the regulatory environment has become more stringent, but hard-core finance and accounting skills alone do not propel CFOs into the CEO suite. According to four former CFOs who became CEOs in the past few years, deep operational experience, customer interaction and communication savvy help make CFOs viable CEO candidates. None of the former finance executives possesses a CPA, yet all of them believe that their tenure as CFO equipped them with perspectives and experiences that have enhanced their performance as chief executives.

"Many CFOs don't spend enough time in the business, which consists of a lot more than numbers," says Andrew A. Stern, chairman and CEO (and former CFO) of USinternetworking Inc., an enterprise application service provider in Annapolis, Md. "The best CFOs spend a lot of time with customers and a lot of time in operations. What they can then do better than anyone else in the organization is to figure out how to merge the operating view and the market view with the financial view."

Sarbanes-Oxley: Boon and Bane

The current regulatory environment represents a double-edged sword for finance executives who seek to elevate their career to the next level. The accounting scandals and ensuing regulations have heightened the visibility of the CFO and other finance executives, but the spotlight's glare does not necessarily translate to more calls from CEO headhunters.

"In the post-Enron environment, companies are very risk averse," notes Nancy Keene, a director in the Dallas office of executive search firm Stanton Chase International. "In almost all cases, they look for a been-there, done-that person." Boards that are searching for CEOs, she adds, typically want to hire a current or former CEO.

Stern notes that swelling compliance workloads have limited the time CFOs can invest in value-added activities, such as strategic planning, that make them more attractive CEO candidates. CFOs at small to midsize companies that cannot afford to hire staffs dedicated to compliance are particularly hard-hit.

Yet there may be a silver lining in the compliance cloud. Finance executives can leverage time-consuming compliance activities to improve organizational performance -- and their career prospects, notes Stephanie Woodruff, Minneapolis-based executive vice president of the corporate governance practice at Accretive Solutions Inc., a professional services firm. "If a finance executive treats their year-two and year-three compliance efforts as an opportunity to deliver process improvements and run the business better, I think they will turn some heads," she explains.

Former CFO Eric Keller agrees -- with one caveat: Compliance can help make finance leaders more attractive candidates for higher office, but "it won't get you the job at the end of the day." The top quality that boards look for when filling CEO positions -- leadership -- has remained constant over time, says Keller, president and CEO of Movaris, a financial-control software firm in Cupertino, Calif. Boards want CEOs who know how to build a team, provide a vision for the company, speak credibly before different constituencies and deliver results, he explains. Thanks to the accounting scandals and Sarbanes-Oxley, among other new rules, boards are also hunting for CEOs who understand and appreciate the current regulatory environment.

"To that degree, I think a finance person has somewhat of an advantage," Keller notes. "They live on the front lines of SEC compliance. But if you don't have those basic leadership capabilities, no matter how good you are at compliance, I don't think anyone will ever see you as a viable CEO candidate."