Dive Brief:

• An ambitious executive aiming to win a company’s CFO seat will sooner succeed by embracing five strategies, ranging from creating a compelling vision for the top finance job to rallying a diverse set of mentors with organizational clout, McKinsey said after distilling the advice from several former CFOs. 
• “The courage to take career risks is necessary for anyone who aspires to lead the finance function at a major company today,” McKinsey said in a report, emphasizing that CFOs must have skills and experience beyond budgeting, planning and risk reduction. 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.”
• Aspiring CFOs must also be able to gauge the impact from external challenges such as climate risk, geopolitical conflict, technological advances and economic disruption, McKinsey said.

Dive Insight:

Executives seeking the CFO leadership role in recent years have faced a bright landscape where turnover is unusually high and “experienced financial leaders are few and far between,” according to Russell Reynolds.

CFO turnover reached 17% among Standard & Poor’s 500 companies in 2022, down 1 percentage point from the prior year but 3 percentage points above the 2019 rate, Russell Reynolds said last year in a report.

“As more CFOs exit the market, to retire or to non-CFO roles, those searching externally are increasingly looking to first-time CFOs in a competitive market, bringing the number of first-time CFOs to a record high of 75%,” Russell Reynolds said.

Churning in the top finance role may be the norm in light of rising retirement rates, efforts to increase gender diversity and CFO ambitions to take the CEO seat, according to Russell Reynolds.

“The timing to seek the CFO office couldn’t be more fortuitous,” McKinsey said, describing how to succeed “at every stage of the CFO life cycle,” from preparing for the top finance job, making a strong start in the role, improving the finance function and, after moving on, achieving new leadership ambitions.

McKinsey said would-be CFOs should pursue five strategies:

1. Create a distinctive vision for the CFO role

Financial professionals need to clearly specify how they would approach their core CFO responsibilities of overseeing the finance function and ensuring high performance across the company, McKinsey said. They should cultivate an outside-in view of the company, including its assets, competitive position in its industry and its opportunities and risks.

The aspiring CFO should ask such questions as what a long-term investor would want company leadership to do, whether the company’s costs are higher than its competitors and whether the company should divest of any assets, according to McKinsey.

“If the CEO is the visionary, the CFO should be a master of execution,” McKinsey said, paraphrasing an insight from former LEGO Group CFO Marjorie Lao.

2. Rally diverse sponsors with organizational clout

Former CFOs said mentors were essential in their climb up the corporate ladder, McKinsey said. Such supporters, while providing encouragement and identifying blind spots, also wield organizational heft within the company.

Often the most helpful mentors are not direct managers but executives who will critique the thoughts and aspirations of the would-be CFO, McKinsey said. Supporters outside finance — such as the chief technology officer or the head of a business unit — can help cultivate a deeper understanding of a company’s challenges.

“Every opportunity you have to work with a more senior person or one who runs a different part of the organization is a job interview,” McKinsey said, quoting former Sysco CFO Chris Kreidler.

3. Strengthen skills of most critical current importance

Aspiring CFOs should measure their strengths and weaknesses against the strategic needs of their company during the next three to five years, McKinsey said.

At the same time, a CFO hopeful needs to build solid knowledge of all three categories of expertise essential for the top finance role, including accounting, capital markets and operational efficiency, McKinsey said, quoting former CFOs.

“No one checks every box,” McKinsey quoted Kreider as saying. Still, candidates should try to check as many as they can while focusing on “the big, important boxes — the ones that matter most to that organization.”

4. Lead a high-impact initiative

A would-be CFO can show readiness for the role and gain attention from superiors by leading a project that yields significant value for the company and requires collaboration with various units of the business, McKinsey said.

“If you’re to be promoted from within, you have to build relationships and trust with the business teams, because you want their support,” McKinsey said, quoting former Cognizant Technology Solutions CFO Karen McLoughlin. “You want them to be comfortable that you have the knowledge and ability to help them do their jobs.”

Often the CEO and CFO are the only leaders with a full understanding of a company’s functional or divisional lines, McKinsey said, quoting Lao. CFO candidates can differentiate themselves from rivals by partnering outside their immediate departments.

“The CFO has overall responsibility for driving operating linkages across the whole business,” Lao said. “To do that, you need to have credibility and demonstrated ability to work with each business or functional leader.”

5. Find opportunities to engage with the CEO and board

Face-time with the CEO and current CFO bolsters an effort to win the top finance spot, McKinsey said.

Leading a financial planning and analysis team is especially helpful, according to McKinsey.

Among its responsibilities, FP&A focuses on budget challenges, and its leader often presents the budget to the board, McKinsey said. With such exposure, ambitious executives build trust and credibility at the company’s highest level.