As the commercial environment becomes more complex and globalized, there has been ample discussion in business circles (and academia) over how and where to train future CEOs.  While some commentators have posited that marketing or operations may be the best department to develop future leaders, the finance department has also gained considerable backing. This essay will argue that statements unequivocally regarding the finance department as the “best place” to train CEOs are likely too general to be meaningful in any specific context. That is, the decision to tap a CFO to become CEO is a function of specific circumstances that must take into account the CFO’s background and the current company needs, ultimately balancing the positives and negatives of candidates with a financial background.

The first point to note is that the CFO’s role has vastly changed over the past 20-25 years.  Indeed, the image of CFOs as largely technical accountants focused on spreadsheets and sequestered from a company’s main operations has gradually evolved due to secular changes in the business environment (Dobbs, R., Harris, D.  Rasmussen, A., 2006). Indeed, finance professionals are now required to have knowledge in a number of fields with direct connection to a firm’s business   For example, the CFO must have substantial knowledge of regulatory affairs in order to implement and comply with complex corporate governance legislation (such as Sarbanes-Oxley), as well as specialized knowledge of inventory, procurement, and operations to make sure the company’s credit cycle is managed efficiently.

While this “rebalancing” of the CFO role from primarily a number cruncher to a more diverse executive has led to more finance professionals becoming CEOs, this trend must be understood in greater detail.  Dobbs et al. posit that two specific circumstances usually dictate when a CFO will be tapped for the CEO position and when that appointment might be the right choice: 1) When finance-related issues are at the top of a company’s strategic priorities; 2) The CFO has a broad background of management experiences to draw upon as CEO (Dobbs, R., Harris, D.  Rasmussen, A., 2006). These qualifications are important to note because the logical conclusion of the article’s argument is that while a CFO might be a good choice, the company’s needs (at a particular time) will also be a significant factor. Dan Durfee, in examining the trend, provides further texture to this important issue when he analyzes data to suggest CFOs might be a good fit for the CEO post in certain industries: 1) Deregulated industries; 2) Desperate companies (financially); 3) Complex companies with many moving financial parts; (Durfee, 2005).  Durfee’s analysis suggests that the CFO skill set, while highly sought after in industries where complex financial decisionmaking is involved, may not be the best fit for firms with a more simplistic financial picture.

There are also certain disadvantages of tapping the CFO for the top job.  Andrew Goodman presents two potential pitfalls in his examination of the issue (Goodman, June 10, 2010).  First, some corporate insiders question the ability of CFOs to think strategically about key operational questions outside of finance. Indeed, one CEO commented that when companies need “creative solutions and marketing approaches, [decisions about] adding or discontinuing product lines [or making acquisitions], CFOs won’t be at the table” (Goodman, June 10, 2010).  Second, the role of CFO in some companies might not be amenable to taking the top job.  That is, the CFO sometimes serves as a “counterbalance” to the CEO giving feedback and often times making enemies that would not allow further development in the C-suite (Goodman, June, 2010).  These potential negatives bring up the point that while CFOs have developed professionally from their earlier days at technical accountants, there still might need to be additional growth in understanding a company’s full business range in order to become the main department to groom the next generation of corporate leaders.