CFO vs. CEO: Do CFOs make good CEOs?

Chief Financial Officers (CFOs) and Chief Executive Officers (CEOs) enjoy a complementary relationship.

The CEO drives the overall strategy, but makes financial decisions based on the CFO’s input, for example where to invest company resources to get the best for customers, shareholders, and other stakeholders. Being in charge of all things finance, CFOs have access to exceptional amounts of data and financial information that can support the development and delivery of the company’s strategy.     

These senior leadership roles work hand-in-hand, and often overlap, but how exactly do they differ? And when it comes to career evolution, do CFOs make good CEOs?

CFO vs CEO: similarities and differences

A CEO is the overall leader of a company. Not just in title, but also in responsibility. The CEO is in charge of managing the company; they set the company’s culture, and develop and drive the organization's strategy, guided by the advice and expertise from the rest of the executive leadership team. 

The CFO is also a leader in the company, albeit with a more precise focus. Usually the highest-ranking member and leader of the finance team, the CFO is the expert in all things money, financial planning, and financial strategy. 

Let’s see what similarities these roles share:

Similarities

• The CFO and CEO are both high-level executive roles that have a major impact on the direction of the company.

• They are both leaders; the CEO oversees the company and the CFO oversees the finance department.

• They both must communicate effectively, sharing the ‘why’ behind decisions and convincing stakeholders to get on board.

• They both act as a bridge; CFOs bridge gaps between the finance function and other departments by sharing financial information. The CEO is the face of the company, the liaison between the company and external stakeholders.

• They are both ultimately responsible and accountable for their scopes; the CFO for financial decisions and the CEO for business strategy and performance.

While they share similarities, there are also significant differences between the role of a CEO and CFO.

Differences

• The CEO is the highest-ranking role in the organization. CEOs and CFOs are not equal in the organizational hierarchy, despite both having ‘Chief’ in their titles. Generally, the CEO reports to the board of directors, whereas the CFO reports to the CEO.

• The CEO should be finance-savvy but does not need a finance background. For a CFO, a finance background (education and experience) is non-negotiable.

• The CEO is a big picture thinker, working on the long-term company strategy. The CFO has a much narrower scope and focuses on the company’s finances.

CEO and CFO: a complementary relationship

While there are similarities between the CFO and CEO roles, they each attract different profiles.

CFOs and CEOs work best together when they have a complementary set of skills. CFOs normally excel at being able to understand items in granular detail, and are metrics-driven.

On the other hand, CEOs have a strong ultimate vision of where the company needs to go in the medium- to long-term. CEO types don’t need the detail; they want to understand what the topic is, how this will impact the organization's strategy, and what actions are available for them to make a decision on the overall direction.

This is not to say that CFOs’ skills inhibit them from becoming CEOs, just that they will need to expand their focus and abilities if they eventually want to become a CEO (more on that below).

Path to CEO vs. path to CFO

As stated, the CEO and CFO share similar traits. But you don’t necessarily take the same path to reach these positions. Education, certifications, and work experience will set CEO and CFO candidates on different trajectories.

CEO

There’s no single path to becoming a CEO. In fact, besides having a Bachelor’s degree and extensive experience in common, very few CEOs have the same exact career track.

Education

A Bachelor’s degree is required for CEO positions; this may change in the future, but today a university degree is still a basic requirement. The exception is usually for company founders who become CEOs. Think Bill Gates or Mark Zuckerberg, neither of whom graduated from university. However, those are extremely rare cases!

Candidates are better off going to university if they hope to climb the corporate ladder to Chief Executive Officer. But what to study?

Many current CEOs studied business (including accounting or economics) or even engineering. But there’s no one preferred course of study; business degrees are probably the most helpful because they’re so broad, although there are many CEOs out there who studied other disciplines. 

Finance, communications, and computer science are other helpful areas of study, depending on the industry candidates are interested in. Healthcare management is a good major to choose if you want to work in healthcare, for example. Choose the degree that suits you best, and then perhaps choose an advanced degree that’s more strategic.

As with any C-suite role, a Master’s degree or advanced degree is not strictly necessary, but it will help set you up for success. MBAs are the most popular option, because the curriculum covers the ins and outs of business: finance, marketing, strategy, entrepreneurship, leadership, and more.

Work experience

After education, there is no defined path to becoming a CEO. The most important determining factor? Experience, and lots of it!

The overall consensus is that experience in a wide range of departments is the most useful for would-be CEOs. Operational experience is key; the CEO should know how a company operates from the ground up. Technical experience is valuable as well, especially for candidates in the tech field.

And because the CEO is a leader, they must also fine-tune their networking skills. Getting to know a broad range of employees from all different backgrounds and departments is crucial. If they only create relationships in one single department, their job will be that much harder once they reach the top. This is why it’s important to get experience in several different departments.

Some CEOs choose to spend a few years in consulting, which is valuable for gaining client-facing experience. Management experience is also necessary, as is getting comfortable with public speaking.

There are surely examples of current CEOs who did not get the work experience described above, because there’s no single path to becoming a CEO. However, to be on the safe side, aspiring CEOs should get operational and management experience across departments within the company, hone their public speaking abilities, and get experience interacting with clients and other stakeholders.

CFO

The path to CFO is more straightforward. If you want to learn more about the CFO role in depth, you can read about CFO skills and qualifications here. 

Education 

CFOs do not have much leeway when it comes to field of study choice. The vast majority of current CFOs studied finance-related subjects.

Aspiring CFOs typically need the following education:

• A Bachelor’s degree in finance, accounting, business, economics, or another finance-related field

• An advanced degree, such as an MBA or a Master’s degree in finance

• Certifications and professional qualifications, like CPA or CFA

(This CPA certification guide shows you need 150 credit hours of higher education to get a CPA license, which is the equivalent of a Master’s degree.)

Because the CFO role has expanded to now include business strategy and other responsibilities that are not strictly related to accounting, many CFOs opt to get an MBA. This helps broaden their areas of expertise and prepare them for the CFO role.

The CFO’s scope is broad and ranges from the internal (balancing budgets) to the external (raising capital, managing M&A) and everything in between. They must have lengthy experience in and a deep understanding of all areas of finance.

CFO to CEO: a natural career evolution?

When hiring a new CEO, the board of directors has crucial decisions to make. An internal or external candidate? Someone from a client-focused role, or with Ops, Finance, or Marketing expertise? Or something else entirely? Is it worthwhile to take a risk, or better to go the tried-and-true route? These decisions will be driven by multiple factors, such as business performance, delivery of its strategy, the external environment, and the skills of the current CEO.

Recently, companies have been increasingly tapping CFOs to fill vacant CEO positions. In fact, the CFO-to-CEO evolution hit an all-time high in 2022! 

This could be due to economic factors, which influence the CFO-to-CEO pipeline. When hard times hit, the board will want to be sure that the new CEO has great finance skills and can steer the company through a challenging business environment to safety. 

Because the CFO and CEO share many similarities, the CFO could be a natural successor to the CEO. However, there are some pitfalls to watch out for.

Do CFOs make good CEOs?

There is no reason why a CFO would not make an excellent CEO. In fact, the CFO-to-CEO transition could be a huge success, if certain factors are taken into consideration.

First, CFOs need to ensure that they get organizational experience outside of finance. Their scope will simply be too narrow if they don’t broaden their horizons, especially into operations.

Second, CFOs must adapt their focus and priorities, from day-to-day finance management to a long-term, forward-thinking vision. CFOs are notoriously risk-averse, but they must be able to adapt their risk mindset to grasp potential opportunities as a CEO.

Third, CFOs-turned-CEOs will need to relinquish control in some areas. No longer the head of the finance function, they will have to instead focus on multiple internal and external matters. This is too much for one person to effectively manage, and the rest of the C-suite are critical to  supporting the CEO through leading their respective departments.

A good solution could be taking on a dual CFO/COO role to compensate for this lack of experience, and learn the operational ropes before transitioning to CEO. This ensures that the CFO gets valuable experience outside of the finance department, and the switch from CFO to CEO isn’t too abrupt.

Final thoughts 

The CFO can be a good fit for the CEO role if they have transversal experience within the organization, and they don’t jump straight from CFO to CEO without first closing the skill gap. Luckily, modern CFOs already have ample leadership experience due to the evolving nature of the CFO role. 

The CFO and CEO roles share enough similarities that the transition won’t be too challenging if the CFO takes time to gain experience beforehand.