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BW Businessworld

Why CFOs Turning CEOs Make Sense

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In any corporation, business growth and overall profit are dependent to a large extend on the CEO. The person holding this position sets the blueprint for success of the organization and directs the upper management team throughout the strategies to attain those milestones. The CEO of a company heads the management team comprising the top persons from operational and administrative branches. Rolling out new products in the market, approval of major marketing stunts, creation of new branches and other impactful decisions of a company need the CEO’s approval. This in turn makes the Chief Executive Officer the operational head of the company only next to the board of directors with whom he or she associate closely. However, responsibilities and functions entrusted to the position are also dependent on the type of the organisation. For instance, in startups, the CEO generally supervises every task. In large corporations, they work with the top management such as the vice president and managers.

The chief financial officer, on the other hand, handles every financial task, devise strategies related to financial management and decision-making. Persons in this position are responsible for budgeting; manage accounts of investment as well as internal and external management of finance across the organization. The responsibilities of a CFO also extend to organizations to which the company extends collaborations and enter into tie-ups.

Currently, CFOs are regarded as the prime contender for the position of CEO in the hierarchy of any organisation. The reason for this can be worked out from a larger prospective. As finance in the strength hold of any business entity, it becomes the prime factor, which determines the internal performance and operation of the company. Cash reserves of the company, financial data, investment and returns are the backbone of a corporation, which are determinants of the tertiary group formed of employees, policies and management setups. The CFO is the only person who ought to have complete knowledge about every financial details of the organization. Therefore, the role is as substantial as the head of the organization itself, since, finance and matters related to it comprises the fundamental segment of the corporation. When a CFO is entrusted with responsibilities of a CEO, the most important facet of a company, that is, finance is being taken care of.

The greatest advantage of hiring the CFO for the position of CEO is that the person is conversant about the every minute functionality and executive level management of the company. Finance being assured, the only segment that needs to be worked upon is to extent his or her cognizance to operational matters. From the prospective of responsibilities, knowledge and competence, it is evident that CFOs are the most potent contender for the position of CEO.

CFO turned CEO are able to implement new financial strategies and customise the organisation to be optimally responsive to such measures. They can be implemented quickly across the hierarchy bringing in better ROI for the organization. This is an important edge for any company, which can be achieved only by CFO turned CEOs.  

Since, CFOs have the clearest idea about the financial terms of a company, turning them to CEOs leverage finance, which in turn become the cornerstone for growth as well as for maximising profit. The best cost effective strategies can be only devised by persons who have thorough knowledge of finance within the corporation. However, if the CFO is less competent to handle administration or to carry out responsibilities such as managerial decisions, collaborations and market strategies, situations might erupt to be a haywire.

A CEOs prime objective is to maximize profit. What is more beneficial for a corporation in hiring the CFO to be the CEO is; this very objective for maximising profit is accomplished in the most effective way.


Author is Satya D Sinha, CEO, MANCER Consulting


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