Goodbye ‘accountant archetype.’ Former CFOs are dominating the C-suite

11/13/2024, 7:16 AM
fastcompany.com

Hello and welcome to Modern CEO! I’m Stephanie Mehta, CEO and chief content officer of Mansueto Ventures. Each week this newsletter explores inclusive approaches to leadership drawn from conversations with executives and entrepreneurs, and from the pages of Inc. and Fast Company. If you received this newsletter from a friend, you can sign up to get it yourself every Monday morning.

In Silicon Valley, where the chief executive ranks are filled with founders and engineers, Twilio CEO Khozema Shipchandler’s résumé stands out. He spent more than 20 years at GE, a run that included stints as chief financial officer (CFO) of five different divisions of the conglomerate, before joining software company Twilio in 2018 as CFO. He soon began adding operational responsibilities. The company named him chief operating officer in 2021 and president of its communications business, which represents about 93% of the company’s revenue, in 2023.

Shipchandler was promoted to CEO in January 2024 after Twilio founder Jeff Lawson stepped down amid pressure from activist investors.

“By the time I took over as CEO—even though you’re never totally ready when something like that happens—it felt natural because there was this progression that had been taking place,” Shipchandler says.

Moving up in the C-suite

While the CFO-to-CEO transition may be unusual in tech, it is becoming increasingly common across corporate America. Next month, Mick Beekhuizen, who joined The Campbell’s Company as CFO in 2019, will become CEO of the food giant. Last week, Panera Brands announced that CFO Paul Carbone will serve as interim CEO after chief executive Jose Dueñas stepped down. Other CFOs-turned-CEO include Best Buy’s Corie Barry and Rite Aid’s Matt Schroeder.

To be sure, like Shipchandler, most of those executives expanded their portfolios beyond finance. Beekhuizen, the incoming Campbell’s CEO is currently president of the company’s meals and beverages business. Barry was Best Buy’s chief financial and strategic transformation officer with responsibility for its growth strategy.

“As more and more CFOs are indexing around operational excellence—not the accountant archetype any longer—they are increasingly interested in becoming CEOs at some point,” says Jenna Fisher, co-head of leadership advisory firm Russell Reynolds Associates’s global financial officers practice. “I would say about 50% of CFOs that we talk to express some interest in potentially becoming a CEO at some point in their career.”

A steady hand for investors

The rise of CEOs with financial expertise also coincides with a growing number of activist shareholder campaigns. Last year, investors launched 243 campaigns, up from 229 in 2003 and just below a peak of 249 initiatives in 2018, according to Barclay’s research reported by Reuters.

Twilio has attracted activist shareholders Anson Funds Management, Legion Partners Asset Management, and Sachem Head Capital Management, who have pushed for governance and structural changes.

I asked Shipchandler if having a former CFO as CEO provides comfort to investors, activist or otherwise. He says former CFOs certainly are accustomed to listening to investors and proactively seeking out their feedback. And he says ex-finance executives can be seen by investors as a steady hand. “Founders and technologists anchor more towards growth and risk,” he says. “CFOs naturally ground or anchor themselves more towards risk management and cost controls. They know that you’re not going to let the place get away from itself from a cost perspective or that the company is not going to take outsized risks.”

Becoming bolder

Indeed, former CFOs may have to work to shed their conservative instincts as they move into operational and chief executive roles. “A CFO aspiring to be an effective CEO needs to do a mindset shift,” says Janice Ellig, CEO of executive search firm Ellig Group. “They need to let go of what they did so well, entrusting their successors to run the finance function while they—as CEOs—demonstrate to the company their bolder competencies and attributes to take the company to new heights.”

Shipchandler has signaled his commitment to innovation at Twilio by bringing on Inbal Shani as chief product officer for Twilio; her responsibilities include research and development and product innovation. And he reinstated the company’s annual “Tweek Week” where employees from across the company could opt to spend time on standout projects. This year, nearly 1,500 of Twilio’s 5,500 employees participated, submitting entries focused on combining communications, customer data, and AI.

He also says he’s been transparent with employees on what the company needs to do to accelerate innovation. He says Twilio is on a three-year arc: 2024 was a rebuilding year; in 2025 the company will focus on execution. “If we execute, the market and our customers will reward us,” he says. “And if we do those two things, then in 2026 and beyond we can write our own story.”

And while Shipchandler recognizes the importance of soliciting the feedback of investors, he cautions that the perspectives of CEOs—whether they are former CFOs or not—shouldn’t dominate. “If we were just doing things for activists, I think we’d be running a really short-sighted and perhaps even misguided play,” he says. “I think what investors—all investors, including activists—ultimately want is an innovative, well-run company.”

What c-suite skills are most transferable?

Are you a former CFO turned COO or CEO, and if so, what finance skills help you in your current role—and what gaps have you had to fill? Send your answer to me at [email protected]. I’d like to share some of your insights in a future newsletter.