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In recent times, the transformation of CFO’s into CEO’s cuts across most of the firms. In the United States, the transformation has taken the center stage. This is caused by the economic crisis which hit the country some time back. In this paper, the key goal is to try to examine both the advantages, as well as the disadvantages of transforming CFO’s into CEO’s.
The Advantages of Transforming CFO’s into CEO’s
The first advantage of hiring a CFO into the CEO of any given company ensures a sound financial management model. CFO’s are constantly involved with processes of controlling the financial resources of a company. Thus, ensuring that the company is operating at a going-concern concept ensures survival of the company in the future. Potential investors, both local and foreign investors, make investments in sound companies. Thus, CFO’s becomes the relevant personnel to assume the CEO’s position, given the fact that they are placed fairly to ensure protection of investors’ funds, as well as can reduce the risk involved with placing funds within the company (Tibor at al., 2009).
A Chief Finance Officer is highly regarded as having immense levels of financial analytical skills and functions. The core goals of many businesses depend on these skills in order to make relevant long-term objectives. In essence, long-term objectives for companies ensure that the overall objective of wealth creation and revenue maximization is put in place. It should also be noted that CFO’s understand the financial needs of a company at any given moment. For instance, when western-based companies faced the economic crisis, it is the finance function that assisted in making both long-term and short-term objectives of operating the businesses lest they close down. The objective of the companies, at that time, required that they embark on activities which increased revenue at a shorter period of time, while decreasing the levels of costs to be incurred. The financial reports from the CFO’s ensured that the aforesaid fundamental decision was made effective and efficient in that manner (Picker, 1989).
Another important reason for transforming CFO’s into formidable CEO’s lies in the fact that they are nurtured internally and understands most, if not all, activities of the firm. Their functionalities ensure that they interact with other departments within the organization.
The Disadvantages of Transforming CFO’s into CEO’s
One of the most perceived problems of transiting CFO’s into CEO’s is their immediate narrow experience in other functionalities within an organization. It is stated that CFO’s lack leadership, marketing and sales skills which are considered to be integral parts of operating businesses. Marketing skills ensure that they gain experiences needed in conducting marketing mixes. Sales skills ensure that they understand the need of their customers first hand. Thus, narrow experiences have come in handy to prevent them from exercising holistic duties of CEO’s (Brewis, 1999).
The second problem which prevents easier transiting of CFO’s into CEO’s lies in the assumption that the former lack skills related to managerial influence, as well as elements of credibility. Stakeholders of any given company rely on the influence depicted by the CEO in order to make key strategic decisions and partnership growth. Given that CFO’s are only limited to certain financial scope makes it difficult for them to handle such facets deemed resourceful in conducting operations of the business, especially to the external partnerships.
In conclusion, it is safe to assume that despite the aforementioned challenges, CFO’s are more fairly placed to assume the top job, given the fact that they possess financial management skills, as well as controlling and auditing the firms’ operating activities. Thus, they should be prepared in advance before assuming the responsibilities.