From my days of playing in a band, opening for the likes of B.B. King and Blood, Sweat, & Tears, I learned a crucial lesson: being good doesn’t mean you’ll make it to the top. This truth isn’t just applicable to the music industry; it’s a reality in the banking sector as well. Drawing on my extensive experience in banking since 1970, including consulting with hundreds of banks and teaching finance for over 40 years, I’ve come to realize that not all Chief Financial Officers (CFOs) have what it takes to become Chief Executive Officers (CEOs). This article explores the ten types of CFOs who are unlikely to ascend to the role of CEO.
Types of CFOs Unlikely to Become CEOs
These CFOs are competent bankers, but lack the necessary qualities to take on the role of a CEO. They may move laterally to another bank, but achieving the top spot is a different ball game.
1. The Hedge-Averse CFO
The first type is the CFO who refuses to hedge against interest rate risk, asserting that “hedging is for investment banks not commercial banks.” These CFOs fail to protect their banks from significant interest rate risk, leading to considerable financial losses. For instance, a 2023 study revealed that over 75% of banks reported no material use of hedging, resulting in over $300 billion in unrealized losses last year.
2. The Short-Term Focused CFO
Secondly, there are CFOs who live and die by quarter-end results, often at the expense of long-term stability. They’re known for making ‘opportunistic’ decisions, like Silicon Valley Bank’s CFO who sold nearly all the bank’s $15 billion of interest-rate swaps in 2022 to hit quarterly targets, ultimately leading to the bank’s demise.
3. The Arrogant CFO
Then we have the “Dilbert CFOs” who, like the engineers in the “Dilbert” comic strip, look down on other functions within the bank due to their “finance knows best” attitude. They fail to appreciate the value that other departments bring to the table, creating a hostile work environment.
4. The Opportunistic CFO
The fourth type is the “CRA greenwashing CFO,” who manipulatively uses Community Reinvestment Act (CRA) investments to get merger approvals, only to dispose of them afterward. This short-sighted strategy often backfires in subsequent M&A deals.
5. The Incommunicative CFO
The fifth type is the CFO who struggles to communicate effectively without referencing a spreadsheet or financial dashboard. Their reliance on Excel and numbers, while useful in some contexts, can hinder their ability to engage with others effectively, which is a crucial skill for a CEO.
6. The Risk Averse CFO
Sixth on the list is the CFO who believes their primary role is to manage risk through cost cutting. These CFOs often dismiss innovative banking opportunities in AI, banking as a service, and crypto, due to perceived risks.
7. The Retrospective CFO
Seventh is the “rearview mirror CFO,” who focuses on past performance and fails to make credible future projections. These CFOs often miss out on valuable opportunities because they can’t see beyond the numbers.
8. The Outsourcing CFO
The eighth type is the CFO who overly relies on external advisors for treasury management. While consultancy services can be useful for one-off deals, daily treasury management should be handled internally.
9. The Benchwarmer CFO
Ninth is the “benchwarmer CFO,” who lacks the emotional intelligence to lead, motivate a team, or communicate effectively with the board. They may be competent in managing the books, but they fall short when it comes to the people skills required to lead a bank.
10. The Non-Selling CFO
Last but not least is the CFO who struggles with sales. As many successful CEOs will attest, banking is as much about selling as it is about making money. CFOs who lack this skill are unlikely to make it to the top.
In conclusion, being a competent CFO doesn’t automatically qualify one for the CEO role. It requires a different set of skills and mindset, which not all CFOs possess. A good CFO can manage finances, but a great CEO leads people, drives strategy, and navigates the bank successfully into the future.
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