By ROB WYSE
As the sands of time pass during a career, is it preparing you to be a chief executive officer (CEO), or even getting you to the C-Suite? The chances are not great unless you gain financial savvy along the way. More than ever, financial acumen is a must.
However, most top leaders do not have a finance degree, nor were they chief financial officers (CFO) before they became organisational leaders.
Tim Cook, CEO of Apple has a bachelors of science in industrial engineering from Auburn University; and an MBA from Duke University. His career started at IBM where, over 12 years, he rose to managing manufacturing and distribution functions for personal computers.
He was then a chief operating officer (COO) of the reseller division at Intelligent Electronics; then he joined Compaq Computer as vice president of corporate materials, before finally moving to Apple.
Toby Cosgrove M.D., the recently retired president and CEO of The Cleveland Clinic Foundation, earned his medical degree at The University of Virginia. Before becoming CEO in 2004, he was a cardiac surgeon for nearly 30 years (note: Cleveland Clinic requires its CEO be a physician).
All three of these successful leaders rose through the ranks – but started as specialists. None of them have CFO in their backgrounds.
In looking at top CEOs, many rose as experts in their field – not experts in finance.
In tech for example, they come from a wide-range of educational backgrounds – from computer science, English, history, economics and physics.
How did these executives broaden their skills to go beyond designer, industrial engineer and M.D. to leaders of complex organisations delivering on profit and loss (P&L) without a finance background?
To answer this question, I asked a top-tier executive recruiter for the C-Suite, Thomas Giella, chairman of healthcare services at Korn Ferry. Giella has conducted more than 800 senior-level assignments.
Giella underscored that finance has become front and centre in running an organisation. Two key issues that have driven this heightened need:
- increased business complexity, and,
- understanding the implication in strategic initiatives.
Business is increasingly becoming more complex. Giella cited his industry: healthcare. He said, “In healthcare for example, before DRGs (diagnosis-related groups) came out, healthcare was a cost plus reimbursement business – it was pretty simple to run financially.
Now the deals are huge and complex. You need to understand not only finance, but also the implications of the technology, supply chain, people and systems. The deals are seven, eight or nine-digit types of investments and critical thinking, and financial acumen is a must – a miscalculation on one of these projects could be detrimental.”
Finance has become, more than anything, front and centre in running an organisation according to Giella. It affects any strategic initiatives, or any type of purchasing. For the large health systems, supply chain management has become a critical function.
He said: “In large, complex health systems, the supplies budget (which is virtually all non-people related expenses) will be in the billions of dollars. If you are in a business like provider healthcare, where margins are tight, managing the supply chain can be the difference between profit and loss. For example if a health system spends a billion on supplies (materials, technology, construction, etc) annually, and it can save just a percent on these purchases, it is USD$10 million savings to its bottom line.”
So, how do you prepare?
The Hourglass Path to The Top
Giella described a successful career path as an hourglass. “As you start out in your career, you can be broad and try several different functions, but as your career develops, you need to focus on a specialty where you can make your mark.
That’s where the hourglass narrows. Then, when you move to the senior management level, where critical decisions are discussed at executive leadership meetings, the best people learn from their colleagues and get skilled in all functional areas of an organisation – that is where the hour glass widens again.”
Giella said if you are the finance person, you have to know human resources, marketing, operations, information technology (IT) and more. So, you go from really wide learning early in your career, to becoming an expert in a narrower area, to becoming a broad thinker at the executive management level where group dynamics and decision-making are critical.
He said, “In order to get to the top, you have to have run something. For credibility purposes, you have to have some type of operational experience somewhere in an organisation. For health systems, it does not have to be running inpatient units. It could be on the outpatient level, major service lines, or an ancillary business. Bottom line though is you need some kind of significant P&L experience.”
If you are purely a staff person and have never run anything, Giella noted it is less likely you will land a top spot.
So time is ticking. Niccolò Machiavelli capsulised perspective on time in this famous quote: “The more sand has escaped from the hourglass of our life, the clearer we should see through it.”
As your career develops, look back, broaden your perspective, and make sure you understand the numbers. It can land you at the number one spot.
Rob Wyse is a leading publicist in the United States as well as a prolific writer. He is a top commentator on workplace issues and dysfunctional CEOs. Rob is also the managing director of Capital Content, a PR and marketing firm that develops issues-driven thought leadership and strategic communications campaigns. To connect with him, email us at email@example.com.