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The functions of Chief Finance Officer (CFO) have broadened beyond traditional focus where they were only limited to finance and accounting aspects. I think finance departments are the most appropriate places to train future Chief Executive Officers (CEOs). Although the promotion rate of CFOs to CEO positions is at 14%, the figure is expected to rise because of the evolving roles of the two job posts (Whitehead, 2015). Although in the past CFOs rarely became CEOs, a number of CFOs have recently managed to get to the top-most post.
CFOs who became CEOs
Daniel L. Florness, the CEO, President as well as Director at Fastenal Company and Robert James Riesbeck, the CEO and President of Hhgregg Company are perfect examples of Chief Finance Officers who became CEOs. Before becoming a CEO on January 1, 2016, Daniel L. Florness worked as an executive vice-president of the same company since 2002. He holds a Bachelors Degree in Accounting from the University of Wisconsin. Robert J. Riesbeck became the CEO of Hhgregg, Inc. after serving in financial and operations management for 25 years. He is a certified public accountant and a graduate of the University of Akron with a degree in Accounting (Management, 2017).
Pros of Hiring a CFO to be a CEO
The global economy needs business leaders who are well versed with financial issues, thanks to the recession, credit crisis, and increased uncertainties. Consequently, companies emphasize on various strengths of CFOs such as financial accountability and risk management while seemingly grooming them to become future chief executive officers (Whitehead, 2015). Today’s Chief Finance Officers are expected to participate more in strategy and operations. Once such officers engage in operations, improve the productivity of a company, and have a good relationship with the public, they become better candidates for the top-most position in their organizations, CEO. This engagement gives these chiefs a holistic outlook of operations thus more suitable for the Chief Executive Officer’s job (Whitehead, 2015).
Chief Finance Officers have the ability to apply their knowledge of business finance to decisions that are meant for the long-term growth of the business. With this skill, a finance officer is seen as a strategic partner who is not only limited to in-house affairs but also plays a great role to make a company sign in the market. Besides, Chief Finance Officers are well knowledgeable about both bottom-line and top-line management. They come up with decisions that address both financial and business perspectives. The most successful CFOs find a middle ground by controlling some decisions while supporting others, a strategy that is ideal for the success of most CEOs. Indra Nooyi, the fifth CEO of PepsiCo was promoted from CFO position to CEO rank in 2006. Under her leadership, Pepsi made many acquisitions. Moreover, Paul Pindar is the third-longest serving Financial Times Stock Exchange (FTSE) 100 CEO who previously worked as a CFO at 3i company (Whitehead, 2015).
The Disadvantages of Hiring a CFO to be a CEO
The hiring of a CFO to become a CEO comes with some drawbacks. First, the perspective of the CFO may be limited to just financial aspects of a company; that is, numbers only at the expense of other factors of growth hence leading to decisions that do not benefit the company entirely. Secondly, most CFOs specialize only in finance and accounting rather than a general marketing background. The limited skills may not be sufficient for the CFO to become an effective CEO (Whitehead, 2015). For instance, after the hiring of Robert J. Riesbeck to be the CEO of Hhgregg Inc., the monthly net sales of the company decreased in January 2017 as compared to the previous months (Management, 2017).
After being founded on April 1, 1976, by Ronald Wayne, Steve Wozniak, and Steve Jobs, the Apple Company released amazing electronic products that caught its competitors and customers by surprise. In 2015, Apple was named the first-ever $ 700 billion company. The company later defeated Google in terms of net worth and became the world’s most valuable brand (Apple Press Info, 2017).
I think Apple will have a successful future, thanks to its present and past outstanding strengths. However, the success will be highly dependent on whether the company will broaden its focus towards satisfying a variety of needs and if it will continue leading in innovation. Although it is almost impossible for Apple to go away completely, the company may become detached from the innovation’s cutting edge if it keeps on focusing on hardware sales as the major organization’s stream. The decline of revenue for the first time in more than a decade is mainly attributed to the peak of the iPhone, which accounts for 60% of Apple’s total sales (Newsroom, 2017).
On October 25, 2016, Apple released financial statements for its fourth-quarter results of the fiscal year 2016 covering the period that ended on September 24, 2016. The results indicated $46.9 billion quarterly revenue and $1.67 of earnings per diluted shares ($9 billion quarterly net income). 62 percent of the revenue of the quarter came from international sales. The results showed a significant decline in the company’s performance as compared to the previous quarter of the fiscal year 2015 where the earnings per diluted shares stood at $1.96 while the revenue was $51.5 billion (Investor Relations, 2017).
The company’s CEO reported that Apple was thrilled by the reception that customers gave to iPhones and Apple Watch. Attributable to the response, the company recorded an operating cash flow of $16.1 billion and returned $9.3 billion to investors through dividends and share repurchases. Apple Inc. is listed in New York Stock Exchange, and its past 12-month rate of return is 36.90%. The investors who bought the shares of this company and sold them yesterday would enjoy a gain of 36.90% of their invested amount. Apple shares are most recently selling at around $ 128.53 (Apple Inc., 2017).
After the departure of Steve Jobs from Apple, the company has been operating under the leadership of highly skilled and experienced top management including Tim Cook, the CEO, as well the company’s member of the Board of Directors, and Luca Maestri, the senior Chief Financial Officer, and vice president. Before becoming the CEO, Tim Cook was the operating officer of Apple and oversaw the worldwide sales of the company. He managed the supply chain of the company and sales activities, in addition to supporting services in all parts of the world and markets (Apple Press Info, 2017).
Before starting to work for Apple, Tim Cook was the Compaq’s vice president of Corporate Materials and was in charge of procurement and management of all product inventories. He had worked as a chief operating officer at Intelligent Electronics before joining Compaq. Luca Maestri has more than 25 years of experience while working for big and complex global companies such as Apple, General Motors, Nokia, and Siemens. The scope of his experience is broad since he was once the CFO of all operations at General Motors (Apple Press Info, 2017). In conclusion, it is evident that the two top managers of Apple Inc. have a wealth of experience in their relevant posts and that may be the reason why the company is still doing well and seemingly has a bright future.
Apple Inc. (2017). NYSE. Web.
Apple Press Info. (2017). Web.
Investor Relations. (2017). Web.
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Management. ( 2017). Hhgregg. Web.
Newsroom. (2017). Apple reports record first quarter results [Press release]. Web.
Whitehead, S. (2015). Hiring a CFO as CEO: Pros and Cons. Panmore Institute. Web.