Is Your CFO Your Next CEO?

I have been working in and with financial institutions for four decades. During that time, I have attended literally thousands of board, supervisory committee, compliance and ALCO meetings. In addition, I have personally moderated or participated in over 600 strategic planning sessions. The intent is not to impress you with the numbers, but rather to lend statistical validity to the observations below.

At many of these meetings, I meet privately with the board and also the CEO. Many subjects are discussed, including business continuity. As part of the discussion, I usually ask the question: “If the CEO unexpectedly left the credit union, who would take his/her place, at least in the interim, until a full CEO search can be completed?” It is a fair question – and one proper credit union governance should be prepared to address.

The answer I hear over 50 percent of the time is: “the CFO.”

The Interim CEO

When the CEO departs suddenly, the credit union is placed in a unique – and delicate – situation. The employees, members, and community are looking for stability and leadership. Many times the chief financial officer will be asked to step up to become the interim CEO. Whether this arrangement becomes permanent depends on many factors, but at least in the interim, the CFO is the person. Why? The reasons are simple:

• The volunteers trust the CFO. Besides the CEO, the CFO is usually in charge of the most sensitive information the board sees, and also is the main person dealing with the regulators. Board and supervisory committee meetings have large blocks of time interacting with the CFO and his/her staff. Over time, they rely on the CFO for many items – and the trust builds.
• It is important to keep credit union operations going. Part of the reasoning of not picking the chief operations officer or the chief lending officer – especially in the interim – is because of business continuity. Loan production, member relations and branch operations usually fall under the domain of the COO and CLO. If either of these people become the interim CEO, production could be hampered. Many times the board will consider other internal “C” level personnel for the permanent CEO position, but only after things at the credit union stabilize following the CEO’s departure. 
• Volunteers rely on the CFO for more than just financials. In the last 10 years, the CFO has become the go-to person for more than just financials. As examples, business analytics (past and projected), opinions on the business model of the future, risk tolerances, and even volunteer governance ideas have been subjects directors are asking the CFO’s opinion on. The path is clear: The CFO’s role has evolved into more than just reporting financial statements; it is now an expanded, total business role.

How to Be Prepared – You Might Be Asked to Step up to the Plate

• Decide on your career path. One of the first decisions for your career is to either 1) remain content as the CFO, 2) stay long term as the CFO, during which time you could be called to serve as CEO on just an interim basis, or 3) aspire to be CEO someday. Each of these paths requires different preparation. If you choose to be a CEO someday, consider additional training – such as CUES’ CEO Institute– that can help prepare you for the role.
• Communicate, communicate. Start by having a discussion with your CEO and, in time, key volunteer positions, such as the chair and vice chair of the board and perhaps the supervisory committee, about your career intentions. I have witnessed situations where the CFO expected to become CEO after the former CEO retired, only to find out he/she had been passed over. The directors assumed the CFO was not interested since no communication from the CFO on his/her career intentions took place. 
• Work closely with the COO and CLO. Remember, in the end, it is the service to your membership, fellow employees and the community that counts. Rivalries can have their pros and cons, but you need to find a way to work harmoniously with the other “C” members of the credit union. As an example of a harmonious transition, I have seen situations where the CFO takes on the interim CEO role, then the COO becomes CEO for three to five years until retirement. In the meantime, the former COO helps “groom” the CFO for the eventual top job.

Bill Goedken, CPA, CMA, CGMA, is CEO of CUES Supplier member idea5, a business intelligence and research company for financial institutions that offers Stratezy. He has an extensive financial institution background; was the founder and former CEO of Profitstar Inc.; and is a frequent CUES speaker and contributor. Goedken is a member of three credit unions, including Westerra CU, Denver, where he is the former vice chair of the supervisory committee; Grow Financial FCU in Tampa, Fla.; and HawaiiUSA FCU in Honolulu.