Why more risk, strategy and tech chiefs are making CEO

It’s a truth universally (and historically) acknowledged that the pathway to CEO comes mainly via the succession of a company’s CFO or COO. Considered the most prominent roles in the C-suite, with strong foundations in finance and operations, respectively, both the COO and CFO are primed for stepping up.

And while this remains true, as the priorities and challenges of business change, in light of the pandemic and digital transformation acceleration, companies are starting to look beyond the traditional ranks of CFO and COO when looking for their next CEO. 

The number of former CFOs to make CEO (18%) has taken a notable dip, down 24% during the same time in 2020, according to the recently released 2021 Route to the Top report from Heidrick & Struggles.

"The top job, like so many others, has been altered by the rapid changes that have taken place over the last 18 months,” says Jeff Sanders, co-managing partner of the global CEO & Board of Directors Practice, Heidrick & Partners.

Instead, the proportion of new CEOs who held other C-suite roles more than doubled in the first half of 2021 compared to 2020, with nearly one-third of CEOs (32%) hailing from other C-suite positions, revealing that boards and organisations are taking a more expansive view in their CEO succession planning.

Risk, strategy and technology officers moving to CEO

C-suite roles that are moving up in paving the way to CEO include chief risk officer, chief strategy officer, and chief technology officer, with 12% of the CEOs appointed formerly risk, strategy or tech chiefs, up from 3% in 2020.

This reflects the increased importance of functions like technology, risk and strategy in organisations today, as the global corporate environment continues to evolve to a greater stakeholder view.

As companies increasingly put technology at the heart of their strategy for future business growth, CTOs who are already at the helm of executing digital transformation and strategy are natural successors.

Many of the CTOs making CEO are within tech companies, including the current heads of Verizon and BT Openreach. However, even non-tech firms are promoting their CTOs, as GE Transportation and Indonesia’s Garuda airline have proven.

In a post-pandemic world, risk management is also increasingly important with more and more CROs taking the top role.

Two of the largest banks in Europe had to make abrupt pivots at the CEO level this year, and each chose to pass the executive baton to their former chief risk officers, proving the increasing importance of the CRO at financial institutions, in particular.

The step-down of Barclays CEO Jes Staley (following financial regulatory investigations into his relationship with convicted sex offender Jeffrey Epstein) saw the bank select C.S. Venkatakrishnan, its chief risk officer for four years, to take the role. Similarly, in April, following allegations of money laundering, CEO Chris Vogelzang of Denmark’s Danske Bank stepped down, and the bank picked Carsten Egeriis, the bank’s chief risk officer of four years who also had risk management at Barclays.

CEO role is expanding beyond day-to-day operations

The fact that newly appointed CEOs have more diversified areas of prior C-suite experience also reflects the fact that the CEO role itself is expanding far beyond its historical day-to-day running of the business.

As Bonnie Gwin, co-managing Partner of the global CEO & Board of Directors Practice points out, CEOs are quickly becoming the standard-bearer for a wide range of issues from cybersecurity, sustainability, social justice and diversity, equity and inclusion, to inspiring employees and navigating rapid digital and societal transformation.

“These changes are requiring a new CEO profile that brings a wide and differing range of experiences in life and business to the role,” says Gwin.

CEOs are in the spotlight more than ever, their actions are scrutinised by a larger number of stakeholders, and they have to be much closer to and transparent with their own employees.

In this context, leadership capabilities such as agility, empathy, role modelling the organisational purpose, and fostering inclusion matter just as much as specific areas of expertise.