CFOs Are Movin' On Up

In local government, chief financial officers are starting to find a clearer path to the top spot.
October 2015
Heather Johnston, a former CFO, is now the city manager of Burnsville, Minn. (City Burnsville)
By Justin Marlowe  |  Columnist
Endowed Professor of Public Finance and Civic Engagement at the Daniel J. Evans School of Public Policy & Governance at the University of Washington

Dick Costolo, Twitter’s chief executive officer, announced in June he would be leaving the company. Few were surprised. Twitter’s stock price had fallen nearly 30 percent and shareholders were eager for a change. One initial favorite to succeed Costolo was Anthony Noto, Twitter’s chief financial officer and former CFO of the National Football League. (At press time, a new CEO had not yet been named.)

Of course, unless you’re into Silicon Valley corporate intrigue, you probably don’t care who the next “Top Tweeter” is. But the Costolo-Noto story is noteworthy, because it shows that in some major companies today the CFO has a clear path to become CEO. In fact, in the past few months AMC Theatres, Siemens, BASF, Sprouts Farmers Markets and Blue Earth, among others, all hired a CEO from the CFO ranks. It seems that a growing number of corporate boards not only want traditional CEO skills like decisive decision-making and persuasive communication, but also the dispassionate, reflective, analytical leadership style we associate with CFOs.

There’s a similar trend in local governments. Conventional wisdom says local government CFOs are exceptional bean counters. They become the CFO by knowing more than anyone about the complex rules on how government money is earned, spent and reported upon. They’re compliance experts, but they’re not necessarily the strategic thinkers, hard-nosed negotiators and community builders that many city councils want for their next top executive.

Still, more and more local government CFOs have made the leap to CEO. I reached out to four officials who have made the transition in the past couple of years to see how their time as CFO shaped their philosophy as CEO. Their answers are similar: All four talk about breadth. “A former CFO is going to know the full range of financial and managerial tools for making decisions,” says Mark Jinks, city manager of Alexandria, Va. “A CFO also has had an organization-wide perspective and has likely been a leader in negotiating many contracts and agreements -- all skills a CEO needs.” In other words, CFOs are not necessarily just bean counters.

The four also talk about salience. In a post-Great Recession world, many city councils want to pursue long-term financial health, and not just talk about it. This is where the CFO excels as CEO. Heather Johnston, city manager in Burnsville, Minn., says that as a former CFO she is uniquely able to help her council focus on “not just how a decision impacts the city right now, but how to make decisions that are financially sustainable over time.” So finance-oriented execs are particularly good at bringing the abstract part of financial health to life to inform decisions today. Bob Wingenroth, city manager of Surprise, Ariz., echoes this sentiment by saying, “Because of my past experience, I won’t present a potential solution unless I can figure out how the finances will work in the long term.”

Perhaps most interesting, they talk about creativity. John Caulfield, city manager in Lakewood, Wash., says, “I try not to let money get in the way of a new or creative solution or program.” Each in their own way said their finance background helps them understand and communicate policy trade-offs, but then offer up creative ways to navigate those trade-offs. Money, then, is not a reason to say no, but rather a reason to think about what’s possible.

Breadth, salience and creativity -- these are not the words we tend to associate with government CFOs. But if these four leaders are any indication, many more cities might look to their CFO ranks for a chief executive with precisely these skills.