In today’s competitive business landscape, knowing how to be more agile and adaptive has never been more important. Given the necessity to grow toward a more tactical business planning approach, key organizational roles are being forced to evolve.
One such example is the traditional role of the Chief Financial Officer, which can shift from CFO to COO. Hybrid CFO/COO roles grew 200% since 2020, particularly in technology and healthcare sectors where operational-financial integration drives innovation.
The Natural Progression from CFO to COO
CFOs oversee so many financial and strategic threads, they're uniquely positioned to become effective COOs. Being a modern CFO vs. COO is comparable to being a midfielder against a coach in soccer.
As a key player, you've got full access to all information, you're aware of what’s going on in real time, and you've got the authority to decide where to invest resources to manage risk and promote team success. However, as a coach, you've got to grasp every facet of the organization and think strategically about how each decision affects overall performance.
A skilled CFO also tends to have a strong commercial acumen, making them the member of the management team best suited to understand the organization from the ground up. Moreover, having solid financial awareness often means being familiar with the organization's operations and pinpointing areas of potential growth and revenue drivers.
Lastly, due to market volatility, investors are increasingly interested in how leadership teams manage financial matters rather than just hearing about companies' stories, so they'll scrutinize the background of senior executives more than ever.
Steps CFOs Should Take to Successfully Transition to COO
To stay ahead of the game, if you're a CFO looking to rise to a COO position…
Your first step's shifting away from traditional methodologies and adopting a more holistic, forward-thinking approach.
Next, establish a solid relationship with internal leadership teams so you can collaborate on business opportunities.
And finally, explore how you can simplify your procedures to increase organizational efficiency.
The CFO's typically been in charge of overseeing all of Finance, including cash flow management, financial risk management, strategic finance, treasury functions, and performance reporting, among others. Because they're required to be more agile and forward looking, modern CFOs are not only in charge of strategic financial planning but also serve as business partners to support the board of directors in decision-making. However, given the challenging business climate, the CFO's responsibilities have expanded to go beyond mere numbers and are now entering a more strategic and forward-thinking role.
As a result, they're increasingly engaging with internal and external stakeholders to understand how each function contributes to the bottom line, make financial predictions based on relevant socio-economic and operational data, and develop actionable plans to grow profitably. Moreover, they've got to stay up to date on the latest business trends and practices so they can implement the right resources and technology to drive growth.
What type of professional makes a good COO?
The chief operating officer (COO) is the second-in-command of an organization. They're responsible for managing and directing all aspects of operations, and depending on the organization this can include Finance, Human Resources, Marketing, Sales, Customer Service, etc. In medium-to-large organizations, they'd usually report to the CEO and work with other senior executives to decide how the company should be run.
However, there has been a 37% decline in COO positions among Fortune 500 and S&P 500 companies since 2013, with 73% of 2024 COO departures resulting in vacant positions rather than being refilled.
Additionally, excellent communication, problem-solving, and leadership skills are essential since they're the C-suite's point of contact with other company departments. CFOs-turned-COOs demonstrate 15% higher cost efficiency but 22% slower revenue growth than traditional COOs during their first 18 months, highlighting the performance trade-offs in this transition.
Aside from the operational perspective, they've got to have a strategic and analytical mindset that lets them see beyond the short term and into the future. While developing and implementing operational strategies—which may entail expanding the workforce, introducing cutting-edge technology, or modernizing outdated procedures—a COO must plan months, quarters, or years ahead to ensure the company's on the right path to reach its business goals.
Additionally, excellent communication, problem-solving, and leadership skills are essential since they're the C-suite's point of contact with other company departments.
Building on these strategic considerations, let's explore what it takes for CFOs to transition into COOs effectively.
How to Transition from CFO to COO
The main difference between a CFO and a COO is where they place their attention, with the CFO focusing more on financial matters and the COO taking a broad view of the entire operational environment.
However, because of a CFO's unique perspective on operations and finances, it can be an excellent career move to transition into a COO role. As a result, seasoned finance professionals will need to pick up new skills to excel at being the CEO’s right hand.
1) Build Company-Wide Operational Knowledge
A CFO has a clear guiding role within the finance department; however, when it comes to leading a large enterprise, a COO is expected to assume a broader scope of responsibility and influence across multiple functions. Thus, they've got to understand and work well with different teams and individuals, build consensus, and foster collaboration among stakeholders.
2) Develop Cross-Functional Leadership Skills
Whereas a CFO can lead a finance team by providing guidance and mentorship, a COO's got to take on more responsibility and act as a business leader who sets goals, anticipates needs, and makes sound decisions on how a company operates. This requires strong interpersonal skills and the ability to manage people from more diverse backgrounds and areas of expertise.
3) Adopt an Execution Mindset
As Head of Operations, a COO's responsible for ensuring the business operates to the highest standard. Therefore, taking an execution attitude toward development rather than only regulating and identifying constraints is another key difference between COOs and CFOs. Ultimately, a chief operating officer must not only spot potential issues early on but also make prompt decisions that drive sustainable growth.
4) Embrace a Forward-Thinking Strategy
In contrast to finance leaders, who frequently focus more on past performance, COOs place greater emphasis on finding and managing opportunities instead of simply mitigating risks. They must have a strong awareness of the company's vision, understand their overall position in relation to external variables, anticipate future industry trends, and be innovative to boost operational performance.
5) Maximize Operational Value
While CFOs like to see business growth through the lens of cost control and profit maximization, COOs prioritize gathering insights by looking for opportunities to increase value while using the same resources to support corporate success. Therefore, COOs approach business development from a more holistic angle, assessing both the company's areas for improvement and methods to raise the value of offerings to bring in revenue.
Key Takeaways on the CFO to COO Journey
CFOs have the strategic insight to shape operational success
Cross-functional leadership and collaboration are essential
Embracing agility and innovation drives sustainable growth
Championing execution fosters a results-oriented organization
Not sure where to begin? Request a demo today to learn more about how Abacum can help you streamline your operations through automation and seamless collaboration.
