Do CFOs Make Good CEOs?

Reading Time: 2:20 minutes

Take the sterling example of Daniel Zhang, the chief executive officer of Alibaba, the Chinese online and mobile commerce mammoth. Once in the shadows of his maverick mentor, Zhang will come into his own come September next year when he takes over as the chairman of the board.

The flashy and well-regarded incumbent, Jack Ma, had announced this handover on his 54th birthday, giving one-year’s notice for the transition. Ma will remain on the board of directors until Alibaba’s annual shareholders meeting in 2020.

Zhang is no stranger to the global corporate scene, although Ma has been the figurehead for Alibaba all these years. Zhang hails from a financial background, to the pride of chief financial officers around the world. He first joined Alibaba 11 years ago as CFO of Taobao Marketplace in August 2007. Rising to become president of Tmall in 2011, Zhang has been credited with the success of its 11.11 Singles’ Day, a $25 billion online shopping spree. In May 2015, he rose to become the CEO of Alibaba Group.

How does a Shanghai-trained accountant rise to such heights?

Born in Shanghai in 1972, the 46-year-old Zhang graduated from the Shanghai University of Finance and Economics with a bachelor’s degree in finance. He started out as a senior executive of PricewaterhouseCoopers’ Audit and Business Advisory Division in Shanghai, and moved on to become the CFO of Shanda Interactive Entertainment Limited, an online game developer and operator then listed on NASDAQ.

As a chief financial officer, Zhang exhibited many of the traits that made him stand out as a Finance Leader.

In a global survey of 1,500 CFOs in 2017, Oxford Economics and SAP found that only a select 11.5% of respondents qualified as Finance Leaders, which are CFOs that are almost twice as likely as non-leaders to report a bigger market share over the past year.

The study identified the following six traits that make a Finance Leader, enabling CFOs like Zhang to stay ahead of the pack and boost performance:

1. Have strong influence beyond the finance function
2. Drive strategic growth initiatives
3. Improve efficiency with automation
4. Are very effective at core finance processes
5. Collaborate regularly with business units across the entire company
6. Work closely with the GRC team and excel at handling regulatory change

The payoff for CFOs that exhibit these traits is that these Finance Leaders have a higher likelihood of growing market share and maintaining a tight grip on costs. The six practices boost business performance and efficiency, as well as governance, risk and compliance (GRC) effectiveness across the company. This positions the CFO to be ready to make the move to the next level when the opportunity arises.

Under Zhang’s stewardship, Alibaba has grown from a PC-based transactions to mobile-based transactions which currently account for nearly 80% of total gross merchandise volume for the ecommerce giant.

Shortly after joining Taobao Marketplace as CFO in 2007, Zhang was appointed its chief operating officer and general manager of Taobao Mall, a business unit which quickly became one of Alibaba’s most important and was subsequently rebranded as Tmall.

The 11.11 global shopping event that Zhang architected in 2009 was his answer to the West’s Black Friday. Last year, the annual shopping bonanza raked in $25 billion for Alibaba alone— four times the sales of Black Friday and Cyber Monday combined. Zhang was promoted to chief operating officer of Alibaba Group in 2011 and CEO in 2015. Since then, Alibaba’s stock has grown 87% while its market value has almost doubled to $420 billion, surpassing its domestic rival Tencent.

Within Alibaba, Zhang is popularly known by the nickname of “Xiaoyaozi” which translates to “Free and Unfettered One”.

So what are some tips that the “Free and Unfettered One” has for the aspiring corporate leader? Below are seven leadership principles, which he published on CNBC, that guide him and his team— keeping them focused on what’s important when they think about competition, hiring talent and making hard decisions.

1. Management is not leadership. Zhang believes it is important to differentiate between “managers” and “leaders”. To him, a leader leads the team and crafts the future, going beyond managers who focus on running the business to get expected results.

2. Compete with yourself. Zhang emphasises the importance of staying on the cutting edge, always learning and innovating, and having the courage to reinvent oneself. He says, “If we don’t kill our old selves, then we’ll be killed by our rivals.”

3. Study the future, not the past. Always think long term to avoid missing future opportunities through shortsightedness.

4. Know when to go all-in, and don’t be afraid to do it. Zhang believes leaders must be decisive and be willing to lose it all to win big.

5. Buy, don’t bet. Rather than betting on a horse, Zhang prefers to buy it, figuratively speaking. Instead of spreading the risk by investing in minority stakes in several horses, he prefers to acquire the company for “important strategic projects that require real synergies and integration.” That way, he assumes responsibility and gives full commitment to ensure these crucial acquisitions succeed.

6. Find people who truly see the big picture. Zhang stresses the importance of finding people who can provide an alternative perspective. For him, he cherishes the views that Ma shares with him over long talks.

7. Hire adventurers, not employees. In searching for candidates for leadership roles, Zhang looks for those with an appetite for adventure who are comfortable with risk and change, instead of employees merely looking for a job and a paycheck.

Asian leader

So do CFOs make good CEOs?

Absolutely—and Daniel Zhang is a living example of this.

In Jack Ma’s letter to Alibaba shareholders and customers, he praised Zhang’s “superb talent, business acumen and determined leadership,” which brought 13 consecutive quarters of growth for Alibaba. Noting that China’s business news media had named Zhang the No.1 CEO in 2018, Ma felt that Zhang had the guts to innovate and test creative business models. In fact, Chinese media credits Zhang as having transformed Ma’s Alibaba “tractor” into a “Boeing 747”.

Under Zhang’s stewardship, Alibaba has grown from PC-based transactions to mobile-based transactions which currently account for nearly 80% of total gross merchandise volume for the ecommerce giant. Indeed, Zhang serves as an apt role model for CFOs who aspire to step up to assume the mantle of CEO one day.

Learn more about the qualities of The Empowered Finance Leader in this infographic.

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