Through their tenure in the chief financial officer role, executives develop strong logic and analytic skills, the courage to ask hard questions and say “no” and the flexibility to successfully adapt to a position that has changed dramatically over the past decade. CFOs also develop comfort in working with the board of directors through significant and regular exposure to the board.
But when boards consider candidates to ascend into broader leadership roles, they sometimes view CFOs as executives who lack experience leading and motivating a 21st century workforce. To counteract this perception, financial executives must develop leadership skills and demonstrate their potential to lead beyond the finance function. By doing so, finance leaders have an opportunity to both improve their performance in their current role and to better position themselves for future career advancement.
Studies of the differences between chief executives who fail and those who have shown remarkable staying power reveal that the most profound way that leaders can differentiate themselves is through their ability to realize their maximum potential and the potential of their workforce.
It is the essential part of a CEO’s job — and the quality that CFOs must develop and demonstrate to prove their own leadership ability.
Research over the course of eight years shows three essential capabilities that allow leaders in today’s turbulent world not only to perform at their best, but also to get the best out of their people. These drivers literally set in motion the fundamental function of leadership, and together they comprise the mental architecture that CFOs must develop in themselves to be effective leaders. Each of these three traits is a catalyst of the mastery displayed by the most successful CEOs.
Realistic Optimism
Most people manage their anxiety under duress by using coping mechanisms that mask the risks involved in the actual circumstances with which they are confronted. They ignore critical facts and rely on a belief that things will work out. Or they focus on the wrong things — propping up a sapling when the whole forest is burning.
But great leaders remain acutely aware of the reality of the challenges they face so they can focus their efforts on actions most likely to yield results. This attribute is called “realistic optimism.” Possessing an awareness of actual circumstances, good leaders balance what is known and unknown to prepare for multiple plausible events. By doing so, they maximize their odds of success and engage a workforce in a world of substantial ambiguity.
Effective leadership requires an individual to take in both positive and negative messages. It requires reacting to setbacks with the appropriate level of disappointment that reflects the seriousness of the problem so that the leader’s staff also takes the bad with the good. Frustration, obstacles and moments of doubt are required to grow to one’s full potential.
Far from being paralyzed by these disappointments, good leaders use them as catalysts for change.
In working with CEOs who are in trouble, the first question asked is: “Is the executive savable? Is it worth trying?” And while the answer is rarely simple, the single most telling factor is the individual’s sense of agency — the degree to which people attribute their circumstances and the outcomes they experience to being within their control.
For people who choose external explanations for what is happening — “I didn’t get promoted because my boss is stupid; I only got this job because my dad called someone” — long-term success becomes much more difficult. For those who look inward for explanations, learning and behavior change become much more plausible.
Because exceptional leaders believe that their own actions largely determine outcomes, these leaders, even in the most challenging circumstances, tend to do things that can appear unconventional to others. Throughout their actions, their sense of agency expands the freedom they feel within their situation. They ignore limitations that would inhibit anyone else, and their self-determination generates a sense of opportunities where others see none. At the same time, they remain aware of the magnitude of the challenges confronting them and the difficulties that lie ahead.
Leaders with realistic optimism also work to instill the same quality in their people. They teach employees to face reality by providing repeated, accurate feedback to show individuals how they are doing, both when they succeed and when they stumble.
And they allow individuals to recognize for themselves the particular habits that help or hinder them. At the same time, they also develop the sense of agency of their people by increasing the observable level of control that people have over their jobs. This enables employees to increase their sense of responsibility for their own actions, and invigorates their level of engagement at work.
Subservience to Purpose
While realistic optimism is the catalyst that allows leaders to see and address deficiencies in themselves and the world around them — and thus grow and realize their potential as a result — subservience to purpose gives them the drive to do so. Leaders who demonstrate this quality put their company’s mission ahead of their own comfort.
They equate progress toward this goal with emotional satisfaction. They are, ultimately, servants to their company’s most noble purpose. And subservience to purpose reveals itself in two critical attributes: affiliations based on shared dedication and affect tolerance.
Affiliations based on shared dedication arise from a leader’s interest in cultivating relationships that come from working toward a common, noble purpose. The work relationships of masterful leaders are not based on shared hobbies, a mutual sense of humor or common backgrounds — things that determine the closeness of most relationships. Instead, because gratification derived from purposeful work is so dominant in their psychology, masters of realizing potential insist on surrounding themselves with coworkers who share this dedication.
This unique aspect of work affiliations relates to the issue of how masterful leaders are perceived by others. There is a common misconception, for instance, that the CEO role is a lonely job, and that to make the tough decisions, the CEO can’t get close to people.
But in reality, CEOs say they think the job is one of the most rewarding paths anyone can be fortunate enough to earn and do not regret the position.
They are not disconnected from the people with whom they work. Instead, they demonstrate deep caring for the people who report to them. But these affiliations are strongly focused on mutual accountability and purpose. And the CFOs who are the best leaders make similar choices and connections.
Affect tolerance — the second attribute relating to subservience to purpose — is the ability to channel intense reactions to recurring setbacks in a way that avoids hampering the leader, but instead constructively keeps the leader and the organization moving forward toward maximum potential.
Most people find their progress dramatically slowed by their emotional reactions when confronting forbidding situations. But the great leaders have learned how to manage these feelings in a way that allows them to make continued progress even in times of the most extreme pressure. This outward calm and focus in the face of stress not only help individual leaders rise to their best achievements, but also shows their people how to do the same.
In fact, one of the most critical tasks for leaders operating in a stressful environment is to channel their emotions and reactions in a way that does not hinder their people’s progress.
The best leaders understand the outsized effect that their emotional behaviors have on their people because of their positional authority. While they experience moments of intense frustration, aggravation and even dejection, they are able to check their impulses to unleash these potentially disruptive reactions on their team.
This is not to say that they avoid authentic reactions, but that they temper the intensity of their responses in awareness of the unequal power dynamics they share with their people.
Finding Order in Chaos
Today’s leaders must thrive in an environment of unprecedented fluidity. Finding order in chaos has two primary elements: clarity of thought and the drive to solve the puzzle.
Maintaining clarity of thought denotes the way that leaders are able to keep sharp cognitive skills even when they are under pressure. Great leaders are able to overcome fear and think more clearly even as the world becomes more confusing and threatening; they dampen their anxious emotions to instead focus on intelligent thinking.
While heightened levels of anxiety have long been shown to dramatically impair people’s ability to think, great leaders know both how to keep their wits about them in fast-changing, highly complex environments and how to raise their level of lucidity as the pressure of the situation increases.
Aspiring leaders need to make adrenaline their friend. Crises can provide opportunities for tremendous progress, particularly in building dedicated teams. By inspiring calm in the eye of the storm, leaders can bring about a highly functional collective response that uses the sense of urgency to create a laser-sharp focus on the job at hand.
The drive to solve the puzzle is the second component of finding order in chaos. Tightly intertwined with clarity of thought, this attribute is critical for a leader aspiring to move beyond merely the ability to think intelligently in stressful situations. It gives leaders the ability to create order from the myriad inputs around them.
More than ever, leaders must identify what their organization can do better than any other organization and what it should be doing better than others, and pursue the latter with relentless focus.
Fully realizing their own potential and that of their people requires leaders to identify and pursue these types of emerging opportunities through intense, ongoing thirst for bringing clarity to complex problems.
Great leaders see the shifting puzzle of the rapidly evolving competitive space as stimulating. They love complex, multidimensional puzzles and take pleasure in finding solutions to them. This drive, and the ability to listen and learn from others, is critical for a leader to succeed.
Learning to Lead
The good news for CFOs is that the three catalysts seen in the world’s best leaders can be developed. With awareness of the catalysts, finance executives can choose to build them in themselves. But realizing one’s own potential alone is not enough. To excel in their current roles and position themselves for broader leadership roles, CFOs must also bring out the best in those they lead.
At their heart, the three catalysts reflect the truth that people do not act as isolated entities, but are reflections of an essential interaction between themselves and the context in which they are placed. Leaders cannot simply give instructions to their people about how to master their potential in a world of duress.
A person’s potential can only emerge as an active process, consciously cultivated through a fluid, ongoing exchange between leaders and their people. And that exchange depends upon the three essential catalysts that make it possible.
Justin Menkes is an author and expert in the field of C-suite talent evaluation. His latest book, Better Under Pressure, released by Harvard Business School Press.
This article first appeared in Financial Executive magazine.