From CFO to CEO

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When Paul Mallen stepped into the CEO role at The Amalgamated Family of Companies in February 2018, he felt well prepared for the top job thanks to fourteen years at the White Plains, NY-based life insurer, which has traditionally focused on selling to labor unions—but is now branching out to mid-sized companies.

As CFO, he had a deep understanding of the company’s finances—but he’d also worked as the defacto COO as well, overseeing functions including IT, underwriting, insurance operations and facilities. He also had the advantage of solid, long-standing relationships with all the other senior managers in the leadership team who would now report to him.

But still, being CEO is very different than being CFO. From reporting to a board, not a boss, at a $180 million (revs) private company to engaging with entirely new parts of the business—not to mention customers—Mallen’s had to expand and reshape his focus. Mallen shares his lessons with Chief Executive for anyone making the transition—and CEOs helping their CFO get ready for the top job. What follows is edited for length and clarity:

You came up on the finance side. What surprised you about being CEO?

One was having to work more closely with the board of directors, which I expected. I’ve worked with the board before in my CFO capacity, but now we’re reporting directly to the board and it’s not like reporting to a direct manager such as your CEO or others. They’re not looking at you day to day. They’re not in the office, they’re spread out throughout the country.

Some of the other differences: I have to focus more on sales and marketing. As CFO, I always worked with the sales and marketing groups, but I didn’t have to get in depth how they market, how they sell and so forth. I had to gain a deeper understanding of the process with our sales executives. And with that we’ve come up with new strategies and approaches to enhance our growth going forward.

There were certain operational areas of the company, that did not report to me, so I had to learn those more in depth. More direct involvement with customers, brokers and consultants, which I happen to like. I’ve been very lucky with the internal relationships here. When I was CFO, of course I had many peers, but then when I was promoted, they were all reporting to me.

That’s a difficult transition sometimes.

It can be. I was very fortunate that the senior executives here supported the board decision to elect me CEO and they’ve been in the past year and a half extremely helpful. It’s really gone a long way in helping our company succeed.

How have you fostered that?

Well, first of all, those relationships developed over many years and from working with them and I think it’s gaining respect at that point, even though they may not have reported to me. It’s respect for the work I’ve done, the way I’ve treated them, the team effort. A lot of that carries now into the executive meetings and the way I’m looking at the company.

If there are issues or problems that have been bubbling, we always try to get to them early before they become difficult to manage. If one person has an issue, we’re not looking for that individual to necessarily resolve it on their own. I’m always looking for a different point of view and disagreements. I’m not looking for yes answers. I’m looking for different viewpoints.

The insurance business is changing, you’re looking to expand beyond your traditional labor base of customers. There are other really large players in your sector. On top of that, there’s digital technology and the way it’s transforming every industry. Can you talk a little bit about how you’re triaging all this and how you’re tackling some of those challenges?

That’s exactly what we’re looking at right now. Our roots are in labor and now we’re looking to grow beyond labor unions to include midsize employers nationally. How do we think about that? Well, serving labor is really no different than serving the needs of rank-and-file employees, including highly skilled workers serving mid-size companies. So we think that we know these people, we know how to service them, we understand their needs. And with that, we think we could be successful in selling our benefits, which is one of our growth areas.

We understand the needs of mid-sized companies because we are one. Because of our size, because of the way we operate here, we can customize solutions.

As far as the technology change, obviously it can be a great equalizer between big companies and small companies done right. But also, you have to be very careful about capital spending and making the right decisions. And there’s just a lot that comes with it.

How are you tackling that?

We’re the smallest standalone “A” rated company in terms of capital. So we have to approach things very differently than larger carriers because we can’t take flyers. If we make a mistake when we’re investing in technology, if we’re putting a lot of capital into it, we obviously have a big issue. Having said that there are real technology needs and…we’re dealing with all the same cybersecurity issues that the larger carriers are. We spend a lot of time in terms of prioritizing where our needs are. We’re looking at the markets. We’re looking at Insuretech, we’re looking at other ways. We can always find efficiencies.

Any advice for someone who’s come up in finance who’s moving into the CEO role from the finance side?

Someone moving into the CEO from the CFO role, whether it’s internally or externally, you’ve got to start to make sure that you understand all the businesses that the company has and the operations so in effect, you’re learning down in terms of the operations. Also, there were a lot of expectations in terms of reporting directly to the board of directors and being able to work that with that board, not just around board meetings, but throughout the year.

I think CFOs always think ahead and are proactive. But as a CEO, you’ve really got to think ahead and keep thinking way out into the future, not just what’s happening this year. A lot of times CFOs might be focused on current year results, but you’ve got to focus out 3 to 5 years.

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