Big Shoes to Fill?

Many companies are passing over controllers when filling vacant CFO posts. Should controllers be worried?
Janet KersnarApril 11, 2007

Not so long ago, when Thomas Henne was an up-and-coming divisional controller at ZF Friedrichshafen and was taking part in a management development course with 25 “high potentials” from other parts of the company, a thought suddenly occurred to him: “There’s no other job better than the one I have.” Today, the 42-year-old, who was promoted to group controller of the €12 billion ($16.1 billion) German car parts supplier, earlier this year, hasn’t changed his view, despite the growing post-Enron pressures and governance drudgery that many HR experts say have been bogging down executives like him.

“Working within a network of controllers,” he says, “is probably the best and richest way that you can be a part of the decision making in a company.” As for the rigors of corporate governance and a more stringent regulatory environment, he says it hasn’t had a negative impact on what he believes should be the controller’s main job — providing sound investment guidance for the rest of the company.

But while it’s the type of work — and attitude — that earns controllers praise from their CFOs, there’s still a big question controllers need to ask: what next? There once was a time that Henne and other controllers could safely assume that they would move up to the job of CFO, either via an internal promotion or an external recruitment. Today that career path isn’t so certain.

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A new study by Korn/Ferry International, an executive search firm, shows that controllers aren’t always a shoo-in for a vacant CFO post. The research analyzed CFO backgrounds at each of the Fortune 500 companies, at or around April 2006. Out of those 500 companies, 190 finance chiefs were external hires, with 58 percent coming from corporate or divisional CFO jobs. Only 4 percent were former controllers.

Meanwhile, the remaining Fortune 500 CFOs — 310 in all — came from internal promotions. Among those, 33 percent were former controllers. “That’s the good news,” says Charles Eldridge, managing director of Korn/Ferry. “The bad news is that in 66 percent of the internal promotions, controllers lost out to treasurers, senior financial generalists and divisional CFOs.”

So why are more controllers promoted internally than appointed externally? Eldridge’s theory is that “the controller is a known entity.” If boards are happy with the outgoing CFO, they reckon that promoting their controllers gives them “more of the same,” he says.

But as to why controller promotions are still in the minority, Eldridge cites research that benchmarked the various leadership qualities — such as conflict management and the ability to motivate others — of best-in-class CFOs against those of controllers. In some areas, the gap between the two was significant. “CFOs bring the total leadership package, controllers don’t.” (See charts, below.)

Suzzane Wood, a partner at executive recruiter Heidrick & Struggles, adds that the slowdown in controllers’ upward mobility is a relatively new phenomenon. It’s partly a by-product of the changing role of the CFO. “The increased recognition of the CFO as the ‘business partner’ and possible successor to the CEO, combined with regulatory and governance demands, means that today’s CFO is stretched,” she says. “And this means the CFO’s team is also stretched” as CFOs offload a lot of their work onto their senior staff.

Other challenges facing European companies — ranging from IFRS to setting up shared service centers — “have dominated the controllers’ time and made them more internally focused and therefore perceived to be less ‘commercial’ and more ‘control oriented’,” she contends.

Go Lateral, Young Man

The advice that Eldridge, Wood and other recruiters offer controllers is threefold: move laterally, not just within other parts of controlling, but also into another part of the company in order to gain non-controlling experience; get away from head office; and work abroad. Many ambitious controllers have already figured this out.

Manfredo Rübens, corporate controller of BASF since 2005, is a case in point. Raised in Argentina, the 43-year-old German joined the €52.6 billion Ludwigshafen-based chemicals company shortly after completing a degree in business administration, and has spent most of the 16 years that he’s been with the company working outside Germany in a variety of posts — notably two stints in the US and one in Brazil. Throughout these assignments, he was always part of a cross-functional global team, gaining experience in areas such as cash management, capital markets, accounting and controlling. “One of the reasons why I joined BASF was that I knew that I’d have an international career,” he says.

And as it happens, his ascent coincided with a new era at BASF, one that has raised the profile of controlling at the senior management level. In 2005, BASF created a new group controlling post, reporting directly to CFO Kurt Bock. In doing so, Rübens says the company sent a clear message to his entire team that it was time to hone the “business partner,” externally focused aspect of controlling that’s lacking at most other companies.
All this, he says, has made a big impact on the younger generation of controllers at BASF. “When I was recruited, the focus was much more on the technical skills that you could bring to the table.” And today? “The same is needed, but positions are so much broader,” he says, partly as a result of the higher profile of controlling, partly because of a new company-wide program focused on value-based management and other efficiencies. “The more you drive efficiency, the flatter the hierarchy, and the more interesting all jobs become, even those at lower entry levels.”

The Navigators

Like BASF, Michelin also wants to raise the profile of controllers. But there’s still more work to do, says Jean-Dominique Senard, CFO of the €16.4 billion French tire manufacturer.

When he arrived at Michelin from packaging and aluminum company Pechiney in 2005, Senard sensed something wasn’t right between controlling and the rest of the company. “I could feel in some parts of the organization that among some controllers there was low morale, and a low sense of the enrichment of their jobs,” he recalls. “We spent a lot of time interviewing not just the controllers, but also others, trying to understand the malaise that could translate into bad feelings about their future.”

Part of the problem, says Senard, was that Michelin’s controllers were seen as the number crunchers and nothing more, working within “silos” often cut off from the rest of the company. The other part of the problem stemmed from outside controlling altogether, with the business unit heads.

“There’s a lot of value that operational people can get from their controllers, but it’s often not clear to them how they need to work differently in order to get those benefits,” says Senard. It’s something he learned himself while head of Pechiney’s aluminum business — because he needed “someone to help me understand the changing world and my options, quickly,” Pechiney’s controller was “his right arm,” he recalls.
“The most important thing is that the operational people change their behavior towards their controllers, and bring them on to their management teams as their navigators,” he says. “When that happens, you see a real transformation of your business.”

This is just beginning to happen at Michelin. A new global program now under way — for the firm’s controllers as well as the business unit heads — aims to “close the gap between finance, controlling and the business,” among other things, says Senard. Thanks to the program, for example, controllers now have clear career paths, with guidelines and training to help them move from one level to the next. And the program looks beyond their own job function, showing controllers how to move to other parts of the business. All told, Senard reckons the program is a good step forward to developing future CFOs.

Staying in Control

Amid the discussion about whether controllers make good CFOs, there’s one more question to be addressed: do controllers actually want to be finance chiefs? Not necessarily, says Gerrit Bonnema, a former Big Four auditor who’s now group controller of ING Real Estate, a division of ING bank in The Hague which oversees a $120 billion property portfolio.

Today, he says, controllers have a lot of attractive career options, including moving up to the role of managing director or CEO, largely because their skills as auditors are now in greater demand. And besides, he says, the CFO’s job has changed just as much as the controller’s, and not always for the best. As Bonnema sees it: “The CFO is the target, your head is on the block continuously. I don’t know if it’s really worth it.”