Finance Factories

Why are some companies better than others at producing CFOs?
Jason Karaian and Eila RanaMay 5, 2008

“There is a competitive streak in me,” declares Nick Rose. “I was looking at the top of the pyramid from day one.”

That is how the finance chief of Diageo, a £10 billion (€12.6 billion) UK drinks group, describes the conviction that fueled his rise from the junior finance ranks at carmaker Ford in the early 1980s to more senior roles at Diageo, including the top finance post, which he reached in 1999. The climb up the corporate ladder to CFO — lasting nearly 20 years — involved frequent job rotations in a variety of countries and markets at both companies, giving him a “fantastic grounding in the art of finance.”

If aspiring CFOs could choose only two companies to have on their CVs, Ford and Diageo would be high on the list. Finance chiefs from some of the UK’s leading multinationals got their grounding at these companies, including ex-Ford man George Rose of BAE Systems and Diageo alumni Andrew Higginson of Tesco, Julian Heslop of GlaxoSmithKline and Ken Hanna of Cadbury Schweppes.

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If the most valuable career lessons are learned on the job, Ford and Diageo should be considered two of Europe’s top “academy companies.” To identify other top incubators of financial talent, CFO Europe traced the career paths of 200 CFOs from the region’s largest listed firms. (See “Career Paths” at the end of this article.) Certain companies appear frequently on finance chiefs’ CVs. What’s their secret?

Recruitment experts agree that academy companies have several things in common: robust graduate training programmes for finance recruits; regular job rotations — generally at least every two years; foreign assignments; and clearly defined processes for identifying talent and succession planning. “Beyond that, you also need to have a very visionary CFO, who will take risks on individuals and get the business to accept rotation outside of finance,” says Laurent de Meeus, a partner in the London office of Egon Zehnder, a recruitment firm.

The Road to CFO

When Rose graduated from Oxford University, he wanted to work at Ford “because of the financial training that it had become known for.” In the ten years that he spent at the auto firm, he switched jobs every 12 to 18 months, gaining experience in planning, treasury, M&A, strategy, investor relations and other functions, in the UK as well as the US. Further promotions would have kept him in Detroit, but he was drawn to the UK for family reasons and so decided it was time to leave.

“There was a pace and directness in the American environment that I wanted to replicate back in the UK,” he says. In 1992, he joined food and drinks group Grand Metropolitan as treasurer, attracted by the company’s entrepreneurial spirit and lack of a rigid hierarchy. Regular job rotation resumed and, shortly after Grand Metropolitan’s 1997 merger with Guinness to form Diageo, Rose became CFO of the entire group.

Despite reaching the top, Rose hasn’t stopped thinking about career paths. “As a function, we take complete ownership of the development of finance people across the business,” he says. “We spend a huge amount of time rating and ranking the vast bulk of the finance department.”

Given his experience, “the rotational development theme is strongly embedded in the way that we run the function,” Rose says. Diageo’s “finance leadership group,” comprising Rose and the major regional and functional finance heads, consults a “huge matrix” that compares business needs against the next best moves for high-potential employees.

As Rose did, finance managers at Diageo can expect to be assigned to new challenges frequently, covering postings across the group’s increasingly international portfolio of brands, its finance shared service centre in Budapest, or even in sales, marketing, HR or general management. At Diageo, nobody with ambition “goes straight up one chimney,” Rose says. He reckons around 50 senior finance employees are currently on foreign assignments.

What’s more, finance has become a key source of promotions for the group’s top management jobs. CEO Paul Walsh and the heads of the Asia-Pacific and international (mostly Africa and South America) business units all hail from finance. “While there are a lot of great finance people out in the world who come from Grand Metropolitan, Guinness or Diageo, there probably would be a lot more had we not provided career opportunities outside of the finance function,” Rose notes. “It’s a key to Diageo keeping its best people.”

David Davies, a Grand Metropolitan graduate, is one who got away. His long and winding road to the CFO post at OMV, a €20 billion Austrian oil group, took him through seven separate employers, including other acclaimed academy companies like UK industrial gases specialist BOC and US entertainment firm Walt Disney.

After a stint in accountancy, first at Touche Ross in Liverpool and later at Price Waterhouse in Milan, Davies’ first corporate job was in internal audit at BOC (now part of Germany’s Linde). Within a year, he recalls, he was pushed “out of the comfort zone” to his first line position, as finance director of the speciality chemicals division. Suddenly, he had to talk to “grizzly manufacturing people” and row with the sales team. “I had no training for that, but you learn on the job,” says Davies.

In 1988, he was lured to Grand Metropolitan. The company approached him in the same week that it announced the sale of Intercontinental Hotels. Three weeks later, it launched a bid for Pillsbury — Europe’s largest cross-border hostile transaction at the time. “It was a company that didn’t hang around. It was growing rapidly, and it seemed to be a place that was known for the quality of its people,” Davies says. “I thought I would take advantage of that.” Five of his six years with the company were spent outside the UK.

Davies then jumped at the chance to join Walt Disney as finance chief of its European retail unit. Given Grand Met’s reputation for developing talent, Davies’ CV attracted headhunters, and with the luxury of considering a wide range of offers, he later moved to London International Group, a medical products company, and Morgan Crucible, an advanced materials group, before heading to Vienna five years ago to become CFO of OMV.

He reckons it’s “the breadth, depth and variety of experience” he gained at the academy companies that helps him do his job today. “When something comes from left field, there’s a greater chance that you can relate back to an experience you’ve had before,” he says.

Does Davies harbour any hopes of OMV becoming an academy company? In some ways, it already is. As the largest industrial company in Austria, the firm attracts “inherently good talent” from its home region. He’d like to think that “people look at us as a company where you could find talent in the finance organisation.” But he doesn’t want OMV resting on its laurels. “We have an ambitious strategy, we believe in rewarding people and, in particular, we encourage our people to be pioneering,” Davies says. Among the many “feeder processes” that OMV’s finance department runs is a two-year programme for new university graduates, hiring a new intake every 18 months and rotating them through the company on six-month assignments. Though there is no guarantee of a job at the end of the programme, every participant to date has been snapped up by various department heads.

Building Experience

Rapid-fire job rotations alone aren’t what make academy companies stand out. ABB, a $29 billion (€18 billion) Swiss-Swedish engineering group, hones talent for all functions, not just finance, through a rigorous leadership development programme and succession planning process, says Gary Steel, the company’s global head of HR. Its high-profile CFO alumni include Peter Voser of Shell, Renato Fassbind of Credit Suisse and Colin Day of Reckitt Benckiser.

Set up with the help of Egon Zehnder, ABB’s Leadership Development Assessment (LDA) programme assesses employees against eight competencies, including a focus on results, intercultural sensitivity and change management skills. Behavioural characteristics like honesty, transparency and integrity are also considered, and all are measured and monitored using a nine-box matrix. For employees who fall short in any of those areas, support is offered by way of coaching, a stint at a business school or some other form of training.

To identify which employees take the LDA, each executive committee member, including CFO Michel Demaré, pores over data from annual performance appraisals, highlighting with HR the employees who can be classified as “challengers.” Challengers are considered leading candidates to fill the top 1,500 posts in ABB. Steel reckons that the company has currently identified four challengers for every one of these roles. “Within the past five years, 70% of our vacancies have been filled off the succession plan,” he adds. The goal now is to push this percentage up to 80%.

Since Steel joined the company five years ago, only 10 challengers have left the company before reaching a key position. “For me, it’s not the biggest crime in the world to leave the company, as long as people have taken the time to find out what we can offer them compared to what’s being offered on the outside,” says Steel.

He keeps in touch with the challengers who leave, speaking on the phone or meeting for coffee or lunch every six months or so. “It’s a chance for me to find out where they are in their careers,” he says. And who knows? Some might change their minds and want to come back, so it helps to have stayed in touch, he adds.

At Diageo, Rose has a similar philosophy. “We don’t like to lose people, but when we do, we want them to go outside and sing the praises of the company,” he says. “We are prepared to put our money where our mouth is in terms of developing people. We hope this is so they build a long career at Diageo, but if not, at least they are building great CVs.”

Jason Karaian is deputy editor and Eila Rana is senior editor at CFO Europe.

View Career paths: Where CFOs got their start.