Making the Leap

There are many ways to get to the top spot in finance.
Alix StuartNovember 1, 2008

Faster than a speeding bank run, more powerful than a loan officer, able to lease tall buildings in a single bound: finance executives practically need to be superheroes to make it to the CFO’s chair these days. So goes the conventional wisdom, at least. Those who aspire to the top finance spot are expected to have substantial experience in all facets of the business, X-ray vision into the workings of the CEO’s mind, and a compelling personal presence that inspires employees and investors alike.

What’s more, the recent carnage in the financial markets may be making it harder for those who haven’t previously been CFOs to join the club. “Most candidates for the CFO role who haven’t held that post before are typically missing two types of experience: investor relations and capital markets,” explains Jeremy Rickman, a partner with Russell Reynolds Associates’ financial officer executive search practice. “In this market, it’s going to be more difficult for them to get to the top.” Specialists in those areas are also less likely to get there, says Rickman, because of the breadth of the CFO role.

Does this mean that finance executives shouldn’t apply for the position until they have gained experience in every area of the company, traveled the globe, and held a CFO job somewhere else? Not at all. As we learned through conversations with CFOs, CEOs, and executive recruiters, those with otherwise strong financial credentials can find many ways to compensate for gaps in their résumés. Not that the conventional wisdom is wrong, it just isn’t absolute. Through varying combinations of perseverance, savvy, timing, and luck, a number of recently hired CFOs have charted interesting paths to the C-suite. You can, too.

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CONVENTIONAL WISDOM: You need substantial experience in accounting and controls.

No one is going to quibble with the notion of hiring a CPA as a CFO these days, thanks in large part to the lingering effects of the Sarbanes-Oxley Act. From 2003 to 2008, the percentage of Fortune 1,000 CFOs with CPAs grew from 29 percent to 39 percent, according to executive recruiting firm Spencer Stuart. The focus on this core skill seems likely to intensify as international financial reporting standards (IFRS) come to dominate U.S. financial reporting.

While being a CPA isn’t always required, some type of experience closing the books is. “Can a non-accountant cross over and become CFO? It’s possible, but I don’t see it very often,” says Marc Schonfeld, a senior executive recruiter in the New York/New Jersey area for Ajilon Finance. “Financial standards are so stringent these days that to try to bypass that [area] would be a real shortcoming for a CFO.”

Given the recent attention paid to accounting, controls, and IFRS, it’s not surprising that the list of controllers who have recently been promoted to CFO — including Greg Hayes at United Technology Corp. and Anna Brunelle at Tivo — is a long one. Some 23 percent of current Fortune 1,000 CFOs were most recently in accounting and controls, Spencer Stuart numbers show, compared with only 13 percent who were treasurers when promoted.

So how did Kim Nelson, who admittedly had zero direct experience in accounting, win the CFO spot last year at SPS Commerce, a midsize, Minneapolis-based supply-chain services firm? For one thing, she had a strong background in financial planning and analysis at big companies like Pillsbury and Nestlé. Also, before coming to SPS, Nelson served as investor-relations director at, a job she took in part so that she could better understand how the accounting department functioned. Although she didn’t help close the books at Amazon, the IR job got her “intimately involved” in the process. “It was by far the biggest learning position I’ve had,” she says.

Finding a boss whose priorities matched her skill set also helped. SPS chief executive Archie Black, himself a former CFO, says the top three things he wanted in a finance chief for the privately held company were the capacity “to help drive change,” the ability to “see our vision and articulate it to the investment world,” and “traditional accounting skills.” Given that Black considered the first two “the most difficult and most valuable,” Nelson was the strongest candidate for the job. “We got over [Nelson’s lack of accounting experience] because…she is a very strong manager and I believed she would be able to recruit, train, and motivate a strong controller,” he says. “You can’t hire someone to cover up for a CFO who is weak in the first two [areas].”

Finance executives who are light on accounting skills may also be able to find opportunities in specific types of businesses. Private-equity-backed firms, for example, prize operational skills over accounting expertise, says Walt Williams, partner at recruiting firm Battalia Winston Amrop. “You don’t care about [financial] reporting, you care about cash,” he says. Meanwhile, investment professionals, who typically don’t have any accounting experience, may be a welcome addition at capital-starved public companies during the credit crunch. Nasdaq-traded Vision-Sciences just hired former HSBC managing director Katherine Wolf as its finance chief, while Micromet, also a Nasdaq company, hired Barclay Phillips, former managing director of Vector Fund Management, as CFO.

CONVENTIONAL WISDOM: It’s easier to move up to CFO internally than externally.

Company men and woman have certainly done well recently. New CFOs at NetJets, which sells fractional jet ownership, and cable operator Charter Communications each logged about a decade with their firms before their big promotions. The new CFO at giant coal company Peabody Energy was there for 20 years before getting the nod, and Terry Endsley was at truck maker Navistar for more than 30 years before his promotion.

“It is easier to move to the CFO ranks internally than it is externally because you’re known, and you have the momentum and sponsorship,” says William Reeves, executive recruiter at Spencer Stuart. Seeing one company through many economic cycles also has its value, says Endsley. He says he never thought of leaving as he moved up through the ranks, because he “always felt challenged” in his roles thanks to economic fluctuations, major restructurings, and the influence and strategies of four different CEOs.

But this piece of conventional wisdom begins to look a little suspect when you consider that about 50 percent of newly hired Fortune 1,000 CFOs come from outside the company, and only 20 percent of all Fortune 1,000 CFO hires have the title when they leap, according to a Spencer Stuart tally. That makes sense if you consider that large companies will often groom multiple people to succeed the current CFO, leaving many qualified candidates to look around when the job is filled (if not before).

Many outsiders reach the CFO’s job by leaping and bounding from company to company, gaining vital skills along the way. Scott Francis, for example, started his career at Ernst & Young and spent four years at The Williams Cos., before moving to a Williams spin-off (WilTel Communications) and seeing it through bankruptcy in 2002. He then became a controller at privately held Vanguard Car Rental just as it was emerging from bankruptcy and relocating its headquarters to Francis’s hometown of Tulsa.

But Francis knew he wanted to do more, such as signing a 10-K himself and taking part in analyst conference calls. “I’d supported many IR functions, but I’d never been the voice on the call,” he says. He got his first chance to be a CFO in September, joining Oklahoma-based cable-television supplier ADDvantage Technologies.

Why was ADDvantage, a small public company also based in Tulsa, willing to take a chance on him, when he hadn’t been a CFO or worked in the cable industry before? The company wanted a CFO who had “a strong [Securities and Exchange Commission] background, a good public-accounting background, and success in implementing Section 404 of Sarbanes-Oxley,” which microcaps are subject to for the first time this year, answers ADDvantage chief operating officer and former CFO Dan O’Keefe. Francis fit the bill on all counts — but so did 20 other candidates. The company hired him largely because he had the right personality fit for the company, says O’Keefe, who was impressed by the extent to which Francis had “rolled up his sleeves” at Vanguard. Among other things, Francis had hired more than 30 people in less than four months and attended training sessions in Florida with them. “That’s a doer,” says O’Keefe approvingly.

He acknowledges that Francis will have to learn about the industry and several areas of the job, including risk management and investor relations. “In some areas he’ll hit the ground running, but other areas will take him months and even years to gain familiarity with,” says O’Keefe. But he figures that would have been true for any new hire, given the complexity of the industry. “We have a strong leadership team here that will mentor Scott like they mentored me,” he says.

CONVENTIONAL WISDOM: You need international experience.

Overseas experience is widely regarded as an unalloyed positive for would-be CFOs, and as even small companies increase their global presence, time abroad may become more important for aspiring finance chiefs. A foreign posting “gives an executive a whole different way of looking at business,” says Russell Reynolds’s Rickman. Candidates with such experience “are much better placed to move more quickly through their careers,” he says.

But at a time when young finance staffers are increasingly resistant to domestic relocation, packing up for an assignment on the other side of the globe can be a daunting proposition. Jeff Burchill, CFO of commercial property insurer FM Global, says he would like to see more staffers in the company’s Rhode Island headquarters take roles in FM Global’s offices in such places as the United Kingdom, Canada, and Asia, but few are willing to go. “What’s working against us is a lot of two-career families,” says Burchill, where the spouse would have to give up a job to move. Joe McCabe, vice chairman and a member of the executive committee at executive search firm CTPartners, says he sees the same phenomenon at many companies. “It generally stems from concerns about work/life balance,” he says, but staying home will ultimately limit a finance executive’s options.

Is there any way to compromise? A number of current CFOs say yes. Burchill, for one, is trying to broaden the horizons of some of his staff by having them handle more international responsibilities from their desks in Rhode Island. Meanwhile, neither Cisco Systems CFO Frank Calderoni nor Bill Foltz, CFO of online advertising sales representation firm Gorilla Nation, has ever lived abroad, but both say they gained global chops by spending weeks and months at a time in foreign locations, negotiating key deals with international partners.

In 2002, Foltz was CFO of Platinum Equity Holdings when the Beverly Hills–based private-equity firm acquired a large company with divisions in every major country in the European Union. Thanks to a “significant” amount of travel and help from highly qualified in-country attorneys, financial advisers, and existing management, Foltz was able to get up to speed on such issues as European labor laws and the massive severance pay they generally require for layoffs. Other challenging issues, he says, were corporate and tax structures, and director liability laws. “Like anything else, it’s a steep learning curve, and you have to ask the right questions of a lot of people to get the right answers,” Foltz says.

CONVENTIONAL WISDOM: You need IT experience.

In this case, conventional wisdom may be hard to refute. With information technology consuming half of all capital spending, and with IT underpinning many of the regulatory controls around finance, it’s hard to be a technophobe these days. More than half the CFOs responding to a recent Robert Half survey ranked IT expertise as the third most necessary skill after accounting and finance. That’s up from 28 percent who named it as a top-three skill five years ago. And according to the most recent CFO magazine/Duke University Global Business Outlook survey, 33 percent of CFOs say the chief information officer reports to them, while 30 percent say the CIO reports to the CEO.

A lack of IT knowledge can significantly limit a finance executive’s career options, say recruiters. “The difference is night and day between one candidate for a CFO job who has experience with SAP, Oracle, J.D. Edwards, Lawson Software, or Great Plains Software and one who doesn’t,” says Paul McDonald, executive director of Robert Half Management Resources, which places finance executives in interim roles.

When IT is central to the company’s mission, a CFO may get away with only selective involvement. ModusLink Global Corp. CFO Steve Crane, for example, will work closely with IT on a project such as an ERP upgrade, but does not oversee the CIO, because “our ERP system is very important beyond finance,” he says, offering customers a window into where their merchandise is at any given point. If the system goes down for even half an hour, “we hear from them.” At ModusLink, therefore, the CIO reports to the CEO.

If international experience is a requirement that is almost mandatory, IT know-how is similarly de rigueur at midsize and smaller companies. There, IT is very likely to report to the CFO, making a knowledge of everything from databases to wireless security a larger part of the CFO’s portfolio. Many companies embed finance staffers within IT organizations to provide some analytical expertise on lease, purchase, contract, and other IT-acquisition matters, which can be a great way to learn what IT is up against these days.

CONVENTIONAL WISDOM: You need to cultivate relationships with recruiters.

Maintaining good relationships with a network of search professionals “is a must,” believes Paul Dascoli, who landed his position as CFO of the jeanswear division of VF Corp. two years ago through a recruiter. “They know about more open positions than your regular networks and a lot of times will have better inroads into an organization.” Dascoli says that keeping up his recruiter connections also helps him hire smarter, since “as you get to know them personally, you learn what companies they can get into and which ones they can’t.”

Other CFOs agree. Eric B. Weekes, now CFO of Embry-Riddle Aeronautical University in Daytona Beach, credits a recruiter with helping him get his first big career break, moving out of General Foods after it was acquired by Kraft Foods and into the role of treasurer for publicly traded Illinois Power Co. He had built up that relationship over two years, meeting informally with the recruiter with “no specific strategy.” His “no-strategy” strategy is also what eventually led him to the CFO seat through a recruiter four years ago. “You have to let the recruiters get to know you, and then they know the right job match when they see it,” says Weekes.

But say you haven’t been in contact with recruiters for a while and now find yourself ready for a new job. Is it hopeless? Not if you’ve maintained your own personal network, which many CFOs say trumps recruiters’ databases. Foltz of Gorilla Nation says only his current job has come through a recruiter, and “nothing replaces the personal and professional network that’s been built over the years.”

In February, James Cline won his first CFO role, at Trex Co., a $320 million maker of wood-alternative housing products. Cline, who was most recently president of Harsco Gas-Serv, jumped into the candidate pool at the last minute, at the behest of Trex CEO Ronald Kaplan, with whom he had worked 11 years previously. While he did spend half a day with a recruiter ahead of interviews, Cline says the most important thing was to convince the board he would be able to handle the role, thanks to the fact that “the CEO [already] knew what my strengths were.”

CareerBuilder CFO Kevin Knapp also got his job through a personal connection, a classmate in his MBA program. Ironically, Knapp was attending the evening program specifically to expand his horizons beyond finance, having headed the function at for six years. “I was eager to expand my skill set, and taking a job as CFO didn’t seem to be the way to do it,” Knapp recalls. But thanks to a good relationship with his classmate, who happened to be the COO of CareerBuilder, Knapp had confidence there would be room to grow. Indeed, as the company has gone from $160 million to $800 million in sales, he has served in a multitude of roles in addition to being CFO, leading HR, legal, customer care, and IT at various times. “Clearly this was the right thing for me,” says Knapp.

Of course, not many aspirants will be fortunate enough to land a CFO position through a personal connection. But ultimately, maintaining a vision of where you want to be in the long term will help you put opportunities, and potential liabilities, in the proper context. Just remember that every rule can be bent, if not broken, and that a failure or inability to tick off a given box on a career checklist does not have to be a deal-breaker. With CFO turnover at an all-time high, there will be plenty of openings awaiting you.

Alix Stuart is a senior writer at CFO. Additional reporting was provided by Josh Hyatt and Kate Plourd.

Looking in the Mirror

There are at least two schools of thought when it comes to developing one’s skills and career: identify and address your weaknesses or concentrate on improving your strengths. Whichever way you go, CFOs say regular self-assessment is essential to attaining the top finance spot.

“It’s important to understand the bigger picture,” says SPS Commerce CFO Kim Nelson. “I’ve always been pretty critical of myself and continue to look for ways I can make the company and myself better.”

Not many people enjoy talking about their weaknesses, but knowing what you lack can often shine light on competencies you may need to develop, says Pam Lassiter, a principal at Lassiter Consulting. To those who want to become CFOs, she suggests finding out which skills and expertise are in demand — say, by scoping out job listings in an industry of interest. “As you consider how you want to grow professionally, it’s vital to know what the marketplace is looking for,” says Lassiter.

Then keep an eye out for assignments or in-house development programs that can help you fill gaps. There are also external options, such as college programs. Nelson enrolled in a specialized leadership and management MBA program because “I needed something that would keep me motivated and help me grow.” That same attitude guided her career choices as well. At age 40, she became a CFO. — Kate Plourd

When Help Isn’t Just Wanted, but Needed

When Karen Cambray was interviewing to become CFO at Zeemote, she met with every member of the senior management team — except the CEO. That’s because the company, which makes wireless controllers for mobile games, didn’t have one. The venture-capital firm backing the company decided a CFO was the more urgent need. That’s a far cry from the days of the dot-com boom, when companies resisted adding a CFO to the payroll until they had reached a critical juncture, whether readying for an initial public offering or ramping up for big orders.

These days CFOs get in the game early, helping out on everything from pricing strategies to compliance. “I can make sure the financial house is in order,” says Cambray, “but I’m also very operationally focused.”

It’s nice to be needed, but why wait for someone to notice? Ali Riaz, founder and CEO of software firm Attivio, received an E-mail last May from Alan Cooke, an equity research analyst at Merrill Lynch. “He had taken the time to understand what we do and had targeted us,” says Riaz. “He told me what he thought he could do for us. He actually created our need for him.” Says Cooke: “I tried to convey to Ali that the missing piece in his team was a well-rounded CFO — one with my operational and strategic skills — to help him grow the business.” You know how this ends: Cooke became CFO in September. — Josh Hyatt

Five Boxes You Must Check

While it’s true that there are many routes to the top, if you can’t make a strong case for yourself in these five areas, the C-suite will almost certainly elude you.

☐ Operational experience
☐ Leadership ability
☐ Communication skills
☐ Compatibility with (and respect for) the CEO
☐ Integrity and trustworthiness