Job Hunting

The Next CFO: An Inside Job

A majority of corporate executives prefer CFO roles to be filled by internal promotions. Finance professionals agree, but many of their nonfinance ...
David McCannApril 19, 2013

Corporate executives generally think it’s better to fill an opening in the CFO chair by promoting from within than hiring externally, new research shows. Finance executives, specifically, think so too – and even more so, according to one top financial-officers recruiter.

Among 583 executives of all stripes who participated in the latest survey performed exclusively for CFO by recruiting firm Korn/Ferry, 59 percent preferred the internal-promotion option (see chart below) and 41 percent the external-hire course. Joshua Wimberley, head of the firm’s North America financial officers practice, said that breakdown is consistent with his anecdotal experience. But he speculates that among finance executives, it “would probably be more like 80-20 than 60-40.”

To succeed, Wimberley suggests, finance professionals in particular must demonstrate a strong commitment to the organization and to their own development, as well as develop a sense of trust in the organization. “When you bring in someone from outside, it can be discouraging and demoralizing,” he says. “They want to know that if they take on various roles in finance, and then move out to the business, and later come back into finance, that there will be an opportunity for them to one day ascend to the top job.”

Certainly there are cases where a company needs to go the external route because it’s in a state of flux where a change agent could accomplish things that no inside person could, he acknowledges. “But all things being equal, promoting someone can be inspiring and can help create a succession-planning and leadership culture.”

Wimberley muses that corporate executives outside finance may not fully understand or appreciate the finance mindset. That shows through even more in responses to the other question posed to survey participants. More than 9 in 10 said that if the CFO role were filled via an internal promotion, the best candidate would be a controller, vice president of finance, or divisional finance chief.

“This snapshot of a broad range of executives from multiple functions shows that most still hold to the legacy view that the CFO should foremost be strong in accounting and controls,” Wimberley says. But meanwhile the CEO may well be looking for a more strategic CFO. Such a person would have a very strong controller and thereby be freed up to be very aligned with the future direction of the business, involved in capital planning and strategic planning and analysis, and help business-unit leaders see what’s going on “around the corners” and where they need to invest and divest.

Such an orientation can come only from strong first-hand experience in business units and operations. Finance professionals with an eye on the CFO seat are advised to get corporate-level experience as a controller or treasurer, “but they’ve got to get out to the business, be close to the field, understand operations, or even take an operational or general-manager role,” Wimberley says. “When we do CFO searches for large-cap companies, CEOs and boards love to see that type of experience, even if it doesn’t exist as much as we would like.”

In fact, he notes that the survey participants’ preference for promoting a controller or finance vice president, over a divisional CFO, is backward; divisional finance chiefs are in fact more likely to get the call. “The responses to this question underrate the reality of what CEOs are looking for,” he says.

Wimberley also finds the paucity of support in the survey for treasurers as potential CFOs to be out of step. “The treasurer is often a very bright, strategic person. Some of the brightest minds in finance rotate through treasury.”