Don’t hold the presses: The average age of CFOs at large companies is 53, and they’ve held that post with their current employers for an average of 5.1 years.
They’re significantly younger and less-tenured than the average CEO, who is 58 years old and has been in his or her existing job for 8.0 years. But CFOs have been serving longer than chief human resources officers (5.0 years), chief information officers (4.3 years), and chief marketing officers (4.1 years).
All right, none of that information — provided courtesy of Korn Ferry, which studied the C-suites of the 1,000 largest U.S. companies by revenue — is quite earth-shattering. Bryan Proctor, senior client partner for Korn Ferry’s CFO practice, acknowledges as much.
But in an interview with CFO, Proctor touches on some related topics that could be of interest to finance chiefs of a mind to test the employment waters — and to those in line to succeed them if they do move on.
In calendar years 2015 and 2016, 59% of the CFOs appointed by the 1,000 companies were promoted from within. That was up from 51% in the four prior years. And long as the economy continues to steer clear of a recession, even more CFO roles are likely to be filled internally, according to Proctor. “The CFO job market is stabilizing,” he says. “That could change if there’s a big recession that sends companies from growth mode to restructuring mode. But I think we’re going to see more internal promotions.”
Typically, a succession plan for a CFO or CEO takes a few years to reach fruition, says Proctor. So there may be a pent-up well of executive promotions to be made as the economic recovery lengthens.
“With the CFO market stabilized, there will be enough time for succession plans to come full cycle,” he says. That would be a good thing, because “it would mean companies are being more thoughtful in their long-term strategy and tying talent to that.”
Overall, large companies are paying more attention to CFO succession planning these days, according to Proctor. Historically, while most companies asserted that their succession plans were robust and thoughtful, such assertions were often lip service, to some extent.
“The same thing applies to understanding the benefits of diversity,” Proctor says. “A lot of companies have a diversity program but don’t monitor it or hold themselves accountable to it. What usually ends up happening is that pressure from investors and the board [pushes] them to do it, and then they start to see the true benefits.”
Increasingly, internal succession plans are being seen as less risky, Proctor notes. “When you go outside, you always assume a risk. It’s somebody you don’t know, and there is a risk of organizational rejection to someone’s relative ability to understand the complexities of the business and [thereby] build credibility.”
Korn Ferry, he says, is helping clients build finance teams where the roles below CFO are filled with people of varying experiences. That increases the odds that if the company were to, for example, change strategic direction, there would be an apt person to take the top slot should it open up.
Internal succession is also facilitated when a CFO or CEO is confident enough to move people to roles where they have no experience, as might happen when a controller takes over investor relations or a corporate accounting manager moves to an operating finance role.
“There may be risks associated with that,” says Proctor, “but the upside is that when succession is needed, there are individuals in the organization with the breadth of experience needed to be successful.
“CFOs who don’t think about that, who always need to have experts running all of their functions, risk waking up in three years to a realization that they didn’t develop anyone enough to be their successor. Then the company has to go outside or risk promoting someone who doesn’t have all the boxes checked.”