Big Shoes to Fill?

Many companies are passing over controllers when filling vacant CFO posts. Should controllers be worried?

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.

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.

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