In a recent webcast presented by the editorial team of CFO.com, executive recruiter Chuck Eldridge of Korn/Ferry International outlined the essential experiences companies are looking for when hiring chief audit executives (CAEs):
• Extreme leadership skills.
• The ability to manage, mentor, develop, and retain top talent. “Companies want their internal audit executive to be a talent magnet for the organization,” Eldridge said. After thorough training in the audit department, individuals can rotate out to other areas.
• A history of best-practices innovation.
• Experience in managing and operating in complex, global environments. Two or three years of working and living overseas is very important.
• A variety of industry experiences.
• Success in overcoming difficult situations and challenges.
• Finance experiences outside of internal audit.
Korn/Ferry’s ongoing analysis of senior executive positions at Fortune 1000 companies reveals both the increased status of the audit function and the new predilection for the rotation approach.
In a study done shortly before the passage of Sarbanes-Oxley, only 28 percent of the companies identified their most senior audit position as “chief auditor” or “VP, audit.” In a recent study, that number had vaulted to 64 percent.
The percentage of companies that described their typical internal-audit career path as “career audit” declined from 51 percent pre-Sarbox to 27 percent. The preference for a “structured rotation” approach jumped from 7 percent to 22 percent, and for “informal rotation” from 42 percent to 51 percent.
Eldridge noted that with a structured rotation, such as practiced by General Electric, internal auditors are moved into specific pre-selected positions, whereas with an informal rotation it is a given that auditors will rotate at some point, though when and where are left open.
At the Fortune 1000 companies, at least 486 audit executives have moved into other roles within the past three years, according to Paula Park, another Korn/Ferry recruiter who heads the firm’s internal audit and compliance practice. Their new titles, she said, span the gamut: chief accounting officer, chief compliance officer, chief risk officer, controller, treasurer, VP finance, divisional CFO, and CFO.
A three-year stint as CAE before moving on may be optimal, Park observed. “It takes the first year to understand the business and get credible, the second year to become really effective, and the third year to work on a transition plan and look for your successor,” she said.
For those who have been in internal audit for some time and see moving to another company as the best course for landing a CAE job, Park advised negotiating up front that they will be in the role for a maximum of three years before transferring to another area of the organization.
Today, staying in audit too long can have a negative career effect, according to Eldridge. “For that 10-year person in internal audit, goal No. 1 should be to get out and into the finance organization — they obviously know the company very well and have relationships.”