How long does it take to become CFO?
“Are experienced employees paid more?” he asked.
As I was walking from Penn Station to Park Avenue, one cold morning in January, the CFO of a major CPG company called me to ask for help.
“It’s impossible to hire a Finance Director,” Jeff said. “The unemployment rate for Finance people is at 1.6%. Now we found the guy, but HR won’t let me pay for his experience. We can only hire 20 years’ old it seems.”
Jeff was frustrated. As I was listening carefully, I was thinking about the candidates he had interviewed. He then asked:
“Could we use some of your Business Transformation data, or the research you are doing, to show HR that experienced candidates make more money?”
The Value of experience
No one has quantified the Value of experience for white-collar employees. I’ve spent much of my career benchmarking headcount, Shared Service Centers, and business transformation processes to improve efficiency. Thus, I was puzzled by it. With the support of two Ivy League professors, I agreed to do the research on a pro-bono basis (free of charge), build an algorithm, and make it available to others. Details on the project are here.
Responses from 100 global companies
Over 100 companies are participating in our research. This includes all 30 from the Dow Jones, over 30 Global ones as well as mid-size and small ones. Jeff is one of 30 C Suite Executives participating in the project. The role of the other respondents is Vice President (30%), Director (20%) and Manager (20%). To join the research (and receive the results) click here.
Why it takes 20 years to become CFO
A typical corporate Finance organization consists of 5 positions: Supervisor, Manager, Director, Vice President, and CFO. To quantify the Value of Experience, we focused on productivity. We studied how long it takes to master each position. Research has shown that experience increases productivity, up to a point when the skills are mastered. Those skills involve both technical expertise and the ability to successfully deploy people, processes, and tools.
Our research found that the number of years required to master a job in the CPG industry is two as Supervisor, three more as Manager, four more as Director, five more as Vice President and six more as CFO. Altogether, it takes 20 years to become CFO at a CPG company.
CPG stands for Consumer-Packaged Goods. Companies in this category are also referred to as FMCG (Fast-Moving Consumer Goods) or Consumer Staples. In our research, most are involved in Household & Personal Products, Food, Beverage & Tobacco.
Which Industry requires the least experience?
The IT industry requires the least, and CPG the most, experience.
When I saw this chart, I hypothesized that the reason for it was the claim we have heard while conducting the research. Some folks indicated that “Technology is changing so rapidly that experience is not important anymore.”
As I was walking back to Penn Station, I wondered whether I had picked the wrong industry (I started my career at Procter & Gamble). I figured, “If I finish my MBA when I am 21, and it takes 9 years to become CFO, then I could have become CFO when I was… 30?”.
Technology made it easy for me to find the answer, while on the NJ Transit train, going back home.
Are IT CFOs in their 30s?
CFOs in IT tend to be younger than in CPG, but none are in their 30s. Most are in their late 40s and 50s.
Does Size Matter?
To make the data comparable, we split the revenue of companies in 5 groups: less than $30 Million, $30–200 Million, $201–999 Million, $1 Billion to $10 Billion, and over $10 Billion.
Jeff is worried that he is competing for talent with IT Start-ups whose CFOs are in their 20s. Younger companies tend to employ younger Executives, but that is true for all industries. As shown in the table above, the CFOs of companies of similar size are of about the same age. The size (revenue, number of employees) of a firm does make a difference.
Did Jeff hire the candidate?
One of the objectives of our research is to enable hiring managers to quantify the savings associated with hiring experienced employees, driven by lower training cost and higher productivity. I was able to share the draft findings with Jeff a day later, on Saturday. He discussed it with the Compensation Vice President, and they improved the offer to the candidate on Sunday.
The candidate is considering another offer, from a cannabis company.