Is sector experience truly essential when applying for a CFO role?

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Following our latest CFO Pathways report, our analysis of research into the appointments of CFOs in 2020 and 2021 across the UK and Europe, Alex Jones, Researcher in our Executive Search, CFO & Finance Practice discusses the statistics and how they match what he sees on a daily basis.

I regularly speak with candidates who are looking to branch out of their current sector or who are perhaps worried they have ‘branded’ themselves around a certain sector, therefore will only be considered for positions based on their prior industry focus. There are only so many number 1 roles out there and that number becomes far smaller if you’re only looking at a single sector. But just how influential is sector in shaping the decision making of our clients?

Below, are some of the learnings I’ve gathered from both the data and my own personal experience.

The why:

Firstly, why would a business want to narrow down its pool of potential talent? Recruiting and retaining talented people is never easy, cheap or quick. Particularly in a time of economic uncertainty, with added pressure being placed on businesses to hire well, most hiring managers are reluctant to take risks.
Much like the quote:

Nobody ever got fired for buying IBM

, hiring managers like to play it safe. Because if a candidate looks like a close fit on paper, then they’re unlikely to receive too much scrutiny internally or from the market.
It is reassuring as a recruiter, when a candidate has sector exposure, as not only do we know the candidate will understand the business and the role, but also that our client is unlikely to be questioning our judgement.

It could be argued that, in a difficult economic climate, businesses require diversity of thought in order to help them innovate and adapt if they wish to survive, let alone thrive – rather than simply sticking to risk mitigation.

The statistics:

In 2020, 68% of UK CFOs had sector-relevant experience. In 2021, it had risen to 73%.

These statistics, taken from our 2022 edition of our CFO Pathways report, certainly seem to suggest that sector plays a major part in influencing CFO appointments.
In our report from last year, however, it was noted that 70% of new CFOs joined from a different sector. While that sounds positive, the statistic is somewhat misleading, as similar sector experience frequently occurred earlier in that appointee’s career.

This would suggest that there is far more than coincidence leading to such a high proportion of hires already possessing sector experience.
So what does that really mean in practice?

The reality:

My role is to create the initial longlist for our clients and then narrow that down to only the most appropriate candidates. It’s essential I work with the client to understand what they want and what they truly need from their hire.

A question that I am often asked by my network who are either seeking to step into the number one finance role for the first time or those already in that position, considering a move, is: how prescriptive are your clients around sector background?

My answer can change slightly depending on the sector in question or the individual brief itself, but for the most part, the answer remains largely the same. While the client does not need someone from within the immediate sector, their background must give the client confidence that they already understand many of the same challenges that their business faces and that they will be able to bring the experience that they have built over their career to help inform their decisions in this new role. Whether that be from exposure earlier in their career or from alternative but clearly transferable sectors.

For instance, a high street retailer is unlikely, in my experience, to demand candidates only from other B2C retail businesses. However, it is highly unlikely that they will consider candidates (regardless of calibre and references) that do not possess recent history within businesses where a consumer is at the heart of their operation and the business is managing a similar multi-site structure. Therefore, the likes of restaurant chains, hospitality, and travel agents, would all be seen as relevant candidate pools to explore.

In conclusion, no, sector experience isn’t essential. Sector is definitely one of the leading criteria that clients highlight when briefing us on a role and does offer a relative safety net. However, many recognise the value in bringing in an outsider’s perspective and understand that they open themselves up to a greater pool of talent if they show flexibility.

So, as a candidate, you shouldn’t be afraid of stepping outside of your industry comfort zone, but always consider the story you are telling and try to ensure you are not wasting all of the specialist experience that you have worked so hard to build. You can definitely overcome sector bias if you possess other elements of key experience that they are searching for.

To get further insight into this topic and to find out the other leading factors determining CFO placements in the UK and Europe click the link below to download the full report:

Please download the full report here

Please do reach out if you would like to discuss your how we can support you on your own CFO journey.