Why boards love to promote COOs and CFOs

“[COOs and CFOs] are generally male-dominated roles, which have very measurable output. They’re not intangible like human resources, which can mean it’s easier to inspire confidence,” she says.

Roles such as human resources, sales or marketing don’t often provide leaders with enough profit-and-loss and corporate governance experience, and very seldom do boards appoint people without those skills, Gardner adds. Examining the backgrounds of the ASX100’s CEOs shows company boards are keen to avoid any surprises, preferring to appoint CEOs they know can hit the ground running. When not appointing former COOs and CFOs, companies opted for divisional heads, who proved their worth by leading large divisions successfully.

“They need to be sure the place is in a safe pair of hands,” Gardner says. “That’s why I differentiate between listed and unlisted boards. Listed boards face a lot of downside if they don’t do their job properly. This can make them a little more risk-adverse.” In private companies, boards may be more willing to take risks, and relationships may be more important to getting the top job.

All the CFOs on LeadingCompany’s list had qualifications in accounting, commerce, business or economics (barring one whose tertiary qualifications we couldn’t find). “Generally, CFOs have come through some formal financial management process,” Gardner says. “Often you will see that they’re chartered accountants or chartered public accountants. Obviously the role requires a very strong number competency.”

COOs have more varied backgrounds. Long experience in a particular industry is often a good way to get promoted to COO, as is a strong ability to execute business plans.

“They’re at the right-hand of the CEO,” Gardner says. “Often the CEO will handle strategy with the CFO while the COO will actually run the business.” This often makes COOs logical successors.

In America, a recent survey by executive recruiter Crist|Kolder examined the leadership turnover of 669 leading American companies, and found 46.7% of chief executives held the COO role immediately before their promotion. This figure was even higher when it came to internal appointments, where 52.6% of CEOs were promoted from the COO role.

The appointment of COOs is on the rise in America, where they have clawed ground back from chief financial officers, who made popular CEO choices during the global financial crisis.

But the appointment of COOs to the top position is likely to decrease in the long-term, with many companies are choosing ditch their COO positions, the survey found. Only 35.4% of S&P500 companies had a COO – the lowest figure since Crist|Kolder started counting in 2000.

The reasons for this aren’t clear, but if it persists, it could radically alter the backgrounds of America’s future CEOs.

Change is coming to Australia too, Magowan says, and is evident anecdotally in the leadership development programs run by ASX-listed companies, which are increasingly being opened to people from a range of professional backgrounds.

“In the past, change didn’t happen so quickly,” she says. “So you needed a really strong bricks and mortar foundation.

“These days, companies are realising a diversity of skill sets can help them be innovative. They realise anything that can be systematised, automated or outsourced will be. That’s a new mindset.

“I’m not saying all people with finance or operational backgrounds can’t do that. But organisations are seeing the need for diversity.”

Myriam Robin is a journalist with LeadingCompany. You can follow her on Twitter at @myriamrobin.This article first appeared on Leading Company.