CFO tenure is on the decline around the world, a reflection of the workforce at all levels of the company but also the increasing demands being placed on the C-suite.
Among North American CEOs in financial services, 59% said the average tenure of a CFO at the same company was less than five years. This figure is even higher for EMEA- and APAC-based finance executives, with 73% and 61%, respectively, saying the average CFO tenure is less than five years.
And in every region of the world covered by FTI Consulting’s recent global survey of CFOs, it’s a big change from last year, when the average was 48%.
A study of 679 Fortune 500 and S&P 500 companies in 2022 by Crist Kolder Associates also found that the average CFO tenure is on the decline, within five years. Ten years ago, the average tenure was 5.3 years.
Gina Gutzeit, executive director at FTI Consulting and its CFO Solutions project leader, said that while there are times when a CFO stays with a company for ten years or more, this is less common.
There are a number of reasons why the CFO change is up, Gutzeit said. One is the change in the company’s structure: M&A, companies that go public, or transactions that see a change from a company that leads to another ownership, are all situations where changes in management are common.
But another big thing is the evolution of the CFO itself.
“What we’re seeing more and more now is that the pressures and responsibilities on the CFO have increased, and they’ve become an important part of the C-suite decision-making party,” Gutzeit said. “I think that responsibility becomes an interesting type where if they don’t like the leadership of the company or they don’t see eye to eye with the CEO, that can lead to change.”
Long gone are the days when the CFO was viewed as a “bean measurer,” Gutzeit said, and being the most powerful member at the boardroom table can lead to more conflicts.
“That’s where that energy comes in, whether you feel included or listened to,” she said. “CFOs can say, ‘If you’re asking me to have a seat at the table and you’re not listening to me, why am I sitting at the table?’
Alan Numsuwan, managing director at FTI Consulting’s CFO Solutions practice, said the CFO’s experience can influence the rate of change.
“I don’t know if I would call it a character or a role, but most CFOs develop a reputation for themselves as experts,” Numsuwan said. “They can be great dealmakers, and if a company wants to go public, they can take them there, or if they want to destabilize organizations.”
IPOs ahead of 2022 and financial growth are likely to increase CFO turnover as new opportunities arise frequently.
Other examples include rapid growth, say a company that wants to go from $1 billion to $5 billion in revenue, as well as financial savings and technology change projects that may create a need for a specialized CFO, he said. The smile.
Big Resignation is another thing. CFOs, like other corporate employees, suddenly find themselves in high demand due to the tight labor market, and they may not be able to use them when faced with a large amount of work or pressure.
Gutzeit said the current economic climate, along with increasing complaints and corporate restructuring, should persuade more CFOs to stay. She expects a decrease in CFO turnover as “people are going to be more cautious about where they’re going and what’s changing.”
Still, she said, the calculation for CFOs who are considering a move or imagining what the future may bring is the same: it is important that CFOs “trust people. [they] work with.”
“It really affects who is the President, who is the board, and where is the direction of that, and building an understanding of their thinking and how they approach issues,” she said. “At the end of the day, you have to trust people in their ability to make good decisions … I’ve seen a lot of CFOs move because the vision they were told or the promises they made didn’t happen.”
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