The ongoing coronavirus pandemic has shifted the role and the path of CFOs, and experts say more change is on the way. Those accustomed to focusing on budgets and forecasts are increasingly asked to think more strategically and display strong management skills. “It’s a ton of pressure,” said Beau Lambert, a senior client partner for global consulting firm Korn Ferry.
CFOs tend to switch jobs a good bit regardless of the business landscape. The average tenure of a CFO is now just under five years, which is consistent with previous years, according to the 2020 Volatility Report from Crist | Kolder, a global recruiting firm based in the US. The report looked at 674 Fortune 500 and S&P 500 companies.
The average CFO tenure is shorter by about two years than that of CEOs, said Scott Simmons, managing director for Crist | Kolder. That’s because boards are responsible for hiring CEOs, but CEOs hire finance chiefs. “The decision doesn’t come easily to the board to change either, but I think it’s easier to change the CFO,” he said.
Many companies aren’t in a hurry to change CFOs during the pandemic, and some finance leaders have put retirement on hold to help navigate the business crisis. Simmons points to longtime Delta Air Lines CFO Paul Jacobson, who said in April he would delay his planned retirement.
But there have been a few high-profile CFO departures this summer, as Korn Ferry points out in a recent report. The CFOs for General Motors, Cisco Systems, and Avis Budget Group all announced in August that they were leaving.
Lambert said finance executives are looking for other opportunities now that some companies are seeing an improved outlook and the stock market is rebounding from its rapid March decline.
“They had this relief of pressure to say, ‘I got us through this darkest hour, and now I’m going,’” Lambert said. “Some are just not equipped to manage in a crisis. And some didn’t know that before the crisis.”
Katie Gleber, CPA, an associate at Korn Ferry, said the fallout from the pandemic has shifted responsibilities for many CFOs, which has contributed to turnover. “We are increasingly hearing, ‘This isn’t what I want to be doing,’ from departing CFOs.”
With an increased demand for CFOs comes a unique opportunity for companies to rethink the kind of skills they want for the role. The job is becoming “less about scorekeeping” and more about leading a virtual workforce with empathy, Lambert said.
Simmons agrees. “CFOs can no longer be narrow and focus on the numbers and the filings getting done on time,” he said.
A plethora of CFO openings can allow companies to emphasise hiring diverse candidates for the role. The Crist | Kolder data shows that, of 674 companies, 90 have women as CFOs, and 66 have ethnically or racially diverse CFOs.
Simmons said it was “disheartening” that companies didn’t make more progress towards increasing diversity. “It’s a win for everybody if our searches end with a diversity placement,” he said.
There has been progress on the diversity front. Ethnic and racial diversity of CFOs has nearly tripled over the past decade. Diversity of CFOs across all industries has increased 150% since 2013.
Other key findings from the report:
- About three in eight CFOs have public accounting experience. About 13% have experience in investment banking.
- The average age of new CFO hires dropped in 2020 to just under 50. That compares with 52 last year but is still significantly higher than the average age of 44 in 2005. More than 60% of CFOs were younger than 50 when they were hired, and more than 85% of sitting CFOs are under 60, according to the report. The average tenure of CFOs increases with age, and people in their mid-50s tend to stay in the role. “The attractiveness of moving around may subside,” Simmons said.
- The financial sector has the greatest percentage of CEOs who were CFOs, at 33%. Overall, the number of CEOs who last worked as a finance chief is at 6.6%, down from 6.8% in 2019.
— Sarah Nagem is a freelance writer based in the US. To comment on this article or to suggest an idea for another article, contact Neil Amato, an FM magazine senior editor, at Neil.Amato@aicpa-cima.com.