Turnover among CFOs at large companies rose for the third straight year in 2013, according to a new report from recruiting firm Crist|Kolder Associates. That continued a long-term trend of higher turnover as economic conditions improve, and vice versa.
Among the 668 companies in either the Fortune 500 or S&P 500, CFO turnover – defined as happening when a new finance chief starts performing that role, rather than when the position became vacant or the new hire was announced – has crept up to 14.4 percent this year. That compared to 13.7 percent a year earlier and 11.0 percent three years ago.
(The Crist|Kolder Volatility Report, which also tracks movements of CEOs and chief operating officers, includes executive changes made through Aug. 1 and projected changes through year-end.)
The new churn figure still trails the historical average of 16.1 percent since Crist|Kolder began tracking turnover data in 1995, another indication that the economy continues to struggle for firm footing. During the strong economies of the late 1990s and mid-2000s, CFO turnover rates generally ranged from 17 percent to almost 20 percent.
It may seem counterintuitive that CFO musical chairs are more active in good times than bad. But, says Tom Kolder, president of the recruiting firm, “As the business environment and markets rebound over the course of time, there’s a greater willingness among both companies and candidates to be receptive to change and new opportunities, as opposed to hunkering down and doing the best they could to survive like they were doing during the downturn.” Many people and companies are averse to the risk of compounding a difficult situation with a major change, he adds.
By industry sector, industrial and financial firms are the most volatile this year see chart below), with CFO churn rates of 19.7 percent and 18.2 percent, respectively. “The fact that those two sectors are rebounding plays into that,” Kolder says. “But they have been volatile over time. There is more diversity of opportunities in those businesses compared to the ones where there’s a greater propensity to stay put.”
Other interesting findings from the report:
• The technology sector has the highest percentage (47.7) of CFOs who were hired from other companies, while industrial was the lowest at 28.9 percent. Technology has always shown a propensity for movement, Kolder says, while many industrial companies have “a stereotypical Midwestern mindset and culture that says if you move every five years you’re a job hopper. For technology folks on the West Coast, five years is an eternity.”
• Internally promoted CFOs have longer tenures (5.9 years) than their externally hired peers (4.7 years). “If you are internally promoted, you’re with an organization that’s more likely to value experience, longevity and loyalty,” Kolder says.
• Fewer than half of CFOs (44.0 percent) came directly from another CFO chair or a controller position. “I don’t think the specs for any of our CFO searches right now require controller experience or even a CPA designation. The effect of Sarbanes-Oxley on the must-have skill set for CFOs has all but disappeared from the landscape,” says Kolder. Higher priorities include financial planning and analysis, operational and strategic acumen.
• The hiring of CEOs with financial experience grew dramatically this year, with 23.5 percent of them fitting that bill, compared to 13.2 percent in 2012.
• Fewer companies have chief operating officers for the sixth year in a row and 11 of the last 12 years. Now just 35.9 percent have COOs, down from 48.1 percent in 2000.