While executive recruiter David Arnold and the CEO of a high-profile Silicon Valley company were discussing the company’s CFO search, the CEO told Arnold, “If you send me someone who has had a lot of short stops, I’ll be skeptical.” That was a red flag and her “number one pet peeve,” says Arnold, president of Arnold Partners, LLC.
Too short a tenure at too many organizations — job-hopping — brings career risks like the concern cited by Arnold’s client. But how do you define how much is too much movement? And are the downsides significant?
The answer on how much is too much is subjective and can vary from industry to industry. Organizational consulting firm Korn Ferry reports the average CFO tenure is 4.7 years, while the most recent Crist|Kolder Associates Volatility Report sets it slightly higher, at 4.86 years. According to the Korn Ferry analysis, the information technology industry has the shortest CFO tenure at 4.1 years, while the industrial segment has the longest, at five.
So is any tenure shorter than that job-hopping? Drew Keith, executive vice president and CFO of Dallas-based Texas Security Bank, sees three years as the minimum to stay in a job if the CFO is in the middle of their career. For someone having just moved up to a CFO role, the minimum might be longer, four to five years.
Still, consulting firm Korn Ferry’s Jeff Constable, senior client partner and co-lead of the global financial officers’ practice, cautions against preconceived notions about too much or too little job movement.
“I try hard to dispel the notion that there’s some kind of perfect number of moves,” he says.
Compared with length of time, having been in a key position long enough to experience an entire business cycle might be more critical, says CFO Keith. “I look at a particular industry, its key capital components, and its cycle. Have you been through the full capital cycle for the business relative to that industry?” he asks. That can give a hiring CEO and board of directors confidence.
Not all business cycles are of the same length, of course. The business cycles in technology are usually faster than in other industries. “It’s the pace of change and the [merger and acquisition] activity,” says Constable. “Plus, private companies are going public through [special purpose acquisition companies] or IPOs or being sold.” All of those circumstances lead to more company movement among CFOs and prompt organizations to switch CFOs.
Constable says that ownership change from that kind of activity is one of the two biggest factors driving CFO departures in any industry or product category. A new CEO is the other. And, if there’s going to be a CFO change when a new CEO takes over, it happens most often in the first six to eight months.
Ownership change played a role in Katherine Edenbach’s experience earlier in her career. After working in a range of finance environments at a large semiconductor company for more than a decade, she accepted a CFO position at a different company that was acquired soon after. She spent only two-and-a-half years in that role before leaving, but it was for good reasons.
“I took them through an acquisition and achieved what I wanted to. It was time to move on and start over with another company,” says Edenbach, who is now CFO of fintech Emburse.
These situations explain why Constable and others say it’s essential to look for the story behind any red flags or questions around the length of stay. Perhaps the executive made a geographic move for personal reasons, or there wasn’t room for growth. The latter is one that Constable expects to see more of as companies work to recruit historically underrepresented talent into the C-suite.
“Maybe someone felt blocked from moving and left because of a bias in the culture. We’re all going to have to continue to get sharper at really understanding career stories,” he says.
Yet, even when CFOs and recruiters are reluctant to define what’s considered job-hopping, they agree that too much movement between companies comes with tangible and intangible risks.
Two of the biggest, according to employment practices and litigation attorney Lauren Paxton, are “job trajectory impairment” and long-term compensation loss. Paxton, a partner at New York-based Calcagni & Kanfesky LLP, says CFOs often have post-employment restrictive covenants such as non-competition clauses.
“A CFO who hops from one job to another may find their trajectory impaired by periods out of the industry,” she says.
In addition, most CFO compensation packages include short-term and long-term compensation. That longer-term pay, usually restricted stock units and incentive stock options, might take three to five years or longer to vest.
“CFOs will generally forfeit the unvested and restricted portions of their long-term compensation when they resign. As a result, the loss of considerable incentive compensation should be weighed against the increased short-term compensation a new job may offer,” Paxton says.
Other risks are less tangible. Critical among them are the concerns raised about a CFO candidate’s judgment. People understand when a finance chief leaves a leadership role quickly once — or even twice — because the company wasn’t a good fit. But when it goes beyond that threshold and can’t be explained by mitigating factors that include being promoted, following a mentor, or moving to another geographic region for personal reasons, it’s “a fatal flaw,” says recruiter Arnold.
“What kind of judgment is this person exercising? Are they making good decisions? This is important because the CFO is a key adviser to the CEO and board of directors,” he says.
Because CEOs and boards also want CFOs with the formative experience of having been part of a key project or initiative from beginning to end, job-hoppers who can’t demonstrate that have limited career growth opportunities, Arnold adds. “Even if they weren’t the CFO, we look for candidates who had a prominent role helping a company go from X to Y.”
Not Enough Time
There’s also the downside that job-hopping doesn’t allow a finance leader to stay with a company long enough to become immersed in ways that help develop strategic thinking skills.
“It’s hard to become strategic if you keep moving from one company to another. You don’t get to learn what drives the company or become a partner to the operations side of the business,” says Emburse’s Edenbach.
One CFO cautions against viewing recent too-brief tenures too harshly, though. Citing the February/March 2021 CFO article “10 Vital Roles for CFOs” and the business pressures associated with the COVID-19 pandemic, David Neaves, CFO of Lendmark Financial Services, says some of his peers are experiencing burnout. The CFO role requires more skills than it did a decade ago, he notes, and while exciting, it can also be exhausting.
“Business has become more heavily reliant on technology, and it is changing more quickly. I don’t have to be an expert in all aspects of a company’s technology, but I do have to understand the core technology,” Neaves says, adding, “That learning is one more part of your day for which you have to find the time.” Throw in the crisis management linked to the global pandemic, and it’s not unusual to see peers leaving their C-suite positions to recharge, explore, and re-focus, he says.
Just don’t do too much of that, cautions Korn Ferry’s Constable.
“There are people in decision-making capacities — board members and CEOs — who can have a bit of an allergic reaction to too much movement,” he says. “No matter how well explained the transitions are, they may not want to hear about it.”
Sandra Beckwith is a freelance business writer.