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Saturday, September 1, 2012

Why CFOs Leave Their Jobs

CFO turnover in the Fortune 1000 is rising again, according to CFO Magazine. After reaching historic highs of nearly 18 percent CFO turnover in 2008, the economy tanked and movement slowed, dropping to a low of 10.5 percent in 2010.

But last year, the rate ticked up again to 11.5 percent, indicating that the improving economy was likely causing CFOs to look at new opportunities. The Wall Street Journal - citing a study by Korn/Ferry International - in June reported a "surge in turnover among chief financial officers," nationally to an annualized rate of 15 percent.

This is not good news for a key executive position that in most companies requires continuity. We did some informal surveying and found that the top reasons CFOs leave include:

  • Dysfunctional Board of Directors
  • Lack of autonomy and trust with CEO and / or c-suite
  • Lack of challenge and professional stimulation
  • Feeling disempowered
  • Being relegated solely to the accountant and protector roles
  • Better opportunities elsewhere
  • Weak ability of the enterprise to attract skilled financial talent for the CFO organization
"Having a stable Board of Directors and a good relationship with the CEO are keys to keeping a good CFO in position," says one former CFO who recently left his position. "Your board is particularly important because if it is dysfunctional, the CFO can be hamstrung and ineffective and that often precipitates a move."

Julia Holian, director of Armanino’s Executive Search, says that CFOs have substantial business acumen well beyond numbers and reporting and want to put those strategic skills to work for their companies. "When CFOs are not given enough autonomy, they don't feel trusted or valued and are much more likely to become a turnover statistic."

Tom Mescall, Partner-in-Charge of Consulting at Armanino, speaks with CFOs on a daily basis and has heard his share of tales as to why CFOs leave their jobs or consider leaving.

"It's mainly because they feel relegated to the accounting and compliance functions of their positions with no hope for a strategic or leadership role," Tom says.

The basic role of the CFO is actually a collection of crucial financial and compliance duties including controllership; treasury and risk management; budgeting, forecasting and modeling; and risk management. Yet, CFOs in small to mid-sized companies are often responsible for much more including oversight of a company's legal, human resources, IT and facilities functions. 

"That doesn't leave any time to be strategic, and does not take into account the aspirational goals of the CFO as a key member of management," notes Tom.

With the economy improving in many sectors, it's important to structure the finance organization in such a way that CFOs are empowered to perform their most value added activities for the business. It should also be structured for long-term sustainability of a CFO. Chief executive officers should be aware of the potential for loss of the CFO, as well as the cost and difficulty in recruiting his or her replacement.


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