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Yahoo
4 days ago
- Business
- Yahoo
Companies vie for ‘tried-and-true' CFOs amid volatility: Russell Reynolds
This story was originally published on CFO Dive. To receive daily news and insights, subscribe to our free daily CFO Dive newsletter. Companies seeking their next finance chief are on the hunt for 'tried and true' finance leaders that can help them navigate choppy economic seas, Jim Lawson, co-leader of executive search and leadership advisory firm Russell Reynolds Associates' CFO practice told CFO Dive, with the appointments of first-time CFOs inching downwards in the year's first quarter. Though most new CFO appointments in Q1 2025 (58%) were internal hires, of those that were external hires, 'experienced CFOs are increasingly favored,' Russell Reynolds' Q1 2025 CFO Turnover Index found. Experienced CFOs made up 80% of external hires, a quarterly high on par with results seen in 2021, 'as some organizations continue to navigate complex economic markets and succession plans fail to materialize,' the report found. 'If we don't think our bench is ready quite yet, we would love to bring in a super experienced CFO who has been successful a few times and can bring that seniority in some of these turbulent markets,' Lawson said in an interview of how companies are approaching their CFO hiring strategies. Businesses are putting a growing premium on experienced finance chiefs after CFO turnover reached a six-year high in 2024, RRA previously found. That trend has continued; for the year's first quarter, 95 CFOs were appointed, compared to 89 appointments in the prior year period, the leadership advisory firm found. Finance chiefs are also reporting shorter tenures; in Q1, the average stint in the top financial seat was 5.8 years, slightly below a six-year, full-year average of 6.2 years, RRA found. A top factor that has continued to drive CFO turnover is rising retirement rates, in keeping with trends seen in 2024, 60% of departing finance chiefs either retired or moved exclusively to board positions in Q1, with many choosing not to seek new CFO roles due to factors such as burnout or financial security, or simply because now seems like the right time for retirement, according to the report. However, that growing exodus represents a challenge for businesses today looking for their next finance leader. One of the most troubling trends is 'we don't see the same kind of pipeline that we used to see 10 years ago,' said Jenna Fisher, managing director, global financial officers practice for Russell Reynolds Associates. There's a narrowing number of new accounting and finance graduates — and moreover, many of the training programs or strategies companies may have historically put into place to hone future finance chiefs have since fallen out of common practice, Fisher said. For example, many companies previously tapped investor relation roles as a kind of 'breeding ground' for their next finance chiefs, a tactic that's become less commonplace today in favor of more specialization. 'Every company wants the best head of investor relations and the best treasurer and the best head of FP&A, and so that heterogeneity of experience, that toolkit building, is harder to come by for many aspiring CFOs than it was five, 10 years ago,' Fisher said. 'And so we see a continued struggle in terms of the supply, demand imbalance for CFOs.' Businesses on the hunt for their next finance chief aren't just searching for leaders with financial chops — though such skills are still key — but for CFOs with 'effective communication skills,' Lawson said. 'Effective communication with the board, with the CEO, with the street or investors, that ask has been amplified,' when it comes to firms seeking out their next finance leader, he said. As the demand for experienced finance chiefs becomes more acute, it's critical for companies to find ways to nurture upcoming talent as a way to bridge the supply, demand gap, Fisher said. Russell Reynolds offers a CFO mentor program which works to pair first-time CFOs with finance chiefs who have recently retired, she said. 'We really believe that there need to be more mechanisms for developing excellent CFOs, because we don't see CFOs fail generally, because of a lack of skill set,' Fisher said. 'Generally, it's because they're failing on some of the quote, unquote, softer dimensions. It's communication with the board and CEO. It's the ability to inspire and develop and retain their team.'
Yahoo
01-04-2025
- Business
- Yahoo
CFO turnover reaches six-year high: Russell Reynolds
This story was originally published on CFO Dive. To receive daily news and insights, subscribe to our free daily CFO Dive newsletter. Global turnover of S&P 500 CFOs reached a six-year high last year at 17.8%, matching the previous peak seen in 2021, according to Russell Reynolds' CFO Turnover Index. Overall global CFO turnover hit 15.1%, just below the record 16.2% turnover seen in 2023, according to the index. Rising retirement rates were a key driver of the increasing turnover, with 54% of finance chiefs departing from their roles either retiring or moving exclusively to board positions — a jump of 100 basis points year over year, the leadership advisory firm said. The average age of finance leaders making those switches was just over 56 years old, the lowest seen in six years. The rising turnover is part of an ongoing trend affecting financial talent: "We're at a point where the supply, demand dynamic is getting concerning,' said Jim Lawson, co-leader of executive search and leadership advisory firm Russell Reynolds Associates' CFO practice. 'Classically-trained' CFOs are making the move to retirement, and 'that is really limiting the pool of candidates moving forward,' he told CFO Dive in an interview. Retirement rates are rising among finance chiefs for a number of different reasons — equity markets throughout 2024 were strong, with jumps in stock prices prompting more CFOs to consider if it was an opportune time to retire, Lawson said. Another factor informing rising retirement rates is that finance chiefs 'get the top job at an earlier point in their career than CEOs,' Lawson said. 'It's just the average tenure of a newly appointed CFO is lower than that of a CEO.' However, with CFO retirements at a six-year high, and with finance chiefs logging shorter tenures in the top financial seat — coming in at 5.8 years on average in 2024, another six-year low, RRA found — businesses are beginning to think differently about how they find their next financial leaders. Most are putting an increasing premium on experience, with 40% of global CFO appointments last year going to experienced finance chiefs — a six year high, according to the index. However, with retirement rates growing and tenures shrinking, businesses are vying for a dwindling pool of those experienced leaders. Many are looking to their own talent ecosystem for their next finance chiefs, with the importance of an efficient succession plan growing. In 2024, 57% of CFOs were internal appointments, 34% were external hires coming from a sitting CFO position and 9% were external appointments coming in as first-time CFOs, RRA's index found. For CFOs, a smaller pool can also create more options for new positions or career advancement. Many finance chiefs 'are looking for more tech enablement in their opportunities,' Lawson said. 'We are often seeing somebody going from more of an old economy company to a new economy company just because they want to work in a more innovative environment, or sometimes it's higher margins.' Higher turnover in the top financial seat also comes as CFOs continue to see their list of responsibilities grow and evolve in the face of changing business needs and new technologies. The growing list of responsibilities CFOs need to juggle is also contributing to increased turnover, Lawson said. 'There are a lot of CFOs that were just exhausted from that continuous cycle of being a public company, working through the quarters, working through kind of one-off debt issuances, and it really just takes a toll over a period of time,' he said. CFOs need strong financial, operational and communication skills, while also being able to understand how to tap new technologies like artificial intelligence to drive efficiencies at their companies, RRA said. As finance chiefs continue to absorb new responsibilities, a rising number of companies have taken steps to merge their CFO and chief operating officer roles. Both software provider Salesforce and payments provider PayPal announced such changes in February, for example, with Salesforce creating a new 'COFO' position and PayPal appointing its CFO Jamie Miller to the additional role of COO. Although turnover continued to rise, RRA's index also showed some bright spots, particularly regarding diversity. Last year, of the 275 finance chiefs appointed, 70 were women, another six-year high. Fifty-four percent of the women tapped for the top financial seat were internal appointments, according to the index. In terms of industry, technology and financial services led the pack on increasing diversity, with 36% and 39%, respectively, of incoming CFOs being women. Recommended Reading CFOs to boost compensation Sign in to access your portfolio
