CFO Job-Hopping: How Much Is Too Much?

Though executive recruiter David Arnold and the CEO of a substantial-profile Silicon Valley company ended up speaking about the company’s CFO lookup, the CEO told Arnold, “If you ship me a person who has had a lot of brief stops, I’ll be skeptical.” That was a red flag and her “number a single pet peeve,” says Arnold, president of Arnold Companions, LLC.

Too brief a tenure at far too many organizations — position-hopping — delivers job threats like the problem cited by Arnold’s client. But how do you define how much is far too much motion? And are the downsides substantial?

The remedy on how much is far too much is subjective and can differ from business to business. Organizational consulting firm Korn Ferry reports the average CFO tenure is four.seven several years, even though the most new Crist|Kolder Associates Volatility Report sets it somewhat higher, at four.86 several years. According to the Korn Ferry examination, the data technological know-how business has the shortest CFO tenure at four.one several years, even though the industrial segment has the longest, at five.

So is any tenure shorter than that position-hopping? Drew Keith, executive vice president and CFO of Dallas-based Texas Security Lender, sees three several years as the minimal to stay in a position if the CFO is in the middle of their job. For a person acquiring just moved up to a CFO role, the minimal could be for a longer period, 4 to five several years.

Continue to, consulting firm Korn Ferry’s Jeff Constable, senior client lover and co-guide of the world economical officers’ exercise, cautions in opposition to preconceived notions about far too much or far too tiny position motion.

“I try out challenging to dispel the idea that there is some sort of excellent number of moves,” he suggests.

When compared with size of time, acquiring been in a crucial placement extended sufficient to working experience an total enterprise cycle could be additional important, suggests CFO Keith. “I appear at a individual business, its crucial money elements, and its cycle. Have you been via the whole money cycle for the enterprise relative to that business?” he asks. That can give a using the services of CEO and board of directors confidence.

Not all enterprise cycles are of the very same size, of system. The enterprise cycles in technological know-how are normally more rapidly than in other industries. “It’s the speed of improve and the [merger and acquisition] activity,” suggests Constable. “Plus, non-public firms are heading community via [special objective acquisition firms] or IPOs or getting sold.” All of those situations guide to additional company motion among CFOs and prompt organizations to change CFOs.

Constable suggests that possession improve from that sort of activity is a single of the two greatest aspects driving CFO departures in any business or product or service group. A new CEO is the other. And, if there is heading to be a CFO improve when a new CEO takes around, it happens most typically in the initial 6 to 8 months.

Ownership improve performed a role in Katherine Edenbach’s working experience earlier in her job. Following doing the job in a vary of finance environments at a substantial semiconductor company for additional than a ten years, she accepted a CFO placement at a various company that was acquired soon just after. She invested only two-and-a-50 percent several years in that role in advance of leaving, but it was for excellent causes.

“I took them via an acquisition and obtained what I preferred to. It was time to move on and start out around with another company,” suggests Edenbach, who is now CFO of fintech Emburse.

These conditions make clear why Constable and other individuals say it’s critical to appear for the story driving any red flags or issues close to the size of stay. Potentially the executive built a geographic move for individual causes, or there wasn’t place for expansion. The latter is a single that Constable expects to see additional of as firms operate to recruit traditionally underrepresented talent into the C-suite.

“Maybe a person felt blocked from relocating and remaining since of a bias in the culture. We’re all heading to have to continue to get sharper at seriously knowing job stories,” he suggests.

The Challenges

However, even when CFOs and recruiters are hesitant to define what’s viewed as position-hopping, they agree that far too much motion amongst firms arrives with tangible and intangible threats.

Two of the greatest, in accordance to work procedures and litigation lawyer Lauren Paxton, are “job trajectory impairment” and extended-term compensation decline. Paxton, a lover at New York-based Calcagni & Kanfesky LLP, suggests CFOs typically have post-work restrictive covenants these types of as non-level of competition clauses.

“A CFO who hops from a single position to another could find their trajectory impaired by intervals out of the business,” she suggests.

In addition, most CFO compensation offers involve brief-term and extended-term compensation. That for a longer period-term fork out, normally restricted stock units and incentive stock solutions, could acquire three to five several years or for a longer period to vest.

“CFOs will typically forfeit the unvested and restricted portions of their extended-term compensation when they resign. As a end result, the decline of appreciable incentive compensation really should be weighed in opposition to the increased brief-term compensation a new position could offer you,” Paxton suggests.

Other threats are a lot less tangible. Critical among them are the worries elevated about a CFO candidate’s judgment. Folks understand when a finance chief leaves a leadership role promptly the moment — or even 2 times — since the company wasn’t a excellent in good shape. But when it goes beyond that threshold and simply cannot be described by mitigating aspects that involve getting promoted, pursuing a mentor, or relocating to another geographic region for individual causes, it’s “a lethal flaw,” suggests recruiter Arnold.

“What sort of judgment is this person performing exercises? Are they creating excellent decisions? This is crucial since the CFO is a crucial adviser to the CEO and board of directors,” he suggests.

Because CEOs and boards also want CFOs with the formative working experience of acquiring been component of a crucial task or initiative from starting to conclude, position-hoppers who simply cannot exhibit that have constrained job expansion opportunities, Arnold provides. “Even if they weren’t the CFO, we appear for candidates who had a prominent role assisting a company go from X to Y.”

Not Ample Time

There is also the downside that position-hopping doesn’t make it possible for a finance chief to stay with a company extended sufficient to turn out to be immersed in ways that enable establish strategic contemplating capabilities.

“It’s challenging to turn out to be strategic if you keep relocating from a single company to another. You never get to master what drives the company or turn out to be a lover to the operations aspect of the enterprise,” suggests Emburse’s Edenbach.

One particular CFO cautions in opposition to viewing new far too-brief tenures far too harshly, while. Citing the February/March 2021 CFO article “10 Critical Roles for CFOs” and the enterprise pressures linked with the COVID-19 pandemic, David Neaves, CFO of Lendmark Fiscal Providers, suggests some of his friends are experiencing burnout. The CFO role calls for additional capabilities than it did a ten years back, he notes, and even though exciting, it can also be exhausting.

“Business has turn out to be additional greatly reliant on technological know-how, and it is switching additional promptly. I never have to be an professional in all features of a company’s technological know-how, but I do have to understand the core technological know-how,” Neaves suggests, incorporating, “That learning is a single additional component of your day for which you have to find the time.” Toss in the crisis administration joined to the world pandemic, and it’s not strange to see friends leaving their C-suite positions to recharge, investigate, and re-focus, he suggests.

Just never do far too much of that, cautions Korn Ferry’s Constable.

“There are folks in choice-creating capacities — board users and CEOs — who can have a bit of an allergic reaction to far too much motion,” he suggests. “No subject how perfectly described the transitions are, they could not want to hear about it.”

Sandra Beckwith is a freelance business author.

CFO job, CFO strategy, CFO turnover, position hopping