CFO Job-Hopping: How Much Is Too Much?

Truman Slate

When government recruiter David Arnold and the CEO of a superior-profile Silicon Valley enterprise were being discussing the company’s CFO search, the CEO told Arnold, “If you ship me anyone who has experienced a great deal of limited stops, I’ll be skeptical.” That was a pink flag and her “number one pet peeve,” says Arnold, president of Arnold Associates, LLC.

Way too limited a tenure at also lots of businesses — position-hopping — provides profession hazards like the problem cited by Arnold’s shopper. But how do you outline how considerably is also considerably motion? And are the downsides substantial?

The respond to on how considerably is also considerably is subjective and can vary from industry to industry. Organizational consulting firm Korn Ferry experiences the ordinary CFO tenure is 4.7 several years, although the most modern Crist|Kolder Associates Volatility Report sets it a bit larger, at 4.86 several years. According to the Korn Ferry assessment, the information technological know-how industry has the shortest CFO tenure at 4.1 several years, although the industrial phase has the longest, at 5.

So is any tenure shorter than that position-hopping? Drew Keith, government vice president and CFO of Dallas-centered Texas Security Lender, sees three several years as the bare minimum to continue to be in a position if the CFO is in the middle of their profession. For anyone obtaining just moved up to a CFO role, the bare minimum may be longer, four to 5 several years.

Still, consulting firm Korn Ferry’s Jeff Constable, senior shopper lover and co-guide of the world economical officers’ apply, cautions towards preconceived notions about also considerably or also minimal position motion.

“I test challenging to dispel the idea that there is some sort of best variety of moves,” he claims.

As opposed with duration of time, obtaining been in a vital situation prolonged enough to encounter an overall organization cycle may be a lot more significant, claims CFO Keith. “I look at a distinct industry, its vital funds parts, and its cycle. Have you been through the complete funds cycle for the organization relative to that industry?” he asks. That can give a employing CEO and board of directors self confidence.

Not all organization cycles are of the similar duration, of training course. The organization cycles in technological know-how are usually more quickly than in other industries. “It’s the pace of improve and the [merger and acquisition] exercise,” claims Constable. “Plus, personal firms are heading community through [particular goal acquisition firms] or IPOs or getting offered.” All of individuals circumstances guide to a lot more enterprise motion among the CFOs and prompt businesses to switch CFOs.

Constable claims that ownership improve from that sort of exercise is one of the two greatest variables driving CFO departures in any industry or product classification. A new CEO is the other. And, if there is heading to be a CFO improve when a new CEO usually takes more than, it comes about most normally in the first 6 to 8 months.

Possession improve played a role in Katherine Edenbach’s encounter before in her profession. Soon after functioning in a array of finance environments at a substantial semiconductor enterprise for a lot more than a decade, she approved a CFO situation at a various enterprise that was acquired soon just after. She invested only two-and-a-fifty percent several years in that role in advance of leaving, but it was for fantastic good reasons.

“I took them through an acquisition and reached what I desired to. It was time to transfer on and start off more than with yet another enterprise,” claims Edenbach, who is now CFO of fintech Emburse.

These cases describe why Constable and many others say it’s important to look for the story behind any pink flags or issues all over the duration of continue to be. Potentially the government built a geographic transfer for personal good reasons, or there wasn’t home for growth. The latter is one that Constable expects to see a lot more of as firms get the job done to recruit historically underrepresented expertise into the C-suite.

“Maybe anyone felt blocked from shifting and still left due to the fact of a bias in the culture. We’re all heading to have to proceed to get sharper at actually understanding profession stories,” he claims.

The Dangers

But, even when CFOs and recruiters are hesitant to outline what’s considered position-hopping, they agree that also considerably motion concerning firms comes with tangible and intangible hazards.

Two of the greatest, according to work procedures and litigation attorney Lauren Paxton, are “job trajectory impairment” and prolonged-time period payment loss. Paxton, a lover at New York-centered Calcagni & Kanfesky LLP, claims CFOs normally have submit-work restrictive covenants these kinds of as non-competition clauses.

“A CFO who hops from one position to yet another may perhaps come across their trajectory impaired by intervals out of the industry,” she claims.

In addition, most CFO payment deals consist of limited-time period and prolonged-time period payment. That longer-time period shell out, usually restricted stock units and incentive stock alternatives, may consider three to 5 several years or longer to vest.

“CFOs will usually forfeit the unvested and restricted portions of their prolonged-time period payment when they resign. As a final result, the loss of sizeable incentive payment need to be weighed towards the elevated limited-time period payment a new position may perhaps provide,” Paxton claims.

Other hazards are much less tangible. Vital among the them are the issues raised about a CFO candidate’s judgment. Individuals recognize when a finance chief leaves a management role immediately after — or even 2 times — due to the fact the enterprise wasn’t a fantastic fit. But when it goes further than that threshold and can not be discussed by mitigating variables that consist of getting promoted, following a mentor, or shifting to yet another geographic area for personal good reasons, it’s “a fatal flaw,” claims recruiter Arnold.

“What sort of judgment is this person training? Are they making fantastic conclusions? This is critical due to the fact the CFO is a vital adviser to the CEO and board of directors,” he claims.

Mainly because CEOs and boards also want CFOs with the formative encounter of obtaining been section of a vital challenge or initiative from beginning to end, position-hoppers who can not show that have limited profession growth possibilities, Arnold provides. “Even if they weren’t the CFO, we look for candidates who experienced a outstanding role assisting a enterprise go from X to Y.”

Not Enough Time

There is also the downside that position-hopping does not enable a finance leader to continue to be with a enterprise prolonged enough to grow to be immersed in ways that enable develop strategic wondering techniques.

“It’s challenging to grow to be strategic if you maintain shifting from one enterprise to yet another. You don’t get to study what drives the enterprise or grow to be a lover to the functions aspect of the organization,” claims Emburse’s Edenbach.

1 CFO cautions towards viewing modern also-quick tenures also harshly, even though. Citing the February/March 2021 CFO posting “10 Vital Roles for CFOs” and the organization pressures affiliated with the COVID-19 pandemic, David Neaves, CFO of Lendmark Money Expert services, claims some of his peers are going through burnout. The CFO role needs a lot more techniques than it did a decade in the past, he notes, and although enjoyable, it can also be exhausting.

“Business has grow to be a lot more closely reliant on technological know-how, and it is switching a lot more immediately. I don’t have to be an expert in all features of a company’s technological know-how, but I do have to recognize the core technological know-how,” Neaves claims, incorporating, “That mastering is one a lot more section of your day for which you have to come across the time.” Throw in the disaster management linked to the world pandemic, and it’s not strange to see peers leaving their C-suite positions to recharge, explore, and re-concentrate, he claims.

Just don’t do also considerably of that, cautions Korn Ferry’s Constable.

“There are folks in selection-making capacities — board associates and CEOs — who can have a bit of an allergic reaction to also considerably motion,” he claims. “No make any difference how well discussed the transitions are, they may perhaps not want to hear about it.”

Sandra Beckwith is a freelance business writer.

CFO profession, CFO method, CFO turnover, position hopping

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