CFO Job-Hopping: How Much Is Too Much?

Whilst govt recruiter David Arnold and the CEO of a substantial-profile Silicon Valley enterprise have been talking about the company’s CFO lookup, the CEO advised Arnold, “If you ship me an individual who has had a ton of brief stops, I’ll be skeptical.” That was a red flag and her “number one particular pet peeve,” says Arnold, president of Arnold Companions, LLC.

Way too brief a tenure at too a lot of corporations — position-hopping — provides profession dangers like the worry cited by Arnold’s consumer. But how do you outline how significantly is too significantly movement? And are the downsides significant?

The response on how significantly is too significantly is subjective and can range from field to field. Organizational consulting organization Korn Ferry studies the regular CFO tenure is four.7 a long time, although the most the latest Crist|Kolder Associates Volatility Report sets it a bit higher, at four.86 a long time. According to the Korn Ferry analysis, the details technologies field has the shortest CFO tenure at four.1 a long time, although the industrial phase has the longest, at 5.

So is any tenure shorter than that position-hopping? Drew Keith, govt vice president and CFO of Dallas-dependent Texas Protection Lender, sees a few a long time as the minimal to continue to be in a position if the CFO is in the center of their profession. For an individual having just moved up to a CFO position, the minimal may well be lengthier, 4 to 5 a long time.

Nonetheless, consulting organization Korn Ferry’s Jeff Constable, senior consumer lover and co-direct of the world fiscal officers’ apply, cautions in opposition to preconceived notions about too significantly or too very little position movement.

“I try out really hard to dispel the notion that there is some type of ideal selection of moves,” he says.

As opposed with length of time, having been in a essential posture extended ample to encounter an entire enterprise cycle may well be a lot more significant, says CFO Keith. “I search at a particular field, its essential cash parts, and its cycle. Have you been through the complete cash cycle for the enterprise relative to that field?” he asks. That can give a using the services of CEO and board of directors self esteem.

Not all enterprise cycles are of the same length, of training course. The enterprise cycles in technologies are typically faster than in other industries. “It’s the speed of adjust and the [merger and acquisition] exercise,” says Constable. “Plus, non-public firms are heading public through [exclusive goal acquisition firms] or IPOs or becoming marketed.” All of those circumstances direct to a lot more enterprise movement amongst CFOs and prompt corporations to change CFOs.

Constable says that ownership adjust from that type of exercise is one particular of the two most important things driving CFO departures in any field or product or service class. A new CEO is the other. And, if there is heading to be a CFO adjust when a new CEO takes over, it comes about most normally in the initially six to eight months.

Ownership adjust played a position in Katherine Edenbach’s encounter before in her profession. Following functioning in a variety of finance environments at a big semiconductor enterprise for a lot more than a ten years, she recognized a CFO posture at a diverse enterprise that was obtained soon just after. She put in only two-and-a-50 percent a long time in that position just before leaving, but it was for superior explanations.

“I took them through an acquisition and obtained what I preferred to. It was time to shift on and get started over with one more enterprise,” says Edenbach, who is now CFO of fintech Emburse.

These circumstances describe why Constable and other individuals say it is necessary to search for the story guiding any red flags or questions all-around the length of continue to be. Possibly the govt made a geographic shift for own explanations, or there was not place for growth. The latter is one particular that Constable expects to see a lot more of as firms perform to recruit historically underrepresented talent into the C-suite.

“Maybe an individual felt blocked from going and left simply because of a bias in the culture. We’re all heading to have to carry on to get sharper at really comprehension profession stories,” he says.

The Pitfalls

But, even when CFOs and recruiters are reluctant to outline what’s considered position-hopping, they concur that too significantly movement involving firms will come with tangible and intangible dangers.

Two of the most important, according to employment methods and litigation legal professional Lauren Paxton, are “job trajectory impairment” and extended-term payment loss. Paxton, a lover at New York-dependent Calcagni & Kanfesky LLP, says CFOs normally have put up-employment restrictive covenants these as non-competition clauses.

“A CFO who hops from one particular position to one more may possibly find their trajectory impaired by periods out of the field,” she says.

In addition, most CFO payment offers consist of brief-term and extended-term payment. That lengthier-term fork out, typically limited inventory models and incentive inventory alternatives, may well take a few to 5 a long time or lengthier to vest.

“CFOs will frequently forfeit the unvested and limited parts of their extended-term payment when they resign. As a result, the loss of sizeable incentive payment need to be weighed in opposition to the elevated brief-term payment a new position may possibly offer you,” Paxton says.

Other dangers are a lot less tangible. Essential amongst them are the fears lifted about a CFO candidate’s judgment. Individuals fully grasp when a finance chief leaves a management position promptly after — or even twice — simply because the enterprise was not a superior in shape. But when it goes beyond that threshold and cannot be spelled out by mitigating things that consist of becoming promoted, next a mentor, or going to one more geographic location for own explanations, it is “a lethal flaw,” says recruiter Arnold.

“What type of judgment is this man or woman training? Are they making superior conclusions? This is crucial simply because the CFO is a essential adviser to the CEO and board of directors,” he says.

Because CEOs and boards also want CFOs with the formative encounter of having been section of a essential task or initiative from commencing to finish, position-hoppers who cannot display that have confined profession growth chances, Arnold provides. “Even if they weren’t the CFO, we search for candidates who had a prominent position supporting a enterprise go from X to Y.”

Not Enough Time

There’s also the draw back that position-hopping doesn’t allow for a finance chief to continue to be with a enterprise extended ample to develop into immersed in ways that help produce strategic imagining abilities.

“It’s really hard to develop into strategic if you hold going from one particular enterprise to one more. You don’t get to study what drives the enterprise or develop into a lover to the functions side of the enterprise,” says Emburse’s Edenbach.

1 CFO cautions in opposition to viewing the latest too-short tenures too harshly, though. Citing the February/March 2021 CFO post “10 Important Roles for CFOs” and the enterprise pressures connected with the COVID-19 pandemic, David Neaves, CFO of Lendmark Monetary Providers, says some of his peers are suffering from burnout. The CFO position demands a lot more abilities than it did a ten years ago, he notes, and although enjoyable, it can also be exhausting.

“Business has develop into a lot more closely reliant on technologies, and it is shifting a lot more promptly. I don’t have to be an qualified in all aspects of a company’s technologies, but I do have to fully grasp the core technologies,” Neaves says, adding, “That mastering is one particular a lot more section of your working day for which you have to find the time.” Throw in the disaster administration linked to the world pandemic, and it is not unusual to see peers leaving their C-suite positions to recharge, explore, and re-concentrate, he says.

Just don’t do too significantly of that, cautions Korn Ferry’s Constable.

“There are persons in selection-making capacities — board customers and CEOs — who can have a bit of an allergic response to too significantly movement,” he says. “No subject how properly spelled out the transitions are, they may possibly not want to listen to about it.”

Sandra Beckwith is a freelance business author.

CFO profession, CFO tactic, CFO turnover, position hopping