Moving On, Happily

Most CFOs leave their jobs in triumph, not disgrace, a new KPMG study shows.


Much has been written about the high rate of CFO turnover, often with the implication that finance executives are bailing out or being sent packing. But new research from KPMG suggests that behind the numbers actually lies a story of collective success. CFOs aren't being booted for botching Sarbox, giving faulty guidance, or green-lighting egregious mergers, KPMG says. Rather they are moving on to new opportunities for which their particular talents are best-suited. And in so doing, they are giving a new generation of CFOs a shot at the big time.

In December the accounting firm released a study in which it analyzed the career paths of 100 newly appointed CFOs at very large companies to see why the position had opened up and where the new CFOs had worked just prior to accepting the assignment. The research found that, most often, the departing CFO had jumped to a new role, either as a CFO at a different company or to a non-CFO position internally or elsewhere. "There was no correlation between negative company news and a CFO departure," says Larry Raff, a partner at KPMG. Instead, he explains, CFOs had usually "fulfilled the strategic need of the company at a particular point in its business cycle and then moved to where the market needed them next." Tenure was consistent across all four quartiles of the Fortune 1,000, averaging approximately 4.5 years.

Richard Jacovitz, who studies executive turnover for Liberum Research, agrees, saying, "That was not the case a few years ago, when many CFO departures were for negative reasons. But more often today they are moving on to new opportunities." As companies shift their emphasis from, say, organic to inorganic growth, a CFO well schooled in acquisitions may be what's needed. So it's farewell to the master of internal growth and hello to the dealmaker. Jacovitz also says that CFO turnover declined by about 15 percent between 2006 and 2008.

When a CFO does move on, he or she is more likely to be replaced from within, despite a widely held belief to the contrary. "Conventional wisdom holds that the largest companies don't hire anyone as a CFO who isn't currently a CFO," Raff says, "but a majority are actually promoted from within." That has implications for how companies groom talent, he says, since ideally a company would develop different kinds of finance expertise so they have a diverse range of skill sets to tap when the business cycle, and the current CFO, take a turn.

Whether new CFOs are internal or external hires, and how long they stay


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