iVillage: six CFOs in five years. Delta Air Lines: four in four years. Hastings Entertainment: four in two years. Why all the churn atop corporate finance departments?
In Delta’s case, at least, two CFOs (Warren Jenson, now at Amazon.com, and Ed West, now at Internet Capital Group) were lured away by dot-coms. A third (Tom Roeck) was replaced in 1997 when a new CEO came aboard, not an unusual turn of events. So, while high CFO turnover may be a traditional symptom of a troubled company, often it is simply a fact of modern corporate life.
In the recent past, according to William Sihler, a professor at the University of Virginia’s Darden Graduate School of Business, the average tenure of a CFO has been five to seven years. “CEOs often turned at about that rate,” he explains, “and wanted to bring in their own CFOs.” But, adds Sihler, co-author of Financial Turnarounds: Preserving Value, a Financial Executives Research Foundation study, “just as companies need CEOs with different skills, CEOs need CFOs with different skills for different stages in a company’s life.” One CFO to perform triage, say, another to prescribe treatment, and a third to expand again, not to mention a CFO who specializes in going public.
Boston recruiter Laurence Stybel says most finance positions he’s been asked to fill recently involve tenures of two to four years. “The market is offering project-oriented assignments of that duration,” he says. “Companies are thinking short term.”
In such an environment, a growing subset of CFOs-for-hire specializes in short stints — especially to repair broken companies. But clearly, any finance executive hunting for a new post must consider working for a shorter term, and can’t ignore a good opening just because of past turnover.
The adjustment may not be easy. “CFOs tend to like stability and consistency, probably more than other functional groups,” says Stybel. “But most companies today are guided by exit strategies such as mergers, in which case the CFO’s job is going to be eliminated.”
Get used to it. Shorter terms will increasingly be the rule. Certainly, “in a big, mature company, CFO tenure can be 10 to 15 years,” notes New Yorkbased executive recruiter Harry Higdon. But “in a dot-com, it can be 10 months.” The IPO market’s collapse increases the turmoil — and the turnover in finance. “Somebody’s got to take the fall,” he says. And when Wall Street is disappointed, “usually the CFO is blamed.”
Of course, some walk if their stock options become worthless, adding to the churn statistics, notes Higdon. Others leave for the opposite reason. Graham Mitenko, professor of finance at the University of Nebraska, Omaha, blames prosperity for some of the leave-taking. “If you have any options at all, suddenly you’re worth $10 million; why do you need the hassle any more?” he asks.
In general, the rise of the short-term CFO isn’t a pretty prospect, warns Scott Davis, United Parcel Service’s vice president of finance. Davis, a 15-year veteran of the company, soon will succeed CFO Robert J. Clanin. “To be CFO for 1 or 2 years and jump ship doesn’t add value for the company,” says Davis. Clanin, who joined UPS in 1971, was named finance chief in 1994.