The turnover rate among large-company CFOs ticked up slightly in 2011 but remained well below its 2008 peak, according to research by recruiting firm Heidrick & Struggles.
Perhaps counterintuitively, turnover among finance chiefs tends to be higher when the economy is performing well. In 2008, before that year’s cataclysmic autumn dive, the economy was humming along nicely in many respects, as private-equity firms and other investors pumped money into start-up ventures and growing existing businesses. Turnover, which Heidrick defines as the number of positions that open up during the year, hit 18% among Fortune 1000 companies.
The 2011 level, 11.5%, was up only one percentage point from the previous year. Jeremy Hanson, global CFO practice leader for Heidrick, takes that as a sign of a still-struggling economy. “Clearly the economy was better in 2011 than 2010, which was a lot better than 2009, but nobody would characterize any of those years as being focused on growth,” he says.
That has changed over the past few months, but not markedly so. “We’ve seen private-equity firms go from an absolute deal halt to active fundraising and investing,” Hanson says. “As a result we’ve seen an uptick in turnover, but nothing dramatic. People are still waiting for the next shoe to fall.”
In down times, corporate boards yearn for certainty and therefore are reluctant to make bold changes in key executive positions, he explains. Making the CFO a scapegoat for a company’s poor performance is not a popular strategy.
While the overall turnover rate was fairly flat in 2011 versus 2010, within specific sectors there were noticeable swings in both directions. For example, in the financial-services industry the rate climbed from 12% to 17%, and tech companies went from 7% to 12%. Industries with lowered turnover included the industrial (down from 29% to 24%) and life sciences (down from 9% to a near-microscopic 3%). Turnover was highest for consumer companies, at 25%, up two points from the prior year.
Meanwhile, there was another notable data point: no fewer than 24 Fortune 1000 finance chiefs actually moved to divisional operations roles. “Corporate boards are under high scrutiny these days, and increasingly they have more confidence in a CEO with a finance orientation and so want their CFO to be a candidate for that job,” says Hanson. “But to get there, the CFO needs direct exposure to other parts of the business.”