Insights
Q&A with Russell Reynolds Associates' consultant Jenna Fisher
The CFO Journal published a Q&A with Russell Reynolds Associates' consultant Jenna Fisher. The article, "New Market Dynamics Bring Change to CFO Searches," discusses the new trends in CFO searches. The article is excerpted below.
The disruption and change that have characterized the business climate appear to be spilling into the CFO job market, impacting what companies seek in their next CFO and how they conduct their searches, according to Jenna Fisher, who leads the Global Corporate Officers Sector, which executes CFO searches, at executive search firm Russell Reynolds Associates. Ms. Fisher discusses trends she is seeing in CFO searches, including increasing interest in CFOs with global experience, as well as those with experience in setting strategy and dealing with shareholder activism. She also explains why she is seeing a decrease in internal promotions, an increase in confidential searches and the rising appeal of “best athlete” candidates. And she shares her views on career development efforts that aspiring and current CFOs can undertake to make themselves more viable job candidates.
Q: What new dynamics or developments are impacting CFO searches?
Jenna Fisher: “Dynamic” is a very appropriate word to use in talking about the CFO job market because we have seen several trends crop up over the last six to 18 months, both in terms of what companies are looking for in CFO candidates and how the searches themselves are unfolding.
For example, we’re seeing faster turnover among CFOs, which is a key indicator we track for our clients. We found that last year, CFO turnover in the Fortune 500 increased to 18% from 14% in 2014. In general, companies are less patient with their CFOs, who often take the fall for missing guidance. Once a CFO loses credibility with investors, it’s hard to regain it. Interestingly, while boards and management are perhaps exercising less patience with CFOs and showing them the door sooner than they might have previously, companies are also taking longer to select a new candidate.
I also am seeing a reversal of a five-year trend favoring internal promotion. According to our ongoing research, at of the end of 2014, 69% of newly minted CFOs were coming from inside their organizations, and by the end of 2015, it was 66%. It’s not a huge shift; but, when coupled with the shifting attitudes I’m hearing at the executive and board level, I think it’s meaningful. It will be interesting to see whether that trend continues to play out this year. Based upon what I hear from my clients, more companies are reluctant to promote from within because of the desire for a proven, known quantity in the CFO seat. Many boards are asking, “In this age of activist shareholders, can we afford to put a first timer in that role?”
Q: Why do you think searches are taking longer to complete?
Jenna Fisher: One contributing factor is CFOs are moving on to general manager (GM), CEO and COO roles in record numbers. In a recent analysis we did, we found that 25% of CEOs at top U.S. companies had held a CFO seat previously. The result is fewer experienced CFOs at a time when boards increasingly want an experienced CFO. So we get searches where clients, feeling they don’t have enough great candidates, are more willing to look “out of the box,” beyond the usual suspects. Having to think more creatively in searches elongates the timeline, particularly for larger companies.
Another trend that is slowing down placement is a rise in confidential CFO searches, akin to how a board search is typically conducted, with extensive vetting of candidates, ranking them and validating their credentials through one-on-one conversations with a number of people. Confidential searches create a different dynamic and require more time to place.
Another possible factor behind longer CFO searches is the increasing involvement of board members earlier on in the search process. Given their growing responsibility for preserving shareholder value and CFOs’ growing strategic role, boards are understandably taking a more active role in the CFO search process and lending their credibility and experience to CFO searches, which is a real positive. But, that can be a challenge if their perspective differs from the CEO’s. And in general, the more cooks in the kitchen, the longer it might take to bake the cake.
To read the full article, click here.