In these difficult economic times, many executives, including financial leaders, are heading for the nearest exit. Global CFO turnover soared in the first quarter of 2024, with 82 new CFO appointments at public companies, according to Russell Reynolds Associates.
The CEO's office was in much the same disarray. According to the Russell Reynolds CEO Turnover Index, 68 CEOs were appointed and 52 CEOs departed in the first quarter, the highest first-quarter totals since 2018 and 2020, respectively. . Even more concerning is that 15% of departing CEOs are “failed CEO appointments'' (Russell Reynolds' term for CEOs who have been in the company for less than two years).
The instability of the CEO's office can be a shock to organizations and employees, but it creates room for finance executives with ambition and the right skills to thrive. Reach the top of the organization chart.
To gain some perspective on the causes of high turnover rates and whether CFOs are really in a good position to go outside of finance if they choose, Katie-Kuehner Hebert discusses how CFOs at Shearman & Sterling We interviewed Doreen Lilienfeld, Global Managing Partner of the company. Lilienfeld helps senior executives negotiate employment, severance and compensation agreements.
This year's executive turnover rate appears to be at an all-time high. Why do you think that is?
Market dynamics have changed and the economic environment is much different than it was a few years ago. We're in an era of high interest rates, and we're also facing other headwinds that some executives have no experience dealing with.
High interest rates also make it difficult for companies looking to grow through acquisitions. Complicating matters is that many companies have recently made acquisitions and are still digesting those operations in this more challenging environment.
Uncertainty about the global macro economy has further increased management challenges. These factors combine to put executives under tremendous pressure, which often leads to turnover.
You mentioned that there are more CFO transitions than CEO transitions this year. Why do you think that is?
Traditionally, CFOs have often been viewed as accounting experts, someone who excels at keeping the books and juggling audits and compliance. Its profile has changed dramatically over the past two decades. The most popular CFOs can do even more.
Companies and boards of directors are always concerned about CEO succession, and now, unlike in the past, they view CFOs as potential CEO successors, and perhaps even potential successors. Companies are eagerly searching for her CFO with a variety of skill sets. We need people who are agile and can do their best work in the short or long term. They are frequently used for internal and external promotions.
How has the CFO role evolved over the past decade?
We are nearing the end of a decade of evolution that has only recently become fully apparent. Today's CFOs need many more skills, such as being comfortable interacting with boards of directors, having deep knowledge of company operations, and serving as a resource for understanding market conditions. They still need to understand compliance, auditing, and internal controls.
The CFO once held the CFO role forever, responsible for auditing, financing, forecasting, and balance sheet management. Today's most effective CFOs perform strategic, market-facing functions with broad authority that covers investor relations and even human resources.
Does balance sheet management require more experienced talent in a relatively tight monetary policy environment? What other skills are important?
Yes, more experienced CFOs may be better able to adapt to tight financial supplies and market volatility. In terms of key skills, CFOs require a deep understanding of, and the ability to deal with, a number of stakeholders, including lenders, investors, and internal teams. Furthermore, the number of companies facing financial crisis is increasing recently. Avoiding further problems, companies are working on creative financing solutions, which require finance teams with a wide range of skill sets. Experienced finance teams have an even bigger and more important role to play in today's marketplace.
