S&P 500 CFO Turnover Persists, Gaining Momentum After Sluggish Start
Article
Russell Reynolds Associates’ latest analysis of CFO turnover in the S&P 500 continues to find that CFOs are increasingly a flight risk. At the end of August, CFO turnover ticks slightly above 2022 turnover, after an unseasonably active August. Analyzing the CFOs of S&P 500 organizations from 2019 to YTD 2023 (N=500), we learned:
1. After a slow start to the year, S&P 500 CFO turnover begins to trend upwards
2. The majority of newly appointed CFOs (68%) are in the role for the first time
3. More women CFOs are coming from outside the organization, as internal talent is scarce
4. Increased CEO turnover continues to result in CFOs taking the top seat
After a slow start to the year, S&P 500 CFO turnover begins to trend upwards
After a sluggish start, followed by an unseasonably high amount of turnover in August, CFO turnover has reached 11% year to date, on par with this time last year (Figure 1a. and b.), with significant activity in the financial services sector (Figure 2). As the S&P 500 market slows from its 2021 high, Fortune 1000 turnover increases year over year by 24%, driven specifically by increases in S&P MID CAP 400 and SMALL CAP 600 turnover. As next-generation S&P 500 CFO talent eye their next opportunity, a first-time opportunity at a smaller organization might be enough to lure them away.
Figure 1a. Trending CFO Turnover
Source: RRA analysis of S&P500 CFOs from 2019 to the end of August 2023, N= 500 Note: 7 of the first time CFOs are interim
Figure 1b. Trending Number of S&P 500 Newly Appointed CFOs
Source: RRA analysis of S&P500 CFOs from 2019 to the end of August 2023, N= 500 Note: 7 of the first time CFOs are interim
Figure 2. Trending Turnover by Sector
Source: RRA analysis of S&P500 CFOs from 2019 to the end of August 2023, N= 500 Note: 7 of the first-time CFOs are interim
The majority of newly appointed CFOs are in the role for the first time
This year, 68% of new CFOs were in the role for the first time, largely due to internal succession plans coming to fruition (Figure 3). While many organizations are open to embracing people with different tenures and experiences, in a difficult market, those hiring externally are increasingly looking for proven experience as exhibited by the increase in external sitting CFO hires (1000 basis points YoY).
Figure 3. Internal versus External Appointments
Source: RRA analysis of S&P500 CFOs from 2019 to the end of August 2023, N= 500 Note: 7 of the first-time CFOs are interim
More women CFOs are coming from outside the organization, as internal talent is scarce
More women have been appointed to the top financial job than ever before, as women now hold 18% of CFO roles in the S&P 500. Organizations without a gender-diverse bench are looking externally for more talent, typically recruiting experienced women CFOs. In fact, in 2023, 50% of women's CFO appointments were externally promoted (Figure 4) versus only 36% of men. These increases in external appointments indicate a larger issue with gender-diverse talent: efforts to increase gender diversity at organizations are still in their nascent phase. While diverse internal pipelines are becoming more robust, they haven’t yet been developed to the senior level.
Figure 4. Internal versus External Women CFO Appointments
Source: RRA analysis of S&P500 CFOs from 2019 to the end of August 2023, N= 500 Note: 7 of the first-time CFOs are interim
Increased CEO turnover continues to result in CFOs taking the top seat
CFOs are increasingly being considered as succession candidates for the CEO role. Similarly to 2022's record numbers, CFOs were 4x more likely to transition into the top seat this year than they were in 2021. If these leaders don’t move directly into the top seat, they often do a stint as a division CEO or as COO to get familiar with operations before assuming the CEO position. Luckily, the majority are doing so in their own organization (Figure 5)
Figure 5a. 2023 CFO Exits
Source: RRA analysis of S&P500 CFOs from 2019 to HY 2023, N= 500 Note: 7of the first-time CFOs are interim
Figure 5b.Number of departing CFOs per new role
Source: RRA analysis of S&P500 CFOs from 2019 to HY 2023, N= 500 Note: 7of the first-time CFOs are interim
Retirement rates remain stable year over year with CFOs retiring, on average, at age 59. While rates remain steady, we can expect retirement rates to continue or even increase in the next few years, as 25% of S&P 500 CFOs are currently 59 or older.
Do you know your CFO’s career goals?As organizations increasingly prefer the weight of an experienced CFO and more CFOs eye the top role, do you know your CFO’s future plans? To mitigate the potential threat of turnover and recruiting, RRA recommends the following strategies to retain top finance talent. Engage in ongoing career development conversationsWith CFOs increasingly eyeing the CEO role, take stock of their viability as potential CEO successors. Understand the key competencies they need to possess to move into the top seat and identify whether that includes expanding their current role or taking a brief stint as COO or a division president/CEO to develop these competencies. Beyond the CFO, engage with next-generation talent, as increasing turnover at the S&P MID CAP 400 and SMALL CAP 600 has created opportunities for next-generation CFO talent who are ready now. Re-evaluate compensationAs experienced CFOs continue to be in demand during an economic downturn, evaluate whether your compensation package is competitive. Sourcing market intelligence on what similarly-sized companies in your industry offer can be enlightening. Don’t let a slightly more competitive package lure your CFO talent away. Plan for retirementOver the past five years, the average age of CFOs who retired or exclusively took board roles was 59. Don’t be afraid to open a dialogue around their plans for retirement based on career conversations. Continue to invest in succession planningAfter engaging in career planning conversations with your CFO, re-assess your finance talent succession plan to ensure both timelines align. Given the lack of a gender-diverse pipeline, pay specific attention to developing and retaining women finance talent. There’s always room to improve: consider whether you are looking deep enough into your organization, the soundness of your assessment and development methodologies, and your overall transition plan. |
Authors
- Linda Barham leads Russell Reynolds Associates' Americas Financial Officers Practice. She is based in Chicago.
- Jenna Fisher co-leads Russell Reynolds Associates' Global Financial Officers Practice. She is based in Palo Alto.
- Jim Lawson co-leads Russell Reynolds Associates' Global Financial Officers Practice. He is based in New York.
- Clare Metcalf is a member of the Financial Officers Practice at Russell Reynolds Associates. She is based in Chicago.
- Catherine Schroeder leads Knowledge for Russell Reynolds Associates’ Financial Officers Practice. She is based in Toronto.