Healthcare CFO Turnover Highlights Upcoming Talent Gap

The healthcare industry recorded 19% CFO turnover in the first three quarters of 2024, its second-highest level of turnover in five years. Over the past two years, increased retirement rates, high CEO turnover, and lower market performance have led healthcare organizations to rethink their CFO succession plans.

As healthcare organizations continue to focus on sustainable margins, innovation, and restructuring in a challenging market, experienced financial leaders are few and far between. In fact, an overwhelming 69% of healthcare organizations changed their CFO since 2020. This poses a significant risk to organizations looking to retain their CFOs in an increasingly competitive market.

To summarize the latest CFO turnover trends and gain insight into this aggressive market, Russell Reynolds Associates analyzed the profiles of CFOs across global public healthcare organizations from 2020 to Q3 2024 (N=106, 48% of which are biopharma organizations, 33% medtech, 16% healthcare services, and 2% healthtech). We found that:

1. Prior CFO experience has increased in importance over the last two years: After multiple years of choosing first-time CFOs over those with prior CFO experience, the market is indexing more heavily on prior experience, leading to experienced CFOs being appointed at a higher rate. Internal candidates accounted for 50% of the appointees in 2023 and 2024.
   
   
2. Women healthcare CFOs are few and far between: Women are rarely found in the top financial officer position. Unfortunately, the past year saw an even more significant gender disparity in the role, with women CFOs accounting for only 10% of appointments, dipping below the five-year average of women holding 20% of CFO appointments.
   
   
3. CFO retirement rates reach five-year high: Healthcare CFOs opting to leave the executive ranks reached a record number, with 59% of this year’s departing CFOs moving into board roles or retiring. This is a staggering jump from the 27% departure rate of 2023.

Healthcare CFO turnover back at peak levels

Between Q1-Q3 of 2024, healthcare CFO turnover hit 19%, just shy of 2022 peak levels (Figure 1). The healthcare industry is also experiencing higher turnover levels than other industries, as overall turnover is 12% - consumer and financial services both saw 10% turnover, industrials saw 13%, and technology saw 15% (Figure 2).

Continued high levels of CFO turnover suggest that this trend has become the norm, due to increasing retirement rates, the age and tenure of the current CFO cohort, and a challenging healthcare market environment that is grappling with risk, technical complexity, and regulatory shifts.

Figure 1: Healthcare industry CFO turnover trends: Q1 - Q3, 2020 - 2024

_{Source: RRA analysis of healthcare organizations in the S&P500, FTSE 100, FTSE 250, ASX 200, CAC 40, DAX 40, EuroNext 100, Hang Seng, Nikkei 225, NSE Nifty 50, S&P/TSX Composite and STI from 2020 to Q3 2024 (n=106).}

Figure 2: CFO turnover trends across industries: Q1 - Q3, 2020 - 2024

_{Source: RRA analysis of BoardEx data from the S&P500, FTSE 100, FTSE 250, ASX 200, CAC 40, DAX 40, EuroNext 100, Hang Seng, Nikkei 225, NSE Nifty 50, S&P/TSX Composite and STI from 2020 to Q3 2024 (n=1822).}

Prior CFO experience has increased in importance over the last two years

After multiple years of favoring first-time CFOs, the market began prioritizing healthcare financial officers with prior experience in 2023 (Figure 3). This is especially prevalent in the medtech subindustry, as 75% of the CFO appointments since 2023 brought prior CFO experience. In the same timeframe, 40% of healthcare services appointments and 38% of biopharma appointments were experienced CFOs.¹

We find boards are often not willing to take the risk on first-timers in healthcare, given the need for this leader to help them navigate an industry with serious complexity in a risk-laden environment. While 2024 saw a shift away from experienced CFO placements (50% in 2023 versus 40% in 2024), the numbers are still up compared to 2021-2022. Given our market observations and conversations, this dip is likely due to a lack of availability, versus a diminished interest in leaders with prior CFO experience.

Figure 3: Healthcare industry internal vs. external CFO appointment trends by prior experience: Q1 - Q3, 2020 - 2024

_{Source: RRA analysis of healthcare organizations in the S&P500, FTSE 100, FTSE 250, ASX 200, CAC 40, DAX 40, EuroNext 100, Hang Seng, Nikkei 225, NSE Nifty 50, S&P/TSX Composite and STI from 2020 to Q3 2024 (n=106).}

This follows the broader global trend where increased priority is placed on experienced CFOs (39% of global CFO appointments YTD, compared to 32% in 2020). With record levels of CFOs retiring in 2024, the number of experienced and available CFOs is decreasing, highlighting a growing gap in external talent and a need for CFO succession planning.

Women healthcare CFOs are few and far between

Women are rarely found in the top financial officer position. Globally, women only hold 16% of CFO positions in healthcare.² Unfortunately, the past year saw even greater gender disparity in the role, with women healthcare CFOs accounting for only 10% of appointments, dipping below the five-year average of women holding 20% of CFO appointments (Figure 4).

When considering healthcare subindustries, we see a greater number of women CFOs appointed in the healthcare services space over the last five years (36%) compared to other healthcare market segments (biopharma at 21%, medtech at 17%¹). Healthcare services is known to have a larger proportion of women across its workforce than the other subindustries, meaning there is more talent to assess, develop, and promote into senior leadership roles.³

Figure 4: Percentage of women healthcare CFO appointments: Q1 - Q3, 2020 - 2024

_{Source: RRA analysis of healthcare organizations in the S&P500, FTSE 100, FTSE 250, ASX 200, CAC 40, DAX 40, EuroNext 100, Hang Seng, Nikkei 225, NSE Nifty 50, S&P/TSX Composite and STI from 2020 to Q3 2024 (n=106).}

Globally, women CFO appointments hit a five-year high, with women accounting for 27% of appointments. This puts healthcare’s dip to women holding just 10% of appointments in an even harsher light. The recent trend of healthcare organizations favoring CFO hires with prior experience likely plays a role in these low levels, as women haven’t historically had a large presence in the healthcare CFO position.

In addition, 58% of women healthcare CFOs appointed since 2020 were external hires, of which only 18% were in the CFO position for the first time. This highlights a telling gap—internal CFO succession planning efforts are not yet creating more gender-balanced pipelines within finance leadership.

The healthcare industry has a lot of work to do to achieve gender parity. To help close the financial leadership gap—and improve overall gender parity at the top—organizations must increase their investments in succession planning and developing next generation women in finance.

CFO retirement rates reach five-year high

CFO retirement rates reached a five-year high, with 59% of this year’s departing healthcare CFOs opting to move into board work or retirement instead of new executive positions. This is a staggering jump from 27% in 2023 (Figure 5). The high retirement rates are seen across the subindustries in healthcare, with 66% of both medtech and healthcare services, and 55% of outgoing biopharma CFOs opting for retirement this year.¹

This aligns with what we are seeing globally across industries, as 52% of outgoing CFOs are retiring or moving to board roles exclusively, up 11 percentage points year-over-year—another five-year high.

While demand for experienced CFO talent remains high, the majority of financial officers chose to retire or focus on board positions in 2024. With an average age above 58 years and a tenure of 7.3 years in the top CFO position prior to retirement, we are seeing a changing of the guard in healthcare.

Figure 5: Healthcare industry departing CFO trends by exit type: Q1 - Q3, 2020 - 2024

_{Source: RRA analysis of healthcare organizations in the S&P500, FTSE 100, FTSE 250, ASX 200, CAC 40, DAX 40, EuroNext 100, Hang Seng, Nikkei 225, NSE Nifty 50, S&P/TSX Composite and STI from 2020 to Q3 2024 (n=106). (Note: Some retiring/departing CFO data is unavailable.)}

How can healthcare organizations address the changing CFO market dynamics?

With CFO turnover back at peak levels, and a large proportion of CFOs choosing to leave the executive ranks, board members and the executive team should ensure they are invested in their organization’s CFO succession plan, taking actionable and targeted steps now to prepare for the CFO’s exit.

When planning for your next financial leader, we recommend the following strategies:

• Anticipate change: On average, healthcare CFOs retired after a 7+-year tenure, while those who departed the organization for a new role left after an average of 4.6 years. Don’t be afraid to open a dialogue around your CFO’s future plans, as this allows them to be involved in planning for their own successor.
  
  
• Continue to invest in succession planning: After engaging in career planning conversations with your CFO, re-assess your finance talent succession plan to ensure both timelines align. Given the lack of diversity in finance talent pipelines, pay specific attention to developing and retaining women and other underrepresented minorities in finance. There’s always room to improve: consider whether you are looking deep enough into your organization, your assessment and development methodologies, and your overall transition plan.
  
  
• CFO development and mentorship: With the high rate of CFO retirements, it’s only a matter of time before the talent pool shifts to more CFOs being in the role for the first time. Given the current focus on prior CFO experience, it is key to provide your CFO succession candidates with the right experiences to be ready for the new career challenges. The value of a trusted, independent mentor who brings specific executive experiences and has faced similar challenges is invaluable.

_{¹Given the low number of healthcare technology organizations in this sample, their results have not been included in this specific deep-dive of the analysis.
²RRA analysis of BoardEx data for healthcare organizations in the S&P500, FTSE 100, FTSE 250, ASX All Ordinaries, CAC 40, DAX, EuroNext 100, Hang Seng, Nikkei 225, and S&P/TSX Composite (n=122).
³BCG – Women Dominate Health Care – Just Not in the Executive Suite.}

_{To complete this analysis, RRA analyzed BoardEx data from the S&P500, FTSE 100, FTSE 250, ASX 200, CAC 40, DAX 40, EuroNext 100, Hang Seng, Nikkei 225, NSE Nifty 50, S&P/TSX Composite and STI from 2020 to Q3 2024 (n=1822).}

Authors

Jim McGlone is a senior member of Russell Reynolds Associates’ Financial Officers Practice. He is based in London.
Rose Mistri-Somers is a senior member of Russell Reynolds Associates’ Financial Officers and Healthcare Practices. She is based in New York.
Sarah Flören leads Russell Reynolds Associates’ Healthcare Knowledge team. She is based in Amsterdam.
Olivia Floto is a member of Russell Reynolds Associates’ Healthcare Knowledge team. She is based in Chicago.
Mohammed Khan is a member of Russell Reynolds Associates’ Financial Officers Knowledge team. He is based in London.
Catherine Schroeder leads Russell Reynolds Associates’ Financial Officers Knowledge team. She is based in Toronto.