By Monica Foster, Managing Director
Over the last 18 to 20 months, CEOs have relied more heavily than usual on their CFOs to manage the
COVID-19 pandemic, whether that has been to shore up the financial fallout it caused or to capitalize on the new opportunities it presented. This has made the CFO an even more indispensable member of the executive suite. So, what happens when your CFO decides to leave, especially if the departure catches you off guard?
When it occurs, a CFO resignation might feel inconvenient at best and highly disruptive (or even catastrophic) at worst, especially if no clear succession plan exists. But there is a different and more productive way to look at an unexpected CFO resignation: as an opportunity to reassess company strategy and to rethink what you and the board of directors want and need in a CFO for both today and tomorrow. Bringing in an interim CFO gives companies the time and space to make the most of that opportunity, while at the same time ensuring no disruptions occur in the day-to-day financial management of your company.
The Great Resignation Has Few Limits
Per the U.S.Bureau of Labor Statistics, more than 20.2 million people quit their jobs between May and September of this year, including 4.4 million in September alone, as the trend line continues to rise. Part of what is driving the Great Resignation is the YOLO economy, the increasingly popular belief—especially among younger workers — that you only live once, so what is there to lose by leaving your job. It’s so popular, in fact, that a recent Personal Capital-Harris Poll found that 91% of Gen Zers and 78% of Millennials are interested in a job change.
Strikingly, they are not alone. In that same poll, 47% of Gen Xers and 45% of Boomers expressed the same sentiment, which suggests that some residents of the C-suite, including CFOs, may be among those ready for a change. Although they are typically risk-averse, many CFOs otherwise perfectly fit The New York Times’ bill of some of the professionals who are seizing the YOLO concept: those with financial cushions and in-demand skills that together give them a sense of “professional fearlessness” not previously felt.
Pressure Builds in the CFO Office
It’s no secret that today’s CFOs have more responsibility than yesterday’s counterparts, playing a much bigger strategic role within their companies. As McKinsey notes, between 2017 and 2019, the average number of discrete roles reporting to CFOs grew from four to six. And now, as emphasized by CFO Dive, these leaders “are on the front lines of helping businesses adapt” as employees depart during the Great Resignation and as their organizations accelerate pandemic-induced changes to create more desirable workplaces and become stronger strategic players in their industries.
Very recent history shows the toll that all this mounting pressure can take on finance leaders. In 2020, a record 37 CFOs resigned from S&P 500 companies, according to The Wall Street Journal. For some, they left because of the difficulty of managing “lockdowns, fundraising, talent retention or real-estate reorganizations from their home office.” For others, they departed “to take a career break or join a new business in a different industry.” This provides further proof that the modern CFO is not immune to the Great Resignation or the YOLO economy.
Given such prevailing conditions, it’s more likely than perhaps ever before that you and your board could face an unexpected CFO resignation. In today’s favorable job market, that resignation might be due to an irresistible offer to take the next career step of COO or better yet as CEO, or even to allow their spouse to take a dream job across the country. Or in the spirit of YOLO, they may choose to take time off to pursue an entirely new career adventure or just to spend more time with their loved ones. Have you considered this possibility and what it could mean for your company’s near-, intermediate- and long-term future?
Permanent CFO Searches Take Time
At Focus Search Partners, we’ve found that the typical CFO who resigns gives their employer four weeks’ notice. By comparison, our average search for the ideal CFO replacement currently takes approximately 110 days, which leaves almost an entire quarter or more when a company runs without a CFO. To bridge that gap, CEOs and company boards often assume they have only two options, both of which carry significant risks:
Speed up the CFO search: This increases the likelihood of hiring the wrong person, in which case a company stagnates or declines by keeping the missed-hire in place. Or they pay the price of replacing the CFO all over again when CFO Dive estimates that employee replacement can cost anywhere between six months and two years of the role’s salary including “the financial impact of hiring, onboarding, and training as well as the cost and negative business impact of leaving the position vacant until the newly acquired talent reaches full productivity.”
Leaving the CFO seat vacant: Even though the CFO’s direct reports might be able to maintain the day to-day financial tasks, without the thought leadership of the CFO, no real company advancement can take place in terms of strategy and timely opportunities, such as a chance to acquire a competitor, can be seized by another company.
Either way, valuable time is lost, which is problematic for any company, but it can spell a particular catastrophe in the private equity space where ROI counts every single day.
Interim Hiring Fills the CFO Gap
Despite what companies think, there is another option—hiring an interim CFO. This solves both the time and talent problem. Because we focus on building teams that grow companies, Focus Search Partners is able to identify and place an interim CFO in only 10 days. This ensures a smooth transition before the exiting CFO leaves and provides accountability until the permanent one is hired, placed, and brought up to speed.
Moreover, interim candidates are classically trained CFOs with current experience leading middle-market company finance organizations. Some are looking for their next full-time position after completing a successful private-equity-backed exit, while others—in the spirit of the YOLO economy—prefer the flexibility of interim postings and the ability to choose to work in a particular geographic area or during a specific fiscal season or phase of the business lifecycle.
Hiring an interim CFO affords you more than just a smooth transition. It allows you to redesign or realign a departing CFO’s imperfect or inadequate strategy, or conversely, to use a highly successful CFO’s exit as an opportunity to attract an equal or better leader to take the finance helm of a company on the rise. Plus, there is this surprising bonus for CEOs and their boards: Up to 40% of Focus Search Partners’ clients find their permanent CFO this way given the high-caliber talent we put at their immediate disposal.