Why Do Senior Financial Professionals Change Jobs?

Although issues of business volatility and unemployment continue to garner a large share of the headlines in business journals today, the trend of rapid business change has been accelerating for several years. This tendency toward change impacts companies of all sizes, whether public or private. The combination of a dynamic business environment and the recent economic downturn has caused many Financial Executives and their employers to rethink their stance on employment stability. Financial Executive change in employment every two or three years is no longer unusual, and many employers are beginning to consider a break in employment to be the norm.

Even though tolerance of job change is increasing, there is still a large contingent of employers who believe that executives who have not been working in their current job for at least the last 5 years are somehow ‘tainted.’ The common perception is that job change can only be the result of deficient job performance or poor decision-making skills related to choice of employer. This is an out of date belief that does not correlate with the reality of the business environment during the last 10 years. The volatility in the US economy has created a new host of reasons why senior Financial Executives change jobs. The following are examples of these causes of job change and the impact on Senior Financial Executives and their employers.

  • Change in control, the new guard wants a new CFO. Often a CFO will find that he or she is in a position where the senior management team and / or members of the board are replaced (partially or completely) by new leadership team members. New teams often bring with them new perceptions of the skills required by the senior financial executive, or they have a person in mind who they have worked with in the past and trust to execute their new agenda. When this happens, the sitting CFO often loses out to the goals of the new team. The company suffers the loss of institutional knowledge in exchange for their perception of a brighter future.
  • Change in strategy, new skills needed. Because of the velocity of change in the economy, often the only reason that an employee is hired by a company is that a problem exists in the company, and the hiring authorities believe that the candidate for the position can solve the problem. These problems can be very specific and tactical, or more general and strategic. A person who is hired to ‘clean up’ finance and accounting departments may find themselves with a clean and fully functioning department, but the CFO’s boss may have acquired a new vision, i.e. an Initial Public Offering, or a strategy of Merger and Acquisition that the CFO is not experienced in. If the CFO is not able to sell the remaining members of the leadership team that he or she can handle the new strategy, the CFO will be looking for new employment.
  • Major problem is solved, overhead mentality of CEO. If a CFO is hired to solve a specific major problem and handles that problem, there is an inherent risk that there may not be another major problem to solve. Once everything is running smoothly, the CFO is at risk of being considered ‘overhead’ by the remaining members of the leadership team. Some management teams do not recognize a distinction between a controller and a CFO. They feel that once the problem is solved, only the controller’s services are required. Because management is under continuous pressure to eliminate components of overhead, a CFO who is perceived as being overhead is usually terminated quickly.
  • Company is acquired, replication of CFO. Successful companies are often acquired. After the acquisition, there is often a period of post-acquisition integration of the acquirer and the target company. Depending on the complexity of the combined entities and the philosophy of the surviving board of directors and the CEO, that period may fall within a range of as little as a few days or as much as several years. Unless the CFO of the company being acquired has a significantly stronger skill set than the CFO of the company doing the acquiring, the CFO of the target company will often be eliminated by the end of the post-acquisition integration period.
  • Company fails. CFO’s occasionally join companies that ultimately go out of business. Obviously the lack of a paycheck from a company will cause this CFO to search for another opportunity.
  • Politics. Although most company executives claim that politics are not a factor in their organization, many companies continue to be subject to the political agenda of members of the executive leadership team. If a CFO does not see eye to eye with the initiatives of other executive team members, the company may search for a new CFO.
  • Fraud is identified by the CFO, and CFO leaves. In cases where fraud of others is identified by the CFO, the results are mixed. In some situations, the executive team will do the ‘right thing’ and terminate the offending party and fix the problem. At other times, executives will try to sweep the issue ‘under the rug’ in an attempt to put some time and distance between them and the perpetrator, with the hope that the issue will not be exposed again later. If the CFO fights to clean up the fraud in this situation, the reaction of the remaining members of the leadership team often leads to dismissal of the CFO. In other situations, the CFO leaves the company in frustration.
  • Not truly a CFO position. Often a CFO will work for a company that does not differentiate between a CFO and a ‘Head Accountant’. This CFO often comes to the conclusion that they would rather hold CFO responsibilities. If an opportunity comes to them to work at a company that provides acceptable challenge in a true CFO role and enhanced compensation, the CFO may leave to take the better opportunity.

Experience shows that in many cases, the only difference between employed and unemployed people looking for a new opportunity for employment is the timing and impact of forces outside of the Financial Executive’s control. Some Financial Executives are able to identify opportunities to move to a new employer before they find themselves in a state of transition, and others are unable to avoid unemployment. No matter how much importance a Financial Executive places on continuous employment, there are in fact some environments where the risk of being employed is much higher than any reward that may come from working there. When an Executive joins a company, he or she receives 3 proverbial keys; the key to their office, the key to the bathroom, and the key to the closet where the skeletons are kept. Sometimes the skeletons in the closet are scarier than being in job transition.

Some companies are weak and/or on the edge of insolvency, and others create a CFO position that is not worthy of a credible CFO. A CFO may take a calculated risk to take on one of these new positions with the knowledge that they will grow professionally if they take the ‘special’ role. Jobs in this category may have limited duration. Also, transparency of public companies is questionable at best, and is often close to nonexistent for private companies. As a result, even the best due diligence by a CFO candidate will often not uncover some of the risks identified above. Most people with an understanding of the reasons why CFOs frequently change jobs will also understand that finding stability in a job is often more a matter of luck than skill.

It is obviously much less expensive for an employer to maintain a stable work force. Employers may have valid reasons for demanding stable employees, but if these employers maintain their absolute requirement for longevity, they will miss out on a huge pool of candidates who are capable of doing an effective job for them.

Just because a Financial Executive has worked for the same employer for the last twelve years, doesn’t guarantee that they will be successful in maintaining longevity in a new work environment. Proven flexibility can be very valuable to a Financial Executive as they enter a new employment assignment. People who have a variety of employer experiences have proven that they have most likely exercised their ’employment flexibility muscle’ and can most likely adapt to new environments easily.

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