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“CFOs are retiring at the fastest pace in at least a decade,” reports a Wall Street Journal article citing that the increasing complexity of the role and for public CFOs, the lure to cash out shares in a hot stock market, make it even more attractive to make the change. An analysis of 12 years of regulatory filings by Audit Analytics for The Wall Street Journal showed that “one in six executives who left the CFO position at a U.S. public company in 2018 did so to retire, the highest share since at least 2007.”
In addition to many baby boomers simply being of retirement age, CFOs are facing new demands professionally. Historically, a CFO’s workload was focused on compliance, best accounting practices, and financial reporting. As the financial world grapples to evolve at an accelerated rate with the onslaught of digital transformation, so does a CFO’s job description. Today CFOs are faced with even more complex responsibilities that include making strategic decisions about investments, understanding and leveraging technology to streamline accounting practices, and developing financial disaster recovery plans to deter risk and cybercrime.
When a CFO leaves, even if for legitimate personal reasons, alarm bells often go off for investors and employees as they wonder if there is something else going on behind the curtain. Bad earnings? Fraudulent activity? Some type of underlying accounting scandal? Your mind can easily take you down a rabbit hole of possibilities and the end result is often instability and a question of the future viability of the organization.
In a perfect world, every organization would be prepared for when a CFO seeks retirement with a CFO succession plan. Development programs would be in full force to build up future leaders within the organization. Internal talent would be assessed to determine where financial skills and gaps sit. Action steps would be taken to address any pain points and build a strong team that could eventually be in the running as possible CFO candidates. Yet, the reality is almost 50% of CFOs don’t have a succession plan.
Without a solid succession plan in place, organizations put themselves at risk.
What do companies do when a CFO retires?
Today the role of a CFO is more important than ever as more CFOs focus on setting strategy and have close ties with technology, operations, and mergers and acquisitions. A Chief Financial Officer retiring or suddenly resigning can cause severe disruption to an organization.
More companies are turning to an Interim CFO to ensure a solid plan is in place to take the organization into the future while building out parameters for the CFO search. “It’s a calming notion to have someone come in and fill the seat so the seat is not empty for very long. It gives people someone to look up to, to talk to and share their anxieties with,” says Interim CFO, Larry Firestone who has led companies from startup to a $500 million public energy company. He has seen operations come to a halt when the CFO role goes vacant. “An Interim CFO is a senior executive that has seasoning and talent and experience that the team can relate to,” he says. “They calm everyone down, and it’s really about keeping the company moving and running the way it should.