Companies with CFO openings and candidates for those posts both have good reasons these days for taking a conservative approach.
CFO openings are taking longer to fill these days, as noted in a recent Wall Street Journal article. While the article didn’t get very deeply into the question of why this is happening, it suggested that both companies and candidates are getting pickier.
That’s true, so let’s examine some of the reasons why either side may be taking a conservative approach.
In cases where a company is the one that’s holding up the process, it’s most likely because it has identified a new skillset that the traditional training for CFO candidates hasn’t readily produced. Based on my practice and observations, there are a few areas where that may be causing a bottleneck:
- Global Competency: As we move deeper into a globally integrated business environment, having a financial leader who can work across cultures and understand the interconnectedness of discrete transactions is becoming more crucial to the success of an enterprise. I believe that most U.S. CFOs were raised in an environment where they worked for U.S. companies with international operations and ran their finances from an American point of view. I believe the same can be said of most CFOs trained in Europe, as well.
- CEO Succession: The CFO role has transformed from a staff function to a true business function over the past several years. With the financial complexity of running a global enterprise, many organizations see the CFO as a stronger succession candidate than ever before. However, those same companies want to see operational expertise and business acumen in CFO candidates. While it’s not rare for a CFO to get this type of experience, it’s still not the norm.
- Activist Shareholders: DuPont, Xerox, Viacom, and more — the Fortune 500 is rife with companies that have either acceded to the wishes of activist shareholders or are currently in conversations with investors who own large holdings. Given that the present level of activist activity is a recent phenomenon, experienced CFOs who have managed an activist relationship are in short supply. I’m sure that any public company seeking a new CFO has this experience on their wish list.
In cases where a candidate is holding up the process, it’s probably because most of the recent CFO openings are not appealing to her or him. Given the current economic environment, I can see a few possibilities as to why:
- Activist Shareholders: This is the flip side of the company perspective on this issue. Managing a proxy fight is no fun. A strong activist investor can certainly reduce the appeal of a company and thereby limit the candidate pool. Companies often have to sweeten compensation packages and severance guarantees to land an attractive candidate in this situation.
- Focus on Consolidation: As one would expect, a majority of CFOs are seeking opportunities in companies with strong growth profiles. Unfortunately, many recent openings are with companies that are managing to the bottom line, either through driving efficiency to reduce costs or financially engineering costs out from a tax standpoint through an inversion or similar strategy. While that could be interesting work, these companies are probably not projecting a sustainable vision of growth for typical CFO candidates.
- Executives hunkering down: This is merely my opinion, based on the lackluster macroeconomic news generated throughout the past year. While U.S. companies continue to hire, as evidenced by the falling unemployment rate, I think executives are getting nervous and their tolerance for risk is significantly ebbing. As such, a new opportunity has to offer remarkable improvements over their current situation in order to justify taking on the risk that a job change entails.
It will be interesting to see if this trend continues as 2016 winds along.
Now, over the near term, there isn’t much that candidates for CFO jobs can do to gain the experiences outlined above. But for those viewing a longer-term horizon for making a change, gaining more significant global and operational experience must be part of the development plan. Over the short term, candidates should make sure to highlight as prominently as possible the experiences they already have in those areas.
My advice for companies is this: promote your value proposition and understand that recruiting a CFO candidate is as much about attraction as it is evaluation. Don’t go into an interview process with the belief that every candidate is immediately going to fall over himself or herself to work for your company, particularly if it appears that your candidate pool is growing more discriminating. Show the love.
Click here to view CFO.com’s article entitled “Why Are CFO Jobs Taking Longer to Fill?”
