CFO Magazine on CFO Churn: an interview with Lincolnshire Stybel Peabody:

The Revolving Door
What It Says about a Firm
Carol Lippert Gray, CFO Magazine, Jan 2001

iVillage: six CFOs in five years. Delta Air Lines: four in four years. Hastings Entertainment: four in two years. Why all the churn atop corporate finance departments?

In Delta's case, at least, two CFOs (Warren Jenson, now at Amazon.com, and Ed West, now at Internet Capital Group) were lured away by dot-coms. A third (Tom Roeck) was replaced in 1997 when a new CEO came aboard, not an unusual turn of events. So, while high CFO turnover may be a traditional symptom of a troubled company, often it is simply a fact of modern corporate life.

In the recent past, according to William Sihler, a professor at the University of Virginia's Darden Graduate School of Business, the average tenure of a CFO has been five to seven years. "CEOs often turned at about that rate," he explains, "and wanted to bring in their own CFOs." But, adds Sihler, co-author of Financial Turnarounds: Preserving Value, a Financial Executives Research Foundation study, "just as companies need CEOs with different skills, CEOs need CFOs with different skills for different stages in a company's life." One CFO to perform triage, say, another to prescribe treatment, and a third to expand again, not to mention a CFO who specializes in going public.

FALL GUYS SAYS LAURENCE STYBEL

Boston recruiter Laurence Stybel of Stybel Peabody Lincolnshire of says most finance positions he's been asked to fill recently involve tenures of two to four years. "The market is offering project-oriented assignments of that duration," he says. "Companies are thinking short term."

In such an environment, a growing subset of CFOs-for-hire specializes in short stints--especially to repair broken companies. But clearly, any finance executive hunting for a new post must consider working for a shorter term, and can't ignore a good opening just because of past turnover.

The adjustment may not be easy. "CFOs tend to like stability and consistency, probably more than other functional groups," says Stybel. "But most companies today are guided by exit strategies such as mergers, in which case the CFO's job is going to be eliminated."

Get used to it. Shorter terms will increasingly be the rule. Certainly, "in a big, mature company, CFO tenure can be 10 to 15 years," notes New York­based executive recruiter Harry Higdon. But "in a dot-com, it can be 10 months." The IPO market's collapse increases the turmoil--and the turnover in finance. "Somebody's got to take the fall," he says. And when Wall Street is disappointed, "usually the CFO is blamed."

Of course, some walk if their stock options become worthless, adding to the churn statistics, notes Higdon. Others leave for the opposite reason. Graham Mitenko, professor of finance at the University of Nebraska, Omaha, blames prosperity for some of the leave-taking. "If you have any options at all, suddenly you're worth $10 million; why do you need the hassle any more?" he asks.

In general, the rise of the short-term CFO isn't a pretty prospect, warns Scott Davis, United Parcel Service's vice president of finance. Davis, a 15-year veteran of the company, soon will succeed CFO Robert J. Clanin. "To be CFO for 1 or 2 years and jump ship doesn't add value for the company," says Davis. Clanin, who joined UPS in 1971, was named finance chief in 1994.

ATTRACTED BY CHURN

Still, adds James O'Toole, a research professor at the University of Southern California's Center for Effective Organizations, "Sometimes a CEO has to replace top members of the management team. Where you have a sign of weakness is when it occurs continually. Just as a baseball team fires its manager because it doesn't know what else to do, a CEO may be frustrated [by poor performance] and not know what else to do."

Some CFOs are unfazed--and indeed are even attracted--by churn, even at troubled companies. That's if there's a visible upside. For example, Robert Sartor became CFO of The Forzani Group, Canada's largest sporting-goods retailer, in 1997, despite two years of losses. "This was the third money-losing organization I've joined," he says, laughing. "I snooped around the books extensively, and thought the company could be fixed."

Sartor remains Forzani's CFO, having engineered a turnaround. "The reason I am comfortable taking on assignments in money-losing organizations is that losses are catalysts for change," he says. "Change in how management operates, in how it defines its business, in how it measures itself, and in how it views the term 'win' for the future."

Still, it's proper to be skeptical about a company that has been churning its CFOs, advises Professor Mitenko. "Consider where departing CFOs are headed. If they're going to a similar job, or even stepping down [to a lower-level job], you don't want any part of it," he says. "But if every two or three years a CFO goes on to bigger and better things, that's OK."