New research suggests that, despite having the shortest average tenure among C-Suite executives, CFOs are well compensated with an average overall compensation of $3.5 million. Notably, female CFOs are seeing faster pay growth than their male counterparts, with their representation increasing to 13.7% in 2021
CFOs have the shortest average tenure among C-Suite executives, according to new research, lasting only 3.51 years on average.
The report, published by Datarails, analyses the role of CFOs from 2056 of the biggest US companies.
Between 2016 and 2021, research suggests CFOs face a high degree of job volatility due to a variety of factors such as changes in company strategy, financial performance, or even changes in the broader economic environment.
Despite the high turnover in the market, the report noted US CFOs are well compensated, with an average overall compensation of $3.5 million in 2021, only behind the CEO ($10.4m) and CTO ($3.8m).
This was pertinent for female CFOs, whose pay is growing faster than their male counterparts. The report highlights the slow but steady increase in the number of female CFOs, increasing from 11.4% in 2016 to 13.7% in 2021.
Of the 2,056 companies studied, more than half (56% of the companies) experienced at least one CFO turnover and 16% experienced more than one turnover in the CFO position.
In a class among themselves, three publicly listed companies got through five CFOs until the end of 2021: a manufacturing company, Superior Industries International, Texas-based retailer Sally Beauty, and a marketing services company, Harte Hanks.
Datarails’ report notes that while the SEC records for 2022 are not yet available, it is likely the exodus of CFOs will continue as a trend.
“In 2022 through a sample of statements to the market, we found at least 87 of the 2056 companies analysed saw high profile CFO shake-ups,” the report said.
The retail sector looks likely to be the most heavily affected. According to the research findings, between 2016 and 2021 the average retail CFO managed only 2.8 years in post during this period.
This continued in 2022. Within the 2056 US companies analysed, CFOs at Nordstrom, Foot Locker, Tanger, Walmart, TJX, Performance Food Group, Dollar Tree, Kirkland, GameStop, Jo-Ann Stores, and Lowe’s were all replaced.
This is perhaps unsurprising given the pressure they faced to perform during the pandemic, and more recently battle against high inflation and weak consumer spending. In the first quarter of 2021, the US economy grew at its slowest pace since the start of the pandemic despite the $1.9 trillion stimulus package.
These factors will have undoubtedly hit corporate balance sheets and the economic outlook, causing CFOs to struggle to forecast.
The role of the CFO has evolved significantly over the years, with an increasing emphasis on strategic decision-making, data analysis, and even elements of operations and IT.
By continuously updating and expanding their skill set, CFOs can ensure they remain valuable and relevant to their organisations. It is no secret that CFOs can increase their job security by clearly demonstrating their value to the organisation.
This could involve identifying cost savings, driving profitable growth, managing risk effectively, or providing valuable strategic insights. But adaptability will be key.
The business environment is constantly changing, and CFOs who can adapt to new situations, challenges, and opportunities are more likely to secure their position.
This could involve staying abreast of industry trends, regulatory changes, and technological advancements, and being proactive in adjusting strategies and processes accordingly.
Problems to tackle in 2023The challenges CFOs are facing have changed rapidly over the past three years.
Low customer demand, low working capital, liquidity, cash flow, supply chain continuity, and a slowdown in customer decision-making were the biggest challenges CFOs faced during the pandemic.
In 2022, this was replaced by price pressures, adapting to changing customer demands and increasing risk exposure.
According to Deloitte, persistent inflation is the most pressing concern among North American companies (73%) this year, ranking more than recession fears (27%).
Internally, manual processes are a drag on CFOs’ time. In a previous Datarails study, data suggested that US finance chiefs consider themselves to have the most painful manual processes within the entire C-Suite.
In the C-Suite, the CFO is the most likely to leave or be asked to leave due to its least automated and most manual nature.
In such a challenging environment technology that allows better insights into numbers, forecasting and strategic impact is unsurprisingly high on the CFOs’ wish list.
Deloitte’s survey found more than half of CFOs pointed to financial planning and analysis (52%) and information technology (50%) as the capabilities that most require investment to help them get the job done.
