CFO ranks see an uptick in female leadership
The corner office responsible for corporate purse strings is seeing a quiet shift in its occupants. In the second quarter of 2024, 28% of newly appointed Chief Financial Officers were women, up from 19% of outgoing CFOs, according to the latest Global CFO Turnover Index from Russell Reynolds Associates.
This 9-point jump in female representation comes amidst a broader slowdown in CFO turnover. The global rate dipped to 3.3% in Q2, down from 4.7% in the previous quarter and 3.8% a year earlier. The change is most pronounced in the financial services sector, where half of new CFO appointments were women. This marks a stark contrast to the technology sector, which saw female appointments lag at 30%.
The shift occurs as companies grapple with economic uncertainties and regulatory pressures. CFOs, once primarily focused on numbers, are increasingly expected to be strategic partners in steering corporate direction.
This evolving role may be contributing to the changing face of financial leadership. The Russell Reynolds report shows that 59% of new CFOs are first-timers in the role, suggesting companies are open to fresh perspectives.
Yet, the road to the CFO chair remains steep for many. The average tenure of departing CFOs stood at 5.1 years, down from 6.3 years in the previous quarter. This shortened stint at the top may reflect the growing demands of the position.
While the overall CFO turnover rate declined, individual sectors tell different stories. Healthcare saw the highest churn at 7.5%, a five-year peak for the industry. This surge comes as healthcare firms navigate post-pandemic challenges and evolving reimbursement models.
Technology, often a bellwether for executive trends, saw its CFO turnover rate fall to 3.8%, its lowest second-quarter figure since 2020. This stability contrasts with the sector’s typically volatile C-suite movements, possibly indicating a focus on continuity amid economic headwinds.
The financial services sector, despite its progress in gender diversity, maintained a steady turnover rate of 3.1%, consistent with its five-year average. This stability belies the sector’s internal shifts, as banks and fintech firms alike grapple with regulatory changes and digital transformation.
The preference for internal promotions versus external hires continues to fluctuate. In Q2, 53% of new CFOs were internal appointments, down from 60% of outgoing CFOs. This marks a reversal of the trend seen in early 2023, when internal promotions hit a three-year high of 68%.
The pendulum swing towards external hires is most pronounced in the industrial sector, where 54% of new CFOs came from outside the company. This outward focus may reflect the sector’s need for fresh financial strategies in the face of supply chain disruptions and inflationary pressures.
The report reveals a continued appetite for first-time CFOs, with 59% of new appointments going to executives new to the role. This figure has remained relatively stable over the past two years, hovering between 56% and 63%.
However, the technology sector bucks this trend. A full 90% of its new CFO appointments in Q2 went to first-timers, the highest proportion across all sectors and a significant jump from its 57% figure in Q1. This surge in fresh talent may signal the industry’s push for innovative financial leadership in a rapidly evolving tech landscape.
The average tenure of departing CFOs dropped to 5.1 years in Q2, continuing a downward trend from the 6.9-year average seen in 2019. This shortening tenure spans all sectors, with technology seeing the most dramatic decrease from 7.8 years in 2019 to 5.2 years in the latest quarter.
The shrinking CFO tenure aligns with broader C-suite trends, reflecting the increasing pressures and evolving expectations placed on financial leaders. As companies navigate digital transformation, regulatory changes, and economic volatility, the demand for adaptable financial leadership appears to be shortening the CFO’s time at the helm.
While the Global CFO Turnover Index provides a macro view, regional differences emerge upon closer inspection. European indices like the DAX 40 and CAC 40 saw above-average turnover rates of 7.5% and 2.5% respectively, potentially reflecting the continent’s ongoing economic challenges.
In contrast, Asian markets showed greater stability. The Nikkei 225 and Hang Seng indices reported turnover rates of 2.7% and 0%, respectively, continuing a trend of lower CFO churn in these markets over the past three years.
As the role of the CFO continues to evolve, these trends offer a window into the changing nature of financial leadership across industries and regions. The rising tide of female appointments, coupled with the influx of first-time CFOs, suggests a profession in transition.
Yet, as tenure shortens and external appointments rise, it’s clear that the demands on financial leaders are greater than ever. In this dynamic landscape, adaptability and strategic vision may well be the key currencies for tomorrow’s CFOs.