The catalyst for a CFO’s second act, following a meaningful time at one company or within one industry, varies. Some CFOs leave one place of employment for the CEO’s corner office elsewhere, or for another CFO role that elevates their career trajectory.
Others retire and improve their golf games. Yet others volunteer or serve on boards of for-profit or non-profit entities. The adjustment process can take a toll on someone accustomed to being in charge. Some CFOs get bored and re-enter the workforce.
Bill Maw knows what it’s like to be in command of a sophisticated finance team, and then transition to a new adventure. After his stints in finance leadership at General Electric and Liquidnet and Covius, Maw turned to advising start-ups and board work before settling into his present position as CFO at FourKites, a supply chain solutions provider.
Maw explains, “I decided to go back to work for several reasons, partly to maintain my current lifestyle, but mostly because I enjoy collaborating with people, I have a purpose, and it’s intellectually stimulating. As you get older, your brain is at risk of decay if you don’t challenge yourself. The worst thing to do is to retire and become lazy and bored.”
“It’s good to retire without a big ego and embrace the possibilities tomorrow brings.”
Bill Maw
CFO, FourKites
Robert Travis, managing partner and an executive recruiter with Boyden’s industrial practice group, echoes the sentiment about finding purpose outside of work. He advises retiring CFOs to recognize it will take time to acclimate to not always being asked to take charge. He says, “It’s almost spiritual for a high-powered C-suiter to dig deep within themselves and evaluate how best to go from full speed to retirement.”
Consultant James Stark, a leader in Egon Zehnder’s CFO and audit chair, industrial and private equity practices, suggests that CFOs who want to retire learn from others about what life purpose means. He recommends reading the article How Will You Measure Your Life? and the book “When Breath Becomes Air.” Stark says, “You just want to pause and reflect because I think too often, you know that you’re on the hamster flywheel, running full speed. You don’t stop and think about what’s most important to you, especially as you look to that next stage in your life.”
Maw advocates mapping out a personal strategy that includes career time as well as family time. “It’s important to have choices. Money isn’t always the answer, but it helps if you aren’t ready to downsize in retirement. It’s good to retire without a big ego and embrace the possibilities tomorrow brings.”
Filling the CFO leadership hole
When an organization’s successful CFO decides to act on these impulses, their departure leaves an ever-deepening leadership hole. The CFO role is expanding to include responsibilities that go beyond finance. The modern CFO spends roughly three hours daily on financial tasks and more than four hours on strategic planning, troubleshooting, getting up to speed on new technologies, recruiting and training new employees and environmental, social and governance reporting.
Finance chiefs with a knack for problem-solving and motivating their team members are in high demand and short supply. Businesses are likewise challenged with finding competent workers to grapple with a shortage of experienced financial talent at all levels. Recent data shows a 114% rise in demand for senior finance vice presidents, vice presidents and other levels below the CFO leadership function. At this capacity, shortfall is serious.
Organizations with a broad and deep finance backbench have the advantage of being better able to replace an outgoing CFO from within, on either a temporary or permanent basis.
Develop a succession plan early
Once a CFO leaves their role, it can take up to six months or longer to find an appropriate replacement, according to Travis. He recommends beginning a CFO search as soon as the current CFO begins socializing the idea of their retirement.
The company’s CEO, Board of Directors and the departing CFO have a stake in ensuring a smooth transition for a variety of reasons. The current CFO has a legal and ethical responsibility to shareholders until such time that fiduciary duties are officially transferred to the successor. A CFO with equity ownership from options, grants or a retirement plan wants to preserve portfolio value. A high-integrity CFO cares about reputation and people enough to help them thrive.
Document what kind of CFO is needed
Start with writing a detailed job description that reflects the expanded role of a modern CFO. Finance skills are necessary but insufficient to fill the shoes of the corporate officer seen as, after the CEO, the most important person in charge. The incoming replacement must demonstrate an ability to communicate clearly with multiple constituencies that include the board, different department heads, legal, human resources and information technology.
The ideal candidate will possess excellent technical skills as well as a high EQ (emotional intelligence), which is what Daniel Goleman, an American psychologist and author, describes as an important leadership competency. Post-pandemic, Travis recommends asking candidates how comfortable they feel managing others in a non-traditional setting, such as working remotely.
Stark, in his role at Egon Zehnder, helps companies evaluate candidates by looking at their past experiences and evaluating their abilities to shape strategies and implement changes. Stark says, “For public companies, it’s essential to anticipate the market response, how analysts and investors will react to the news of a particular CFO replacement. For private companies backed by external funding, an incoming CFO is frequently selected due to their experience having worked for or with a private equity or venture capital investor.”
Optimize for your time horizon
Time is a critical determinant of the optimal succession plan. Without the luxury of one or two years of preparation, a company may be compelled to take shortcuts to recruit a new CFO.
Travis cites industry as a potential problem area, adding, “A CFO candidate may look good on paper in terms of transferable skills but not have the chops to work in a specialized industry like manufacturing if they’ve worked mainly in another industry like consumer goods or financial services.”
Following a hiring decision, regardless of whether the new CFO comes from in-house managerial ranks or from outside the firm, the existing role holder, and the future CFO, can work side by side for a relatively lengthy period.
“A CFO candidate may look good on paper in terms of transferable skills but not have the chops to work in a specialized industry like manufacturing if they’ve worked mainly in another industry like consumer goods or financial services.”
Robert Travis
Managing partner and an executive recruiter with Boyden’s industrial practice group
This facilitates a well-ordered changeover at both the macro and micro levels of policymaking and implementation. Shareholders gain by not losing precious institutional knowledge that could adversely impact the bottom line.
The finance team gains by having ample time to meet their new boss and understand future priorities for the CFO function. The CEO and the Board of Directors avoid a protracted recruiting process which means they are free to formulate ways to foster corporate growth.
