The Shallow End of the CFO Pool

There appears to be a shortage of available candidates for CFO positions, according to a recent study by Heidrick & Struggles.

"Many financial services companies are finding when it comes to choosing a new Chief Financial Officer, the well is dry," says Jory Marino, Vice Chairman of Heidrick & Struggles, who adds that "a number of CFOs, after remaining in place to see their firms through the (financial) crisis, only recently feel able to leave and turn over the reins.

"The stronger demand for new CFOs - met by a diminished supply of talent - presents a formidable challenge for boards and CEOs in 2011," says Marino.

In a new white paper examining the CFO talent shortage - "What to Do When the Well Runs Dry? Rebuilding the Finance Function within the Financial Services Industry" - Jory Marino and Todd Monti explore the CFO talent gap within this industry - illustrating the dynamics of the talent shortage, why it will get worse and how financial service companies can fix the problem.

Crisis Actually Slowed Turnover

In 2010, only 12 CFOs of financial services companies in the Fortune 1000 turned over, dropping from 15 turnovers in 2009 and 26 in 2008, according to Heidrick & Struggles. The slowdown mirrors numbers across other industries, with only 75 CFOs turning over across the Fortune 1000 as a whole in 2010, down dramatically from 126 turnovers in 2009 and 191 in 2008.

However, a kind of 'fatigue' has set in among CFOs, who increasingly see the position as unattractive. And, many of the up-and-comers who might have been seen as natural successors for the role just a few years ago frankly don't want the job.

"A series of factors are kicking in - but, the biggest is that CFOs are actually taking their delayed retirement - a direct contributing factor for a real talent shortage," states Todd Monti, Managing Partner of the global Private Equity & Venture Capital Practice. "CFOs have had a rough couple of years - toss in increased regulatory pressure, heightened public scrutiny and any CFOs at a breaking point may be inclined to retire early."

Heightened Demand Creating Talent Crunch

The shortage in top talent is being met by a heightened demand, say the authors of the white paper. Demand is being driven by:

Need for new blood to help lead financial services companies into recovery mode - "CEOs are now beginning to make changes to their leadership teams and are competing for game-changing financial talent that can shift gears past the survival mode," Mr. Marino notes.

Private equity firm hiring - "Private equity firms are successfully competing with publicly traded companies for exceptional CFOs, lured for their existing portfolio companies or looming new deals in the pipeline," says Mr. Monti.

Pull of regulatory changes - "With increased regulatory reform, almost all financial services companies will be shoring up their finance function to meet new risk management, financial disclosure and compliance requirements," added Mr. Monti.

To combat this talent drought, CEOs and boards must re-think their finance retention talent strategy. As part of the study, Marino and Monti illustrate the essential steps financial services firms must take to rebuild their finance talent pools to position their companies better for future succession planning as well as maintaining their current talent infrastructure.