Geopolitics, consumer behaviours drive high CFO turnover

Companies are facing increased CFO turnover due to market dynamics and shifting consumer trends, with Asia Pacific presenting a unique landscape.

Chief Financial Officers’ (CFOs) turnover rate reached an unprecedented 200 in the first three quarters of 2023, with factors being the impacts of geopolitics and evolving consumer behaviors.

Anupama Puranik, Managing Director & Consultant at Russell Reynolds Associates, said that the entire external environment has shifted dramatically, pointing to a decade of stable market conditions upended by the COVID-19 pandemic.

She said that this shift has introduced new market dynamics, including high inflation and interest rates, alongside geopolitical uncertainties and changing consumer patterns. These factors have compelled organizations to reconsider their financial leadership, seeking CFOs who can navigate this new terrain effectively.

“So what we're seeing is a trend where organizations are looking at businesses differently. And then turning around and saying I think we need a different finance leader to lead this way to take us to the point where it has to go from here,” Puranik said.

Puranik described the Asia-Pacific region, and Singapore in particular as unique as multinational companies in Singapore view it as a regional headquarters, leading to a higher CFO turnover, as roles typically last three to five years before talent moves on.

“If I start looking at the local Singapore-listed entities, the trends tend to be a lot more stable. And the movements happen, either because there is a retirement or there is a change in the leadership of the company, or there is a change in the direction of the organization. And that's when the change happens,” she explained.

The global leadership monitor conducted by Russell Reynolds Associates reveals that almost 40% of CEOs globally are open to changes in their CFOs, indicating that the trend of high turnover is likely to continue in the coming 12 to 18 months.

CFO succession planning emerges as a crucial strategy for organizations amid this high turnover rate. Puranik emphasized the importance of succession planning not just for CFOs but for the entire C-suite.

“The CFOs in the C suite are the ones who are really deciding on the strategy and where the organization is expected to grow. And if you've got the succession planning done in the right manner, people who are taking over from them in the mid to the longer term will continue that growth path for the organization,” she said.

She added that effective succession planning ensures business continuity, aligns with the company's long-term strategic direction and facilitates talent management and development. Additionally, it can significantly reduce the cost of talent acquisition and the risks associated with hiring externally.

Furthermore, a robust CFO succession plan enhances an organization's brand image, portraying it as an entity that seriously invests in its people for the long term. This approach not only attracts external talent but also ensures that the organization selects the most suitable candidates for leadership roles.