CFO turnover subsides

Financial Week must be a little bit schizophrenic. A Sept 1, 2008 article titled “CFO turnover hits a record high” stated that, according to Crist Kolder Associates:

CFO volatility—a measure of how often an executive leaves his or her finance post—reached its highest level in 13 years in 2007, with 128 CFOs departing their jobs, up 38% from 93 in 2006.

While my blog on that article focused more on CFO tenure than turnover, it pointed out that the facts in the article were difficult to interpret and not consistent with other resources. On CFO turnover specifically, I found a separate Liberum Research report which claimed that more than 2,300 CFOs left their jobs in 2007. The discrepancy between the two reports seems to be based on the universe of companies considered.

As if this confusion wasn’t enough, less than two months after that initial article, Financial Week published another entitled “CFO turnover subsides“. Amazingly, this new article quotes the same two firms but uses different statistics to come to a completely different conclusion.  The explanation isn’t that CFO turnover has slowed down recently after hitting record highs earlier this year. In fact, the article states that “CFO turnover had fallen 14% from 2006 to 2007”.

This sloppy reporting is based on the careless use of statistics and a similar fate can befall performance management deployments as well. Just like we’re not sure what universe of CFOs are being reported on, metrics can be misinterpreted unless they have a standard definition. Even for a metric as seemingly obvious as customer, I often find that there are multiple potential interpretations. For example, new vs repeat, direct vs channel, and high vs low lifetime value.

Those might be somewhat easy to resolve but consider a customer who purchases a product In June and later returns it in July. Does this customer count in the total number of customers for Q3?  In addition, since we certainly counted this customer in the June total, do we go back and restate the number of customers when the product is later returned?

I’m guessing I’ll never sort out my confusion over the CFO turnover metrics unless someone from Financial Week reaches out to me. With careful definition of your metrics, you can avoid causing the same issue for people that try to use the metrics on your scorecards and dashboards.

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3 Responses to CFO turnover subsides

  1. Robert E October 30, 2008 at 1:49 pm #

    I agree that without the proper context, numbers can be misinterpreted.
    How many CFOs have left the position to take over as CEO? (Which would elevate the importance of having a good CFO)
    Is high turnover of salespeople or customer-facing staff in a company actually making a larger impact on numbers than turnover of a CFO? (Which might bring some needed humility to executives who think the success of a company is totally attributable to their wisdom and decisions.)


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