The Shortage of Seasoned CFOs, Silicon Valley and Beyond

I had the pleasure of meeting with Rob Krolik, the former CFO of Yelp! a couple of weeks ago. As one of the few CFOs to take a company from less than $100MM in revenue to nearly $1B, with a successful IPO along the way, his phone rings “just about every other day with a new company seeking a CFO hire.” He is not in the CFO market. The truth is, there are more and more former CFOs who are not in the market for another CFO gig. It is putting pressure on the entire ecosystem. Here are some facts, then I will get to some ideas on what to do about it, including the novel things Rob is doing about it himself and the “CFO Academy” run by FEISV (Financial Executives International Silicon Valley).

Unprecedented Demographic Shift

The truth of the matter is we are undergoing a major demographic shift as the Baby Boomers are now reaching retirement age in droves. Every day 10,000 people turn 65 in the US and this will continue for the next 19 years (Source: Pew Research). One of the unique things in the Valley is that some of the most successful C-suite executives tend to opt out of regular, full- time employment much earlier than age 65 if they have had a big hit. So many companies want to hire the “been-there-done-that-with-success executive” like Rob, but the executives may not be inclined to want to work in the trenches like they had before. It is a perfect storm for a CFO shortage.

As cited in the 2018 Silicon Valley Index published by Joint Venture Silicon Valley: “Silicon Valley’s population is aging rapidly. There has been a 31% increase in residents ages 65+ over a ten-year period, and a declining share of children partially due to declining birth rates, which were lower in 2017 than in any year since the mid 1980’s. Overall population growth has slowed over the past two years.”

On the larger, national demographic picture, you can see on the chart below that the second smallest group of the labor force is the age group 45 to 54 — prime CFO age range for sure (Source: US Bureau of Labor Statistics).

Rob says there are at least 60 CFO openings in the greater Bay Area right now in the Technology sector, and I am personally aware of at least another 15 in the Life Science sector. These are the openings that are mostly out to search. Rob said within a few years that number could easily double, as new companies are constantly being funded, and the number of seasoned CFOs will have further declined when these companies are ready for one.

So, What Is To Be Done? Two Innovative Programs

FEI Silicon Valley is keenly aware of this problem and in 2015 started the CFO Academy. It offers a four-session course to help up-and-coming CFOs (Controllers, Treasurers, FP&A execs, and the like) understand where they have gaps in their hard and soft skills and to provide a real-world training opportunity to help close those gaps.

Candice Graves, who heads the program points out, “Our attendees are a step or two away from becoming a CFO and many have gaps in Investor Relations and or fund raising. We specifically address these gaps with presentations from investment bankers, venture investors, and sitting public and private company CFOs. We talk about preparing for a fundraising and what is done inside the company and what happens after that information is turned over to the investment community.” She said that they have “about 20 students each year” and the biggest challenge to recruiting people into the program is the time commitment. “These are all working professionals and we seek a mix of small companies to large, and a mix of gender and ethnicity, so pulling each group together is a big effort.”

Mark Muenchow, the current President of FEISV adds: “The program is an ongoing effort with the current students as well as the graduates. We have an annual event to bring all the previous speakers, students, and organizers together once a year. In addition, each class holds quarterly follow-up meetings, so it is not “here is your certificate, good bye,” but rather an on-going effort to continue the group knowledge.”

The program expanded to the SF Bay Area chapter last year and is getting national attention from other chapters of FEI.

Rob Krolik is doing his own sort of CFO academy called, “How to be a great CFO.” Thus far he has put on two one-day seminars for both Andreessen and Menlo Ventures. He is now gearing up to partner with the Wharton School Executive MBA program to expand the reach. His course is based on his experience and is focused on practical items managing the various disciplines under the CFO umbrella, such as Board Meetings, Facilities, Taxes, Treasury, etc. The primary goal he says is “to give the up and coming CFOs confidence.” He says by giving the attendees the skills they need to do the whole job, it builds confidence to accomplish the second goal: “Helping the CFO guide the Board and CEO in decision making.”  He also provides an ongoing forum for those that take the course to interact and ask questions of each other in a “safe” environment that build their knowledge base and network. “This isn’t rocket science. 99% of what you have questions about can be answered by someone in the forum,” Rob says.

The Bottom Line

At the end of the day, CEOs and Boards will have to face the music that there are not enough seasoned CFOs to go around. They will be forced to take the up-and-coming CFO candidate. However, though the efforts of FEI and Rob, perhaps making that hire will have been significantly de-risked. Both programs truly provide the forum to build skills that will lead to good decision making. And at the end of the day that is the job of the CFO. Personally, I applaud their efforts and highly recommend anyone aspiring to be a CFO to take advantage of these programs. As Mark Muenchow points out: “The finance world is mostly a group of self- selected, left-brained, analytical people. But the role of the CFO is equally right-brained and CFOs need to solve a variety of problems that are not always quantifiable. We try to equip our members with these types of skills through real-world examples from sitting CFOs.” I say Bravo!

What’s your experience with recruiting and hiring CFOs? If you would like to learn more about Arnold Partners’ successful CFO search process and our strategy for dealing with the challenges of CFO search, email me at dave@arnoldpartners.com.