Business officer survey predicts major turnover in CFOs
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INDIANAPOLIS – Just like their bosses in the president’s office, many of whom are slated to leave office in the next few years, a large number of college and university chief business officers appear to be on the verge of retirement or departure, a sectorwide shift that could usher a lot of new blood into senior administration at a time of major financial change for higher education.
That is a major finding of a survey of business officers conducted by the National Association of College and University Business Officers, the findings of which will be presented and discussed today here at the association’s annual meeting.
The survey is a follow-up to one conducted in 2010. Many of the findings, such as CFOs' educational and professional backgrounds and their professional responsibilities, have changed little since the original survey. There have been some demographic shifts, notably that CFOs are now older, have been in their jobs longer, and are more likely to be thinking about retiring.
According to the survey, the average age of a CFO increased from 54 to 56, and the proportion of CFOs aged 65 and older doubled from 5.4 percent in 2010 to 11.2 percent in 2013. About 40 percent of chief business officers plan to retire as their next career move, and 37 percent of those plan to leave the job within the next four years. The survey notes that if CFOs interested in leaving for other positions are included as well, as many as one in four campuses could be looking for new business officers over the next four years.
“The impending departure of a large portion of CBOs due to retirements and other career transitions suggests the position will undergo substantial change in the future,” the survey states. “These survey results should give campus presidents and other leaders opportunities to discuss strategies for dealing with this upcoming change.”
Unlike the presidency, where the increasing rate of departure has been attributed at least in part to decreased tenures, the average length of service for CFOs has actually increased since the last survey, from 6.6 years to 8.1 years.
If the predicted turnover comes to pass, it will happen at a time of significant change in the financial model for higher education. Analysts say that higher education institutions of all size face potential constraints on all their revenue streams over the next few years. After several years of budget-cutting and efficiency measures in the wake of the recession, colleges and universities are now looking to adopt new financial models to generate new revenues that could be invested in long-term growth prospects, a theme that has been a major point of discussion at this year’s meeting.
Turnover could bring increased diversity -- including more women, members of minority groups, and individuals from outside higher education and with different backgrounds -- to a position where white, married males with backgrounds in higher education tend to dominate.
About 86 percent of the survey’s respondents were non-Hispanic whites, and that percentage is roughly similar to where it was three years ago. The percentage of business officers who were male actually increased slightly from 2010, growing from 65 percent to 67 percent.
Search consultants say institutions will have to take creative approaches in finding the next generation of finance administrations. "My impression is that the CFO pipeline is not particularly strong within institutions," said Mark A. Hall, senior associate with the Spelman & Johnson Group, a higher education search firm, and former vice president for finance and administration at Columbia College. "Demonstrated experience successfully managing complex operations will be critical for the next generation of CFOs, regardless of whether that experience comes from the public or private sector."
Despite high-profile cases of business officers coming into universities from other industries, business officers are still much more likely to come from inside higher education than from business, government or other fields. More than half of CFOs have spent the majority of their careers in higher education, with the overwhelming majority ascending to their roles from another higher education position, such as an associate or assistant vice presidency.
Where Are They Going?
While the majority of CFOs either plan to retire as their next career move or do not have concrete plans, those who plan to continue working are most likely to seek another CFO job at a different institution.
Administrators and executive search consultants have argued that the responsibilities of the presidency have shifted in recent years to align more closely with the current responsibilities of business officers rather than provosts, the traditional stepping-stone to the presidency.
“Historically, presidents have come from the academic side of the house, but the public is more frequently viewing higher education as a business, desiring leaders with a bottom-line mindset,” wrote Patricia A. Charlton, senior vice president and chief of staff at the College of Southern Nevada, in a pamphlet form last year’s meeting. “Internally, with budgets changing along with fluctuating enrollments and funding, a president with a strong financial background who understands the day-to-day flow is advantageous.”
That discussion has stepped up in recent years as surveys have shown that many chief academic officers no longer have interest in seeking the presidency.
But despite those changes and a push at last year’s NACUBO meeting to get CFOs to consider the position, few business officers seem interested in the job. The number of business officers interested in a presidency actually decreased between 2010 and 2013, with only 6.2 percent expressing interest in seeking the presidency this year, compared to 8.1 percent in 2010.
What’s the Job Like?
Chief financial officers generally report directly to the president, and the majority oversee between 6 and 10 direct reports.
They overwhelmingly cited “managing the institution’s resources” and “strategic thinking and decision making” as their top two job responsibilities. But chief business officers believe there is significant disconnect between what they, presidents and governing board members think the role of the chief business officer entails.
CFOs said the job entailed strategic thinking and leading change, and that board members and presidents tended to discount the importance of these attributes of the job. But since the survey only asked CFOs what they believed these positions would say, there is no actual insight into how presidents and boards perceive the role.
While there has been much discussion in the post-recession years about aligning the academic and financial sides of the university and fostering better partnerships between provosts and CFOs, relationships between the two did not appear to be hugely positive. In no category of institution did more than 20 percent of respondents say their best relationship was with the chief academic officer. And 24 percent perceived it as the most challenging relationship.
CFOs were much more likely to say that their best professional relationship was with their bosses.
According to the survey, CFOS are generally satisfied with their jobs. Their biggest frustrations come from “culture that resists change” and the fact that there was “never enough money,” both concerns that have frustrated others in the academy in recent years.