When 3D Systems Corp. DDD -5.08 % announced it was “privileged” to be hiring Ted Hull as its new finance chief in November 2014, it seemed like a coup given his experience at companies including Cisco Systems Inc. CSCO 0.66 % and International Business Machines Corp. IBM 0.52 %
Six months after he joined, 3D Systems stock was down more than 30%. In a May 15, 2015 press release, 3D Systems said Mr. Hull was leaving at the end of the day “to meet company needs and to pursue personal interests.” Chief accounting officer David Styka took over as chief financial officer.
Though such short-lived CFO tenures are few, they make up for their scarcity by the damage they can wreak on a business or finance chief’s career. At the least, companies like 3D Systems, Express Scripts Holding Co. ESRX 0.13 % and Parexel International Corp. PRXL 0.84 % suffered short-term share declines when CFOs left after relatively brief stints.
“It’s always intriguing when someone leaves after a short period, and raises big questions in shareholders’ minds,” said Bryan Proctor, head of recruiting firm Korn/Ferry International KFY -2.09 % ’s financial officer practice.
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The share-price declines are a result of investor concerns about internal problems or industrywide headwinds. 3D Systems stock fell 3% the day of Mr. Hull’s departure.
Mr. Hull declined to comment, as did a spokesman for 3D Systems.
Among the 1,000 large companies that Korn/Ferry tracks, only 4% of the finance chiefs who departed over the past six years left within their first 12 months. That is fewer than 40 people. Fifteen percent, about 140 people, left within two years, and 27%, about 250, left within three years. Overall, the average tenure of those who left was 6.6 years.
CFO turnover can also contribute to operational problems, such as a lack of talent development or missed M&A opportunities.
“If that seat becomes a rotating door, it creates uncertainty around culture, direction,” said Scott Simmons, managing director with recruiting firm Crist|Kolder Associates.
For the exiting CFO, the move may sandbag career progress. “It creates a stigma,” said Mr. Simmons.
Few companies or finance executives want to talk publicly about a hasty departure, but a lack of chemistry with the CEO is commonly cited, recruiters say.
The majority of those with tenures of less than a year, 75%, were hired from outside the company, which “almost certainly implies a clash with company culture and/or CEO,” said Mr. Proctor.
Miscues over responsibilities are another factor. “What the CFO role looks like can vary quite a bit from company to company,” said Grant Clayton, a search leader with recruiting firm Egon Zehnder International.
For candidates, recruiters consider both of those reasons fairly benign, as long as an executive doesn’t have a history of short stints. “One is a data point, two is a trend,” said Mr. Clayton.
And few would fault an executive for leaving for another job that appears to be significantly superior, as long as the move too doesn’t represent a trend.
In many cases, a quick CFO exit is a sign of problems at a company. Growth was slowing in the 3-D printing industry when Mr. Hull joined 3D Systems, said Longbow Research analyst Joe Wittine, who had an underperform rating on the stock. Shareholders hoped Mr. Hull would help the company stabilize as it searched for new applications for its printers.
When he left abruptly, it confirmed to Mr. Wittine how difficult the task was.
There is no minimum acceptable tenure for CFOs that everyone agrees upon. Three years is a common benchmark among recruiters, but analysts may see it differently.
John Kreger, an analyst with William Blair & Co., generally counts tenures of less than five years as too short. In July he downgraded Parexel International, a clinical research company, on the news that CFO Ingo Bank was leaving after about two years and 10 months, and before annual results were reported.
“To leave after less than three years suggests he decided that the opportunity he initially saw just isn’t there,” said Mr. Kreger. Shares of Parexel have since recovered.
Parexel spokeswoman Cristi Barnett said that Mr. Bank was returning to his native Germany. “We congratulate and wish Ingo success,” she said. Efforts to contact Mr. Bank were unsuccessful.
Besides punishing a company’s stock price, high CFO turnover may entail extra compensation costs.
Express Scripts named four new CFOs including two interims, between 2013 and 2015. It disclosed in its 2015 proxy both a $500,000 signing bonus and a $2.6 million severance package for Cathy Smith, who was finance chief for 10 months in 2014. Express Script’s next CFO, James Havel, spent a similar amount of time in the role before transitioning briefly to vice president of finance. He left with a $4.8 million severance package, plus about $1.2 million in signing and performance bonuses.
A spokesman for Express Scripts declined to comment.
Ms. Smith went on to become the CFO of retailer Target Corp. TGT 0.24 % last September. Through a spokesperson, she declined to comment. And 3D Systems has appointed a new CEO and CFO. Mr. Wittine has raised his rating on the stock to neutral.