As the war for top talent rages on businesses invest significant time and financial resource in defining and implementing what they hope are effective talent management strategies.
However, a significant percentage of organisations fail to recognise the importance of succession planning.
All too often succession planning is treated as the ‘poor relation’ in the wider talent management strategies.
Succession planning is by no means always given the attention it merits. And yet, if left unaddressed, there can be severe repercussions.
Many businesses still do not see this as an important element that should be top of the agenda when it comes to talent.
Yet one does not have to look very far to see the damage that the absence of appropriate leadership can do to an organisation.
Alarmingly, research has found that nearly half of CFOs do not have a succession plan in place, with many indicating that, as they are not planning on leaving their company any time soon, they feel no need for a succession plan.
Others believe that there are no suitably qualified candidates currently at their organisation who would be able to take over the CFO role.
These are both worrying facts.
A similar study also found that 81 per cent of businesses questioned would be unable to make an immediate replacement if necessary.
On the other hand, should the CEO leave, the vast majority of organisations do have plans in place for succession.
This is worrying on many levels. Not least is that the CFO role is integral to the smooth and efficient running of a business and, of course, is a key guardian against risk and fraud.
Often seen as a solid, perhaps even marginally dull, function that priorities steadiness and control, the role of the CFO is changing and changing fast.
Later in the article, I look at things to consider for an effective CFO succession plan.
However, for now, I would like to highlight three key areas where a good CFO makes a difference and where any time without a CFO can have devastating consequences.
#1 Digital Disruption
Any gap in the senior management team is a potential threat to an organisation, especially in today’s incredibly fast-paced business environment where agile, disruptive competitors are nipping at the heals of more established businesses, harnessing digital technologies to gain market share, fast.
Organisations and their senior leadership teams (including CFOs) need to ensure that they can be flexible, respond to change at speed and be more creative than ever. This can be especially challenging for traditional, larger organisations, but it really is a case of do or die.
The CFO is perhaps more important than ever, and while the attributes traditionally associated with CFOs are still required, CFOs are honing new skills to help businesses adapt to change in a new digital marketplace.
CFOs in 2019 and beyond will harness tools to wade through big data and transform this digital gold dust into actionable insight.
#2 Risk Management
While dealing with risk has always been part of a CFO’s role, businesses cannot afford to be as risk-averse as they once were.
Now is the time to be creative and put yourself out there as a business in order to succeed, so taking calculated risks is essential for a modern CFO.
A good CFO will ensure that the business can respond to – and to an extent be resilient to – risk in its many forms and guises.
Although no one is expecting CFOs to be technology experts, they require a strong appreciation as to the way in which new technology can be exploited in driving organisational change and improvement.
They also need to be able to understand where the money for technology systems should be most wisely invested.
Now more than ever, CFOs need to be relationship builders and communicate why investment in certain aspects will drive success.
They also need to ensure that they can access and recruit the best possible talent who are comfortable with the latest accounting technologies and platforms.
How to implement an effective CFO succession plan
In an ideal world, CFO succession planning should feed into a strategic talent plan that takes a wide-ranging and long-term view.
An important element of this is identifying how existing skills within an organisation can be nurtured and developed and where current gaps are.
It is not enough to simply look at who is performing strongly at any one moment and assume that they will be the next leader.
Just because someone is, for example, performing outstandingly in a supporting finance role to the CFO, does not mean they will excel in the many areas that are needed for good leadership.
Merely focusing on how a person is performing at the moment does not give a full picture as to how they will act in a more senior role and how they will motivate junior team members.
Another common omission in those looking at succession planning is to fail to expose people to other business functions and operations.
A meaningful succession planning strategy will look at all the areas to which someone will have exposure in a leadership role and prepare them accordingly.
While filling roles from within can work well, it doesn’t always end up working out that way for a number of reasons.
However, looking outside the business for talent can actually be a really positive move.
This reflects the fact that the business world is progressing at pace and the digital revolution has changed the face of business as we know it.
In addition, organisations need to look at the bigger picture, including where the business is now and where it wants to go.
The current CFO may very well be a transformative leader; someone who has led the firm through a period of significant change.
As such, it may not be essential that the succeeding CFO possesses the same skill set. Indeed, they may require rather more of a stabilising style.
Other factors to consider
All too often, businesses overlook the importance of EQ, which is a hugely important factor and something that helps with communication, negotiation, inspiring colleagues and taking them on a journey.
The role of the CFO is expanding and developing rapidly and it is hugely important to be constantly monitoring junior team members to assess who has the right skill sets and where certain employees may need development in order to help shape them into a CFO of the future.
We can’t predict the future, but we can plan for it and an effective CFO succession plan is one very real and key way to do this.
Now is the time to look at CFO succession planning, as part of a wider, strategic talent management programme of work.
Done well, it can make the difference between a firm which continues to grow and compete in an ever-changing and competitive environment, or a business that may flounder without a steady hand to guide it.