Successful succession planning

1 Identify the faces of the future
Succession planning should be an integral part of a leadership development process, says Kira Thompson, director of the accounting and finance division at Twenty Recruitment Group.

So after identifying the business-critical roles, you should determine a logical progression path for each target position, Thompson adds.

Christoffer Ellehuus, managing director of the Corporate Executive Board’s corporate leadership council in EMEA, says succession planning should cover the three or four levels below the CEO.

“It would definitely cover the CFO, but also critical sub-functional leaders, such as the controller and head of tax. What’s important, though, is that succession planning is decided not by the level of the role, but by its business criticality. For example, where the role requirements and skills of the executive are more difficult to find in the labour market, it’s important that succession planning for those roles is strong.”

2 Have a good mix of staff
“If you have too many ambitious staff you risk losing them as there are insufficient roles that you can give them as they are being groomed for the top job,” says Richard Francis, head of interim CFO finder Francis Vienne.

“The trick is to have some staff who are happy doing what they are doing and don’t necessarily want the top job.”

3 Become a talent champion
Ellehuus says that those CFOs with the strongest pipeline of successors are “talent champions”, who typically do five things well.First, they identify and engage high-potential staff early.

Second, they link strategic and talent planning – so they ask critical questions about successor and capability gaps.

Third, they spend less time on managing individuals and more time managing the wider workforce.

Fourth, they hold their managers accountable for “talent outcomes” – so they don’t accept managers who deliver on the technical aspects of their job but, at the same time, burn through talent and don’t develop capabilities and skills in their team.

Fifth, they rely on HR beyond routine staff management, in order to help develop their talent.

4 “Headroom hiring”
“Headroom hiring” is where the appointee is recruited to one role, but is given an assurance that it will develop into a more senior position.

James Aston, director of finance search specialists Archer Mathieson, explains: “We worked with a global corporation, running a multi-country finance/human resources transformation programme and SAP implementation. Initially, it was looking for someone to drive a single country pilot roll-out of the system.

Following this, it wanted the same person to be capable of rolling out the transformation globally, and at pace. This required a fast learner who could grow rapidly with the increased responsibilities of the role.”

5 Go deep and wide in planning
Graeme Yell, director of UK financial services consulting at Hay Group, says that organisations “miss a trick” by only focusing succession planning on obvious successors to the most senior roles within a three-year timescale.

“But you need to get the basics right before trying to build more comprehensive, deeper succession planning and talent management programmes.”

Ellehuus adds: “It takes years to develop a successor for a senior role, such as the CFO. Succession planning that just looks at the top three levels of executives in the organisation is often too late to identify and close critical successor gaps. It is necessary to identify and develop talent deeper in the organisation.”

6 Nurture skills for the future
David Cookson, a member of the financial officers’ practice at executive search and assessment specialists Russell Reynolds Associates, says: “Finance leaders are increasingly rated on the strength of their teams and direct reports.

“However, it takes a confident CFO with great self-belief to hire a talented deputy who will be ambitious for the chance of promotion. If success is measured through consistently raising the bar when making new hires, CFOs must be comfortable with their own performance.

“A low ego helps to ensure that any success is shared with the team. Successful mentors will make other stakeholders aware of the relative strengths of their teams to ensure that when the time is right they have the support of others in the business. Such individuals will often reflect glory downwards, where possible.”

7 Focus on succession risks
Ellehuus says that CFOs should focus on four succession planning risks. First, vacancy risk.

“Prioritise succession planning for the roles most critical to business success and most scarce in the labour market.”

Second, readiness risk. “If the controller has been identified as a likely CFO successor, how do we ensure that he or she is truly ready to take on the CFO role in three to five years? Only through focused development.”

Third, transition risk. Best practice organisations have a year-long “on-boarding process” for senior executives before they even take on the role.

Fourth, business-alignment risk. “Business strategies and environments change. Successors should be identified based on future requirements – not current expectations.”

8 Set up a finance academy
Companies that take succession planning seriously embed it in the finance function, says Cookson.

“Indeed, many develop finance academies where individuals are rotated through departments. This develops the individual, broadening his or her experience, and provides more options and flexibility for the organisation.

“Graduate rotation programmes are an early indication of a succession planning and talent management agenda. The ethos of development and succession planning becomes more intrinsic in the DNA and fabric of the organisation the earlier it is started.”

But Yell sounds a final warning. “There is a big peril in looking for a ‘mini me’,” he says. “Succession planning and talent management is left to the personal decision of the CFO and the senior team. This risks missing out on new talent because it doesn’t fit the status quo.”