Most US companies would be ill-prepared should they suddenly lose their CFO, a survey by executive staffing firm Robert Half Management Resources suggests.
Robert Half asked about 2,100 CFOs whether they had identified a successor for their positions. Only 22% of the respondents said they had. That’s up from 17% in 2010, but it indicates that many companies have some work to do.
“Succession planning is a critical business process that should be implemented throughout the organisation,” Paul McDonald, Robert Half senior executive director, said in a news release. “Even if there is no immediate need to fill a position, identifying future executive talent helps companies prepare for the unexpected, develop a pipeline of strong leaders and build a more capable staff.”
A few factors may explain the lack of preparation: The shifting role of the CFO, the availability of quality talent and the volatile economy.
First, CFOs have taken on broader, more strategic responsibilities – including identifying a successor. Nineteen per cent of CFOs said they were too focused on other concerns to worry about succession, the Robert Half survey said. That’s up from 6% in 2010.
Another 14% said the main reason they hadn’t identified a successor was that there weren’t enough qualified candidates working at their organisations. That’s up from 7% in 2010.
But the biggest reason for not finding a successor: CFOs didn’t plan to leave the job. Sixty-one per cent of respondents mentioned it, compared with 81% three years ago.
Earlier this year, in a separate survey, Robert Half asked 1,400 US CFOs: “How, if at all, have your retirement plans changed in the last five years?” Thirty-eight per cent said they are more uncertain and cannot predict when they’ll retire. Another 7% said they plan to spend more time working than they had expected five years ago. “Economic trends and personal demands are causing many executives to re-examine their retirement plans,” McDonald said at the time that survey was released.
Succession planning and staffing were also among the top issues facing US accounting firms, according to an American Institute of CPAs survey released this month.
“Employers should provide professional development opportunities and hands-on experience to ensure the next person in line for a key role is ready for a smooth transition,” McDonald said.
McDonald recommended four steps to identify and groom potential CFO successors:
- Establish which senior-management positions in the company are critical and should never be left vacant, determine which might open up due to retirement or other factors, and identify senior or mid-level managers who might qualify to take on those roles.
- Determine which personal and professional qualifications successors will need, and hone the functional expertise and decision-making skills of potential candidates.
- Expand the search for high-potential succession candidates, and go beyond the people next in line for promotions. Look for people with natural leadership abilities, people who have worked hard to motivate and inspire their colleagues, kept important projects on track and ensured client satisfaction.
- Set clear milestones for succession candidates to reach and provide ongoing feedback to help them progress.
Related CGMA Magazine content:
“38% of CFOs Rethinking Retirement”: Many executives are re-examining retirement plans, and more professionals nearing the traditional retirement age are exploring part-time work so they can continue their careers, according to a Robert Half survey.
“To Ascend to CFO Role, Controllers Must Take a Broader Look at Business”: Controllers have some of the skills needed to become financial directors, but they need to adjust their detail-oriented focus to a broader, more strategic way of thinking. Here are key ways controllers can make themselves FD-worthy.
“As Role Evolves, CFOs Must Brush Up on Communication Skills and Strategic Thinking”: CFOs of multinational companies say their roles are evolving beyond the finance function. As a result, finance chiefs need to develop more skills centred on strategy and communication.
—Sabine Vollmer (firstname.lastname@example.org) is a CGMA Magazine senior editor.