While most companies are prepared for a sudden CEO departure, nearly half of companies do not have a CFO succession plan in place, according to a recent survey released by Robert Half International.
A 2018 survey conducted by Robert Half Management Resources found that 48% of the more than 1,100 CFOs surveyed in the US have not identified a successor for their position. For those without a succession plan, the top reason was that they are not planning to leave soon, followed by having no qualified candidates at the company and being too busy focusing on other concerns.
“The value of succession planning is that it ensures a seamless business transition when key talent moves on to a new position, both internally or externally, through a planned or unexpected departure,” said Matt Weston, managing director at Robert Half UK. “This is crucial for businesses of all shapes and sizes and is not just something that affects the C-suite.”
As the search for finance talent intensifies, so too does the need for a concrete CFO succession plan, he added. Without one, a company opens itself up to the risk of having senior skills gaps, which can affect a company’s wider talent management strategy. Other risks include potential adverse effects on long-term performance and staff morale and the loss of legacy knowledge.
Experts in the executive search industry agree the CFO role has become more prominent and, therefore, a more difficult position to fill.
“The role of CFO has become more significant in recent years,” Weston said. “Where finance was once a siloed reporting function, CFOs are now integral to driving business strategy and partnerships with other areas of organisations forward. Additionally, many are continuing to take on more of a strategic advisory role, as well as continuing to serve as the stewards of the bottom line.”
It can take up to six months for a typical CFO search, and during a protracted leadership void of that length, significant damage can be done to organisational productivity and strategic decision-making.
Experts also agree that an organisation’s succession plan should be in place from the C-suite all the way down to entry-level positions.
“If you’re not evolving and having a recurring conversation around succession, you can get some real bottlenecks in your organisation,” said Jason Waterman, senior client partner with Korn Ferry, a management consulting firm headquartered in Los Angeles. “If candidates early in their career who are good performers don’t see internal people getting placed in jobs, or they notice people are staying too long in those jobs, it can be detrimental to your employment brand and keeping the right kinds of people in your talent pipeline all the way down to entry level.”
The best finance people are in high demand, and they will go find that CFO role somewhere else if they don’t see a path to it in their current organisation, he added.
For companies looking to take a proactive approach to succession planning, Weston recommended investing in professional development options to upskill staff, as well as having defined career paths in place in order to build leadership skills and accelerate career growth within the company.
“These plans should be in place regardless of the length of time current CFOs plan to be in their role, in order to ensure as smooth a transition as possible when the time comes for them to eventually step down,” he said.
— Hannah Pitstick is a freelance writer based in the US. To comment on this article or to suggest an idea for another article, contact Drew Adamek, an FM magazine senior editor, at Andrew.Adamek@aicpa-cima.com