Succession planning is a recent hot topic for CXO roles including the CFO role. At lower middle market companies, this is a tricky matter to navigate. In a perfect world, there would be an Apprentice CFO on staff. Someone to shadow the incumbent at all meetings, all phone conversations and of course, all e-mail communication. In other words, an executive-in-waiting fully groomed and fully-trained to step in on Day 1 of a new era. Unfortunately, no middle market company I am familiar with has a cost structure and margin profile that can afford that.
So here are a few steps a company can take to be as ready as possible to replace a CFO who might win the lottery next week:
- Eliminate, or greatly minimize, the work product that is solely prepared or controlled by CFO. Most CFO’s at lower middle market companies are working managers but there should be minimal analysis or standard reporting they alone prepare. Maintaining most recurring work with a staff member puts the Finance & Accounting team in a stronger overall position to continue in the immediate absence of the CFO.
- If the current staff is large enough to have specialists in accounting, FP&A, treasury and tax areas, communication is key to success for both today and tomorrow. Each specialty area should be aware of projects and priorities of each other. Their work includes many interdependencies and timing is critical so all can complete their work in a timely manner. Improved communication bolsters the teams’ performance and makes each member a better contributor.
- There may be a direct report on the team that has accounting and finance expertise outside their current particular subject matter. This person could on an interim basis, fill-in for the departing CFO. For example, a FP&A manager may have had previous treasury experience and could be a possible internal candidate to cover entire finance and accounting team. Of course, it is also critical this individual has the desire to take on expanded duties even on an interim basis, but is a possibility.
- Another suggestion is for CEO, CHRO and investors to have a network of contacts of trusted former CFO’s they have worked with. Individuals that could be used on interim, or short-term basis. Alternatively, have a list of professional contacts like executive recruiters that are close to this type of executive if you are not.
Pretty straightforward ideas worth some consideration. There are also interim management firms like Double Eagle Advisors that can provide interim CFO services in the event someone on your team needs to be replaced. Click here to visit my Linkedin profile.
