In a PLC environment, unless you have previously been a CFO of a listed company, the shareholders are wary of anyone being promoted internally because they are worried they don’t have the necessary experience. Additionally, in a PE environment, if you haven’t been the CFO of a PE-backed business, PE houses don’t want to talk to you.
So how can organisations find a better balance between breadth and expertise across all financial disciplines, to allow senior finance executives to step up into the number 1 role?
Developing talent internally
One approach to internal talent development discussed at a recent CFO breakfast meeting hosted by BIE was giving others the chance to present to the group executive, particularly if they were integral in preparing the information or financials. This gives senior stakeholders the opportunity to get to know the rising talent.
Another approach is having the attitude of trying to make yourself redundant. If you can achieve this, it starts filtering down and it motivates everyone within the team. If you don’t get out of your current job, you won’t get promoted. You must make sure someone else is ready to take over, so you can take the next opportunity. It’s a push and pull model. You want the person above you to pull you along and the person below you to push your career. You need both to keep everyone motivated. Generally, it’s not a problem for the person pushing, but often there is not sufficient pull coming from above.
It was agreed by everyone in attendance that if you don’t start developing internally, you end up potentially looking to recruit from similar or larger organisations which have invested in broad training.
It was noted that as many functions in PE-backed companies are smaller, they don’t have the breadth to move talent around so there is limited progression. They want a controller to be focused on control and technical accounting and the commercial side of the business to excel at that, so there is not the same opportunity for cross-fertilisation.
Research shows that 60% of PE houses replace their CFOs within 18 months of a transaction happening. They are not going to look for an FC to promote into the job. Instead, they are going to recruit a CFO with PE experience. They will be very specific and can be focused on the short term. This then becomes a vicious cycle, as they continue to pigeonhole talent because there is no time to take risks, especially if there is an exit plan between years 3-5.
Take a step back
BIE research revealed that just 45% of CFOs surveyed are meeting with their HR Director at least once every six months to discuss leadership development and succession planning, and one in five CFOs have never done so.
It’s paramount that leadership teams sit down for 1-2 hours every 6 to 12 months, to review the organisational charts to see who is the top talent, who is willing to move and what gaps they have. This can get some quick wins that could rejuvenate the team, especially if you have the scale to do so.
Often asking colleagues outside of the immediate function to reflect on talent within the group, can open up different ways of analysing and using the talent appropriately.
Transformation as a means of succession planning
BAU is no longer the norm. The goal posts keep moving and businesses are constantly going through change. Finance is one area that it is natural to go after first, as it links to different initiatives across the business. Other areas may have more priority over others at different stages to drive the business forward and generate cash and profits, as well as delivering the best possible exit result for a PE-backed company.
Employees can cope with this if they can see where their career is heading and how it can develop during the transformation. Internally, when going through a transformation, you need to look at who are your high potential talents and look to put them on the transformation programme. As always, it’s important to get the right talent involved to support the business as it grows. Then with the right structure in place, it becomes easier to embed new processes and ways of working.
Transformation is about change, and some people don’t like the unpredictability. Often people are reluctant to move from a line role into a transformation role. They need persuading that doing transformation is great for their career and that they will end up being worth more in the market, having built that skill set, and will be more equipped to be a CFO in the future.
Alternatively, you can give them an opportunity to fix an area of the business they are frustrated with. This is a great opportunity to get exposed to the rest of the business and personally develop, and people tend to understand and embrace this more.
In an environment where there are less and less roles in finance because they are outsourced, transformation is one of the best places where you can still give people succession development opportunities that make them ready for the next step.
In our Finance Succession Planning and Transformation Survey 2018, we investigated how organisations are dealing with succession planning within their finance function. To download your copy of the report, click the link below.