Who’s Next?

Succession planning should be a critical exercise in finance. Too bad so many companies avoid it.

Such rotations are not always welcome, however. When 35 key finance employees at Bristol-Myers Squibb were moved into new positions two years ago as part of the drug maker’s plan to develop its finance team, some line managers expressed concern about trading their experienced staff for new faces. “A significant number of those changes were considered risky,” says CFO Andrew Bonfield. “You have to make sure that line managers accept that taking the risk is good for the organization as a whole.” At first, this took some persuasion, says Bonfield, but as new employees settled into their roles, managers throughout the organization adjusted well to the changes.

Candidates themselves may also resist rotation, particularly in a global company. Roger Blanken, finance director at International Flavors and Fragrances, says employee reluctance to move has been the firm’s biggest challenge in succession planning. For years, the finance department had a star performer in Spain whom they tried to lure to the Netherlands to head the company’s European finance group. “We just could not pry him loose,” says Blanken.

Because many people balked at moving, and because the company had a relatively small finance team, Blanken and CFO Douglas Wetmore had to be creative, offering potential successors the chance to expand their duties outside finance. For example, some finance staffers handle general management responsibilities in their respective countries. Blanken will also move people outside of finance entirely. “Clearly we’d rather place them inside the company than lose them,” he says.

Managing Expectations

As the GE example makes clear, succession planning can mean losing talent. “As soon as the next CFO is identified, you run the risk of creating consternation among the other players one level down. Someone gets the nod and everyone else leaves,” says Crist’s Simmons. While there may be other opportunities for the also-rans, inevitably some of those passed over will resign. This scenario just played out at Delta Air Lines (see On the Record), where, after identifying CFO Edward Bastian and chief operating officer James Whitehurst as leading contenders for the CEO spot, the board ultimately hired Richard Anderson, the former CEO of Northwest Airlines. Bastian stayed on as president, but Whitehurst quit the company.

Commitment to communication helps retain talent and defuse the tension that often accompanies succession planning. But such communication “has to be carefully managed,” says Jeff Burchill, CFO of business-property insurer FM Global. “You need to communicate not only with the people who have been identified for rotations, but also with those who have not been included.” Managers at FM Global meet with employees who aren’t selected for rotations and explain what they need to do, often reimbursing them for classes to round out technical or management skills. Sometimes employees who are close to the top tier are also invited to attend the company’s internal management classes. When the issue is one of interpersonal skills rather than accounting ability, the conversations are trickier, but “I can’t think of a situation where we’ve just given someone a dead end and not given them an opportunity to develop,” says Burchill.

Discuss

Your email address will not be published. Required fields are marked *