“We depend on annual one-on-one discussions between managers and their direct reports to set expectations, identify development needs, and make sure that we don’t have too much of a mismatch between expectations and reality,” says CDW’s Klein. In the case of such a mismatch, “it’s probably best if both sides admit that and the person moves on,” she says.
Such face-to-face meetings also help separate the more-ambitious employees from the staffers who are content where they are. But many employees know which of their co-workers are stars and consciously or unconsciously defer to them already, says Simmons. He recalls visiting one finance department: “There were four individuals and clearly one was running the show. You could tell that, down the road, that person would be viewed as CFO material,” he says. In such a case, as long as one understands that the other has better experience and that opportunities exist for all, tensions can be avoided.
Even the best-laid succession plans can fail if a top performer is recruited away or retires. McDonald’s was caught off-guard last summer when Matthew Paull, a longtime employee who had risen through the ranks to the CFO chair in 2001, decided to pursue a teaching career. Surprised by the departure, the company is now conducting an internal and external search for his successor.
Because such a surprise can be a heavy blow to a company, thoughtful management teams plan for that contingency. At Bristol-Myers Squibb, Bonfield says, multiple candidates are groomed, so that if one leaves, another can take her place. When the finance department at the drug maker began its planning four years ago, some functions had neither a clearly designated successor nor anyone who seemed up to the job. Now there are at least three people in line for each role, some who are dubbed “ready now” for a given position, others who will be ready in a year, and a third group that will be ready in three years.
Not all finance staffs can muster such bench strength. At a small company, even rotation programs can be a stretch. “We don’t have the luxury of saying, ‘Let’s take this person and stick him here for three years, then here for three years, and then he’ll be ready for the top spot,’” says Kurt Braun, finance chief at $250 million ClearPoint Resources. Instead, employee development is more informal: as the CFO assumes new duties, he delegates more responsibilities to his staff as necessary. Braun says that, should he leave the company, his two top reports could team up to do the job while the CEO conducted an outside search.
Developing a robust succession program is a delicate and time-consuming process. But companies with the resources and the will to implement a plan see a real payoff, not only in the orderly transition and avoidance of outside search costs, but also in the retention of their top talent. And for a new CFO like Richardson, having the support of a team of seasoned finance stars makes a tough job a whole lot easier.
Kate O’Sullivan is a senior writer at CFO.
10 Steps to Successful Succession
- Start the conversation.
- Create a formal succession document.
- Identify high-potential employees.
- Partner candidates with mentors.
- Broaden candidates’ skill bases with rotations.
- Conduct annual performance reviews.
- Manage expectations.
- Develop contingency plans.
- Be prepared for defections.
- Communicate often, precisely, and discreetly.