Legacy systems: Why companies need a formal CFO succession plan

About one quarter of CFOs say their companies do not have a formal CFO succession plan, according to our recent survey. Even further, the highest proportion of those companies belong to the survey’s highest revenue bracket—$10 billion and up. This raises the question: Why is CFO succession planning not more of a priority?

It’s possible that the perceived value of the CFO may not have yet caught up with the actual value of their CFO. Devising and formalizing the plan can also be painstaking work. It requires diligent follow-through, as traditional approaches to succession planning can be rigid and slow-moving careful CFO succession planning is important. It can help mitigate any disruption to the finance function’s operations or ongoing departmental projects and mitigate shareholder concerns about a change in senior management. And while succession planning should be a continuing process, better to confront it sooner than later. No one wants to have to identify the next CFO while scrambling to address a key executive’s departure.

In a dynamic business environment where priorities continually shift, companies want CFOs who are forward-looking and skilled at finding paths to cost-efficient growth. A company’s next CFO had best be conversant in strategy, fluent in technology, and capable of thinking commercially.

If that sounds impossibly demanding, it’s because it reflects the CFO’s duties. Demographic shifts and rising CFO turnover now coincide with a change in expectations of what the CFO role entails. Quite simply, the job description has not only expanded, but has also become increasingly complex—with CFOs now having greater influence over corporate strategy. Given this expanding influence, it would seem pertinent for boards to formalize a detailed map for CFO succession.

As a sitting CFO, preparing someone to take over your job can generate mixed feelings. As formal a process like succession planning may be—and as vital as it is to a company’s long-term performance—it invariably contains an emotional component. CFOs should keep that in mind when identifying potential successors, and remain focused on leaving the finance function in the hands of a qualified successor—one who will enhance your legacy.

Download the full PDF to explore more about how CFOs can help facilitate a smooth transition of power and confidently identify a future CFO even as the nature of the job itself is growing in complexity.