succession plan

Do You Have a Strong CFO Succession Plan?

You may be surprised to learn that according to a recent study, 80% of CFOs say that there is nobody in line behind them to take over when they move out of their role with the company.  Even more disturbing? Only 38% of Chief Financial Officers indicate that there is even a trace of a succession plan to replace them.

What exactly does this mean for a company? It could mean that financial management takes a hit or even worse, that management makes a hasty decision in order to fill the role. Because CFOs play such a vital role in the company, the selection for this position should be carefully considered. Failure to have a succession plan in place often times leaves companies high and dry.

Companies Need to Focus Internally

So often, we see companies focused on out-maneuvering the competition at the expense of planning for the company’s future internally. Leaders should remember that their company is only as strong as the people that they have operating it, and ensuring that they have a CFO succession plan should be a primary focus.

Make Sure Candidates are Ready

According to research, 60% of CFOs are appointed internally. While there is nothing wrong with finding a candidate within the business, you should make sure this person is ready to take on the position. Appointing a CFO should be done so intentionally and not hastily because you didn’t create a succession plan. CFOs need to be ready for the responsibility and have the desire to move into the role.

Taking the time to create a succession plan may feel tedious, and like it’s taking away from your current strategy, however, this mentality must change. A CFO succession plan should be at the top of the list of your long-term company strategy.

Looking for a Succession Plan Solution?

DLC can help! Using interim staffing allows your organization to function smoothly while a careful, un-pressured search is made for a new CFO. DLC’s interim CFO consultants are highly credentialed, Big 4 CPA’s and/or MBAs from the top 25 graduate programs.

succession planning

Succession Planning: Considerations

It likely comes as no surprise that 62% of family businesses are passed on to the next generation. However, you may be shocked to learn that only 18% are done with proper succession planning. Lack of succession planning can adversely affect the success of the company.

The Most Difficult Transition

The most difficult transition for a business is when it is passed between the first and second generation. The reason is most likely because this type of transition has never occurred for the business, so each challenge will be new. Because the business has had the same leadership until this point, there will need to be considerations for the new vision and leadership style going forward. You can smooth the transition by doing the following:

  • Create a family vision
  • Prepare for challenges
  • Create a transition plan

Second to Third Generation Transition

This scenario is likely easier than the first one described. The reason is that now the business can rely on the previous experience to help them through the process. Still, there will need to be some care given to how this particular transition will take place. In order to make sure that the succession goes as planned, you should prepare for the following:

  • Create a family employment policy
  • Create a board of directors
  • Prepare for following generations 
  • Fine tune the succession plan

Succession Planning Overview

Succession is a pretty common occurrence among family business owners. However, care should be given to ensure that the transition is smooth and doesn’t cause negative disruption to the operation. Failure to complete proper planning could mean issues for the business and even cause family strife.

It’s important to remember that this process is lengthy and may require considerable amount of time before it is completed. Consider the bigger picture when making changes to the company during this time, and ensure that you remain true to the company and the family’s vision.

For more business planning advice, check out Forecasting: Optimizing Business Planning.