When leaders conduct succession planning, they arrange their own replacement and who is going to take charge of the organization. Rarely is there a plan in place for the CFO until it comes up when they have already announced the decision to retire and you will need to resolve it in short order.
There are three short-term options we will consider with a short pro/con list:
An outsourced CFO is, in most cases, the best option for companies that have less than 5 million EBITDA and are still growing. This is because they are not restrained by the candidates that want to work with your organization, the contracted company will typically have multiple experienced CFOs available and can assign the best person for your organization. Furthermore, typically you don’t need a full-time employee in the role and could save money by outsourcing for specific services such as performance measurement.
Hiring a replacement CFO
This should occur with an intermediate organization with a team of four to six full-time accounting staff. Once you are at this size, it makes the most sense to hire internally as it will be the cheapest option as well as have the most longevity. It also makes sense to move directly into the hiring process as soon as possible and include the existing CFO to hire their own replacement.
This should occur with huge organizations with multiple locations, over 10 million EBITDA and multiple full teams of accountants with a total head count of over ten accountants. When an organization is this large, the number of CFOs who can be successful in the role is limited and it makes sense to have a long drawn out recruiting and hiring effort. During that period, it is usually best that an existing member of the internal accounting team is brought up to fulfill the duties of the CFO until a suitable replacement can be found. Occasionally the acting CFO will become permanent, but most often, a more experienced CFO from outside will need to be brought in.
Succession planning & management process
Regardless of which of these short-term options is appropriate, there needs to be a systematic approach for the succession process. In the infographic below, we have outlined a five-step process for conducting a successful succession plan.
One important caveat to consider for deviation from the process:
If the predecessor isn’t available through the process, it is better to bring in a third-party expert rather than ‘go it alone’ in defining the skills, competencies, and knowledge required in the position. This is due to the complexity of the role at this level of leadership could require knowledge and analysis that isn’t transparent to the rest of management.
Click this link for the infographic:
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