The CFO must include in their focus the aspiration of excellence in every aspect of their job. This extends beyond his or her technical and strategic assignments and includes leadership excellence. The best leaders understand the objectives and efficiently achieve results by leading their team to success, including assuring that appropriate succession planning is in place.
Preparing the Next Generation of Leaders
The responsibility for building and managing talent belongs to the company and candidates alike. CFOs have a pivotal role in succession planning and developing potential contenders who could assume finance leadership. Yet among those EY surveyed and interviewed in recent years for the report Finance forte: the future of finance leadership, the majority said very few in their organization have the skills required to become a Group CFO.
Finance talent exists, but there appears to be little structure around the opportunities for channeling those capabilities, not just in finance but across the business. Leading organizations are diligent in nurturing internal talent, retaining them, and promoting them into senior positions. Future finance leaders will not rise to the top by accident. The company needs to institutionalize the process, according to one survey participant. Simultaneously, individuals who aspire to leadership must take the initiative to craft a curriculum with diverse experience, from exposure to multiple business units and international markets to direct contact with the marketplace itself. Simply put, aspirants are responsible for self-development. They must manage their transitions and proactively ask for help to achieve their goals, whether that means pursuing a lateral assignment or some other opportunity of interest.
Beyond the basics
Future finance leaders need a skill set more varied than before. In the past, CFOs did not participate in active commercial or strategic discussions. Now those skills are in high demand. They need a command of the business and its drivers. They should articulate a story about business performance, offering insights on where to take the company and how to get there.
No matter the industry, an experience beyond finance is vitally important. A breadth of experience across the business is imperative.
- Gain a wider breadth of finance experience
- Develop commercial insight
- Seek leadership opportunities and team-building skills
- Balance traditional finance with other skills
- Gain international exposure
- Participate in or own finance transformation initiatives and major change operations
- Seek mergers and acquisitions experience, both transaction and post-merger
- Develop communication skills through exposure to the market and its stakeholders
- Proactively build relationships with the board
None of these action items supplement the need for a firm grasp of finance fundamentals. But prospective candidates need to do more than rotate through the central functions. It is more important to build upon skills acquired at the head office and gain broader divisional and operational roles.
Those who can demonstrate experience in critical areas beyond finance will stand out, especially those who can lead diverse teams with a wide range of expertise. Organizations also will need to give aspiring finance leaders exposure to a wide range of stakeholders to foster external relationships with bankers, equity and bond investors, analysts, and the media.
Providing a fertile training ground
Talent development and succession planning are often a reflection of an organization’s revenue. Those with a 5% or greater increase over a 12-month period are more likely to have identified potential successors to the CFO and expect current finance leaders to mentor and coach candidates formally. Those companies are also more likely to allow junior finance talent to gain broad commercial skills.
Employee development also boosts morale. A culture with ongoing feedback, training, and guidance helps teams grow, share, and contribute. Targeted development for strategic roles and thoughtful reflection and action on a clear career path helps ensure that top performers reach their potential in a way that is aligned with the organization’s goals.
Still, companies that take a formal approach to groom are in the minority. Among that EY interviewed for Finance forte, only 28% had identified a specific candidate to appoint to the Group CFO position or had several candidates in mind. The rest had a broad pool, but no shortlist or no formal succession program at all.
Talent management programs should look beyond the top echelons of the company to middle managers. This will enable the organization to prepare these individuals for senior roles. Focusing on younger employees will instill an awareness of how difficult leadership positions can be.
The Talent Development Cycle
Every organization has a continuous cycle for developing talent in one way or another. Too often than not, the cycle begins with talent acquisition and ends with on-the-job training. Proper talent development utilizes all or most of the following development systems:
When properly understood and systemized, the talent development cycle can be an organization’s greatest resource. Not only attracting and retaining the highest quality leaders but maximizing the value of their efforts as well.
Managing organizational change can be tricky, and a much-needed cultural change can contend as one of the most complex transformations an organization can go through. That, however, does not make it unmanageable or preclude leadership from approaching it scientifically. As we have emphasized, the CFO now has broader expectations outside the historical expertise of the role. Helping identify and direct strategy from a financial perspective has profound cultural implications. There are objective financial measures that the subjective company culture can impact, including but not limited to employee motivation.
Finding ways to facilitate discussion between all hierarchies within an organization helps identify the company culture’s positive and negative components. Employees who feel too distant from their superior’s superior are less likely to influence others around them positively. A standard method to openly display management’s opposition to this notion is in a CEO’s decision to sit his desk out in the open. Having office doors made of glass can have the same effect, literally and figuratively increasing transparency. The most effective management techniques include time set aside by upper management to have regular, one-on-one rapport-building conversations with employees.
Questions for consideration:
- Does your company take a formal approach to talent management and development?
- What role do you play in mentoring and coaching future finance leaders?
- Has your organization identified a pool of candidates who would ideally scale the ranks in finance?
- How challenging is it to motivate individuals to take the initiative in their professional development?
- What types of experiences do you deem necessary for future finance leaders? How do you ensure they gain exposure?
- Does your organization make its people feel comfortable to express ideas and opinions?
- Do you make a regular effort to build rapport with others in your organization, both above and below you?