Succession planning for next-gen CFOs

The roles and responsibilities of the next generation of CFOs will be bigger than ever before. CFOs will continue to play the two modern roles of strategists and catalysts. They will wear the two traditional hats of operators and stewards. From driving strategy to enabling execution, reporting financials and facilitating operations will remain on CFOs’ plate, and the pie for each will increase.

The financial landscape will continue to be driven by an evolving ESG regulatory framework, increasing adoption of digitisation and the emerging imperative of talent. While generative AI and machine learning will hold the key for next-gen CFOs to augment finance productivity, their responsibilities in terms of sustainable development will involve disclosing information related to climate risks. CFOs will perform these tasks in the backdrop of challenging credit and equity markets, heightened levels of regulation, an active investor community, and a volatile and uncertain economic environment.

As the roles of the next generation of CFOs get wider and deeper in scope, succession planning will also assume greater significance. Organisations must focus on succession planning to generate a steady pipeline of leaders so that they can step up to the additional pressure and burden of next-gen CFOs. This succession planning would be expected to eventually lead to a stronger organisational culture, a future-proof workforce, and greater organisational stability and resilience.

How companies should prepare

Succession planning is most effective when organisations take a “centred” approach. A “centred” approach is one that is designed to put the people involved—that is, both leaders managing the process and successors being considered—at the centre. This approach recognises that succession planning has an enormous impact on the careers of current leaders who are responsible for its success.

To work towards this “centred approach,” organisations should provide incentives and opportunities to incumbents for creating environments that develop successors, not just identify them. Organisations can link the KPIs of incumbents with developing future CFO talent. This way, succession planning will become an agenda item for both leaders and successors.

Another important practice organisations should focus on is establishing accountability. That is, organisations should identify who is responsible for developing the potential CFO talent, whether it is the CEO, CFO, CHRO, direct managers, or the Board of Directors. Lack of accountability can be a major spoiler. If it is unclear whether the responsibility of planning and grooming potential CFO talent lies with the CFO, CHRO or other business leader, no one will be encouraged to invest in this important initiative.

Organisations should also closely look at the future of the finance function while building succession processes. They need to go beyond the needs of their current roles. For instance, with the role of the CFOs expected to further move in the direction of business partnering, organisations may help promising young professionals gain exposure to other business functions within the organisation.

Firms should also explore opportunities in the market to find workshops dedicated to developing the next generation of finance leaders. They should look at the programmes offering an experiential curriculum that is both intense and thorough. They should also look at the academies providing executives preparation, self-reflection, networking opportunities, as well as hands-on scenario planning support related to key aspects of the CFO agenda.

Creating short-term goals for succession planning to match the long-term focus, gaining access to high-quality data to ensure the transparent and fair selection of candidates, and institutionalising a framework to build the right methodology are some practices organisations should adhere to. 

The bottom line

The roles and responsibilities of the next generation of CFOs will increase over the next decade. The next generation of CFOs will continue to serve not only as stewards and operators but also as strategists and catalysts. These key decision-makers and leaders will be expected to set high standards.  

For new CFOs to successfully take the reins on day one, early preparation is essential; companies should start ahead and not be late on succession planning. This will go a long way in ensuring that successors in organisations are smoothly able to transition and meet the rising demands placed on the next generation of CFO leaders. 

About the Author: Nandita Pai is Partner and CFO Program Leader, Deloitte India.