Watching the England cricket team snatch an unlikely test match win against Sri Lanka on Monday got me thinking about the number of leaders on the pitch. With Andrew Strauss, the captain of the test team, Alistair Cook, captain of the one-day team, and Stewart Broad, captain of the 20-over side, all on the pitch at the same time, it is clear that the team has a robust succession plan in place.
Should Andrew Strauss find himself charged with some form of misconduct and summarily dismissed from active duty, Alistair Cook or Stuart Broad would be able to step into the breach. Their chances of success have only been enhanced by being giving first hand experience of leadership.
As absurd as the instant dismissal of Andrew Strauss – who to all intents and purposes appears to be a man of unimpeachable integrity – may sound, it was even more inconceivable a month ago that Dominique Strauss-Kahn, the former head of the International Monetary Fund (IMF), was to step down from his position because of charges of attempting to rape a hotel maid.
The IMF now faces a long and arduous search for his successor, which will no doubt be subject to the kind of speculation from investors, analysts and business journalists that would normally be reserved for the tabloid hacks writing on the back pages.
Picking the right replacement matters, and is no less important in the corporate world. The unexpected departure of a successful and revered FD who has effectively ‘fallen under the bus’ – and the failure to provide a timely and strong successor – will send jitters through the markets, potentially damaging share prices.
Yet, only a minority of companies adopt a formalised approach to succession planning. According to report by Ernst & Young, a third of businesses don’t have a programme in place, while only 28% have either identified a specific candidate to succeed the group CFO or have several candidates in mind.
In this, actions are very different from words. I am constantly being told about the importance of nurturing the bright young things within the business to become the leaders of tomorrow but the approach taken by boards and FDs is one of indifference.
And I can see why. Why spend so much time and effort nurturing someone within the business when there is constant supply of FDs and would be FDs coming up from the ranks of practice accountancy and into business. The even bigger risk is that after spending considerable time and effort grooming your next superstar CFO, that they leave for new pastures, tiring of waiting for the incumbent FD to shuffle off to a cosy non-executive number.
Take Byron Grote, CFO of BP, for instance. As far back as 2007 he was being touted for retirement yet here he remains. No one can blame BP for not wishing to change CFO in the aftermath of the Deepwater Horizon disaster, but nevertheless it highlights the fear factor that grips boards when it comes to moving from an experienced CFO that has been there and done it all, to one that is an unknown quantity by contrast.
There is much to be said for easing the younger blood into the top positions, but this takes guts. It is a brave board that is willing to put succession planning ahead of delivering today’s results. The argument goes that by weakening the team of today, you create a stronger one for tomorrow.
If the Australian cricket team, which only four years ago was the best for a generation had heeded this approach by staggering the retirement and succession of such stalwarts as Shane Warne and Glenn McGrath, it would be they and not England that had their eyes set on the heights of being the number one Test nation in the world.
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More important for FD succession planning is not whether the talent comes from within or without, it is for the management to ensure their company does not end up like the Australian cricket team.