RESEARCH shows that 40% of senior executives leave their role within 18 months of being hired. Some of these are voluntarily, but many are not. So what can the future or current CFO do to maximise their own chances of success?
To understand what caused such a high turnover, Deloitte began to research the challenges faced by executives as they take up new roles. This led us to establish Deloitte’s CFO Programme to support new-to-role senior finance professionals. At the heart of the programme is a one-day “transition lab” workshop. Here we assist CFOs to frame their priorities, assess their talent and organisation, and identify different approaches to managing their complex stakeholder relationships.
The transition lab uses a model called the “Four Faces”, which describes the different aspects of a CFO’s role and responsibilities. The framework helps these leaders understand where to focus their time and describes the behaviours that are expected of them. It also allows CFOs to clearly articulate how they will make a successful impact on their organisation. These include:
Since 2011, over 150 newly appointed UK CFOs and over 1,000 CFOs globally have used the Deloitte CFO Programme to manage their transitions. The findings showed that executives need to manage three key resources to succeed: time, talent and relationships.
Time is of the essence
During a lab we ask CFOs to focus on areas where their personal time is most needed. Whilst most express that their time is currently spent in steward and operator roles, such as fulfilling regulatory and reporting requirements, most say that they wish it could be spent on catalyst and strategist responsibilities. These include partnering with the business and building key relationships with corporate peers.
It is important to be aware of how quickly time can pass in that first 180 days. The most successful CFOs quickly determine how to balance their resources across the Four Faces. However, the pressure of the transition often means that time is not properly planned out. Only by effectively prioritising their time can a new-to-role CFO build and then sustain impact.
Managing and developing talent
It is critical for incoming CFOs to make sure that the right people are in the right roles. If the wrong people are in critical roles it is unlikely that the financial leader can deliver all their priorities. Our data shows that on average, a new-to-role CFO inherits 7.3 direct reports. When asked, new CFOs classified 14%, or on average one of their direct reports as ‘weak’. Making the decision to replace a direct report is difficult, especially if the CFO were previously a peer. However, not doing so will drain time and risks the leader not being able to meet their own objectives.
CFOs need to identify a capable ‘second-in-command’ to take ownership of specific initiatives. Even after two months have passed, 95 per cent of CFOs declared that they have still not determined who is best placed to be their deputy. Without a ‘second-in-command’ to take the lead on some Steward and Operator responsibilities, a CFO will struggle to shift their focus to the Catalyst and Strategist responsibilities they must master.
Building lasting relationships
Input from stakeholders such as the CEO, Chair and Audit Committee Chair is collected as part of the preparation for a CFO’s transition lab. Many CEOs interviewed say that they want their CFO to be a sparring-partner. This view is strongly supported by the wider board who want to see the CFO constructively challenge the strategic decision-making process.
Naturally, stakeholders – both inside and outside of the company – form opinions of incoming CFOs even before their first day in role. The emotional agility needed to successfully negotiate all of the new relationships can be difficult, especially when every interaction is part of a process to establish the CFO’s reputation. According to the data from the lab, internally appointed financial leaders give a higher priority to relationship building activities than their externally appointed counterparts.
Therefore focus is required so that these relationships can be maintained through day-to-day activities. To maximise their impact, CFOs must have early conversations to clarify expectations and to understand the different communication and working styles of their key stakeholders.
Success or succession
Knowing what is important and urgent is central to a successful transition. However, new CFOs should take a step back and think holistically about the role they are about to undertake and the legacy they wish to leave. They must take the time to challenge themselves on whether they are focusing on the right priorities, whether they have the right team in place and are developing the right relationships to make the most impact. Otherwise, CFOs risk joining the statistics of senior executives leaving their role prematurely.
More information on Deloitte’s research, ‘The CFO view: making an impact’, can be found here