The construction industry is no stranger to succession planning. Family businesses are typical in our industry. Over the last decade, we’ve seen the generation that first found success in the seventies and eighties hand the baton to their kids. Detailed planning and disciplined execution are vital for the new leadership to take control without skipping a beat. Succession planning is not just for generational handoffs. It should be a priority for any thriving business that wants to sustain success for many years to come. Given the effort involved, only the business’s key positions need a succession plan, which typically includes the CEO. We think it should also include the business’s top financial manager.

What does a succession plan do?

Succession planning ultimately is sustainability planning. At its core, it involves grooming an individual who serves as the executive’s “backup plan.” Once in place, the plan protects the business if the executive decides to retire, suffers a health setback, or gets wooed away by a competitor.

To achieve this goal, a company needs to complete at least three steps:

• Identify a suitable successor-in-waiting. For many businesses, deciding who will become the financial manager’s shadow is not easy. The right person may not be on staff. Even if they are, the selection process needs to be handled with care. The “successor” role is not for everyone: with the exception of planned retirements, it may not come with much assurance that the executive position will be open in a predictable timeframe.
• Develop a systematic training process. The object of succession planning is to close the gap that otherwise would be left if the executive was no longer part of the business. Doing that requires preparing the successor to do all of the executive’s job. A regimented, routine training schedule is usually necessary to ensure the executive and successor consistently move toward their shared goal.
• Documentation. Succession planning often sheds light on the limitations of a business’s process documentation. The need for documentation to assist training offers an ideal opportunity for getting information from the executive’s head into process documents that the whole team can use.

Why the financial manager?

Because succession planning is a long-term, resource-intensive process, leadership may question why the CFO needs a successor at all. Isn’t financial management a fungible role that can be quickly filled from below or outside the business when the time comes? 

Those of us in the profession know that replacing an experienced manager is not easy. A seasoned financial leader's day-to-day, quarter-to-quarter, and year-to-year expertise go well beyond what someone could learn in a book, or even at another business. 

Every successful company has its own way of working, from how it prices bids to managing debt and other risks. Practices may be codified in detailed spreadsheets or financial management platforms, but their inner workings are often only understood by a small group. The group that understands why things are done that way often is even smaller. Leaving so much critical information in the head of one person is asking for trouble.

Share your thoughts!

Has your business tackled the succession planning challenge?

As regular events return, CFMA members will once again have the opportunity to discuss issues like succession planning in person. We’re thrilled to have those in-person conversations come back. At the same time, the last 19 months also have underscored the value of online discussions. We hope you’ll take a minute to visit our chapter’s LinkedIn page and join the conversation with other members. See you at the next member event!