At CDW, Klein says the gain outweighs the short-term pain. "Only by giving people new experiences and stretching them," she says, can you see whether they can assume new roles. Recently, for example, the head of financial planning moved into the marketing department to help manage the overall marketing budget. Another longtime staffer moved from the credit department to treasury and returned, energized by his new perspective, to lead the credit staff when his former boss left.
Even unsuccessful rotations "give you a lot of information about what candidates need to work on or what their limitations are," says Heather Ishikawa, an organizational consultant with CPP, a workforce-development firm. Instead of giving up on that candidate, however, Ishikawa says CFOs should monitor the situation and return the candidate to his old position after 90 days if problems materialize. Any longer and the person's peers — and even the person himself — may start to doubt his abilities. After moving the employee back, the CFO can assess whether a different rotation might work better, whether additional training is needed, or whether the person is better off staying put.
Such rotations are not always welcome, however. When 35 key finance employees at Bristol-Myers Squibb were moved into new positions two years ago as part of the drug maker's plan to develop its finance team, some line managers expressed concern about trading their experienced staff for new faces. "A significant number of those changes were considered risky," says CFO Andrew Bonfield. "You have to make sure that line managers accept that taking the risk is good for the organization as a whole." At first, this took some persuasion, says Bonfield, but as new employees settled into their roles, managers throughout the organization adjusted well to the changes.
Candidates themselves may also resist rotation, particularly in a global company. Roger Blanken, finance director at International Flavors and Fragrances, says employee reluctance to move has been the firm's biggest challenge in succession planning. For years, the finance department had a star performer in Spain whom they tried to lure to the Netherlands to head the company's European finance group. "We just could not pry him loose," says Blanken.
Because many people balked at moving, and because the company had a relatively small finance team, Blanken and CFO Douglas Wetmore had to be creative, offering potential successors the chance to expand their duties outside finance. For example, some finance staffers handle general management responsibilities in their respective countries. Blanken will also move people outside of finance entirely. "Clearly we'd rather place them inside the company than lose them," he says.
Managing Expectations
As the GE example makes clear, succession planning can mean losing talent. "As soon as the next CFO is identified, you run the risk of creating consternation among the other players one level down. Someone gets the nod and everyone else leaves," says Crist's Simmons. While there may be other opportunities for the also-rans, inevitably some of those passed over will resign. This scenario just played out at Delta Air Lines (see On the Record), where, after identifying CFO Edward Bastian and chief operating officer James Whitehurst as leading contenders for the CEO spot, the board ultimately hired Richard Anderson, the former CEO of Northwest Airlines. Bastian stayed on as president, but Whitehurst quit the company.
Commitment to communication helps retain talent and defuse the tension that often accompanies succession planning. But such communication "has to be carefully managed," says Jeff Burchill, CFO of business-property insurer FM Global. "You need to communicate not only with the people who have been identified for rotations, but also with those who have not been included." Managers at FM Global meet with employees who aren't selected for rotations and explain what they need to do, often reimbursing them for classes to round out technical or management skills. Sometimes employees who are close to the top tier are also invited to attend the company's internal management classes. When the issue is one of interpersonal skills rather than accounting ability, the conversations are trickier, but "I can't think of a situation where we've just given someone a dead end and not given them an opportunity to develop," says Burchill.
"We depend on annual one-on-one discussions between managers and their direct reports to set expectations, identify development needs, and make sure that we don't have too much of a mismatch between expectations and reality," says CDW's Klein. In the case of such a mismatch, "it's probably best if both sides admit that and the person moves on," she says.
Such face-to-face meetings also help separate the more-ambitious employees from the staffers who are content where they are. But many employees know which of their co-workers are stars and consciously or unconsciously defer to them already, says Simmons. He recalls visiting one finance department: "There were four individuals and clearly one was running the show. You could tell that, down the road, that person would be viewed as CFO material," he says. In such a case, as long as one understands that the other has better experience and that opportunities exist for all, tensions can be avoided.
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