CFO Succession: Could The Convergence Of Responsibilities Hold The Key?

We are often asked to find candidates to assume responsibility for multiple functions, none more so than in the CFO role. It is curious however to see where convergence starts to occur further down the organisational structure and how the trends change from year to year and sector to sector.

We have recently completed a search to appoint a Director of Corporate Finance for a FTSE 250 company. Nothing unusual in that! However, on this occasion, the role was to assume responsibility for M&A/Corporate Development, Treasury and Investor Relations. Now things start to get interesting.

The Benefit Of Converged Responsibilities

It struck me at the outset that this was, on the one hand, a very unusual combination of experiences but on the other an incredibly sensible and interesting one. This role essentially charges an individual with defining and executing the value accretion strategy for a company, thus positioning the successful candidate in a very challenging and influential role.

It brings a very unusual level of responsibility and accountability to the Head of Corporate Development, a role that often operates in relative isolation. Not only must the individual identify and execute potential non-organic development opportunities and enable funding in the most efficient manner possible, but also ensure that, in combination, these activities create shareholder value. It surely creates a much clearer level of accountability for the M&A agenda when the individual responsible for executing transactions needs to sit in front of investors, rationalise and justify any decisions and bear first-hand the consequences of their actions.

Development Advantages

This is a great development role for an aspirant CFO. To define a group acquisition strategy, an individual must engage extensively with operational leadership across a group, gather their ideas and buy-in, prioritise capital accordingly and often work in close collaboration with a general management fraternity in execution. Such a role, therefore, creates an opportunity for an individual to evidence their stakeholder management capability both internally and externally, and give a clear indication of their suitability as a CFO.

Yes, there are other functional experiences that most CFOs need to gather along the way, but few have the opportunity to gather experiences that will prepare them as well as a CFO of the future than a role like this.

Clearing The Path For Succession

For companies thinking about internal CFO succession, this is perhaps something worth reflecting on. I regularly advise ambitious individuals that they will need to gather experience of managing acquisitions or transformational projects and engaging with external stakeholders before they are truly equipped to join the Board, or indeed able to compete with accomplished CFOs for such appointments. As such, this type of role is very attractive. It might be something other companies should consider in enabling candidates who are perceived to be future CFOs to evidence their capability to operate in such a capacity by assuming a role such as this for a couple of years before stepping up.

However, finding this combination of experiences proved to be very challenging. Finding great Treasurers, M&A people or accomplished IR professionals is relatively easy and fairly routine for us. Finding these skills and experiences in combination is an entirely different matter and created a very interesting challenge for us in successfully delivering the search.

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