Building financial executive 'bench strength': some companies are increasing their commitments to succession planning--but many still have a long way to go when it comes to drafting a team of high-performing financial executives able to hit the ground running.

• Author: Bierck, Richard
• Position: SUCCESSION

Succession planning is often the subject of more talk than action. Though their chief executive officers are charged with assuring the preparation of in-house candidates for top positions--including key financial jobs--many companies characteristically have been more reactive than proactive.

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Recently, however, experts have noticed an increased commitment to grooming candidates for top-five positions and the openings that succession creates below them. "Many companies have become more proactive," says Paul McDonald, executive director of RHI Management Resources, a division of executive search firm Robert Half International.

This proactive posture apparently stems from a new sense of commitment to succession planning programs that may have been in place for years but haven't received enough attention to be effective.

"There's no question that companies are taking this more seriously," says Daniel J. Ryterband, president of Frederic W. Cook & Co., an executive compensation consulting firm.

Yet many companies still lack the commitment. "I'd say that a majority of companies still aren't planning for succession," says Richard Smith, senior vice president and an executive compensation consultant for Sibson Consulting, the Human Resources consulting division of The Segal Group Inc.

Inadequate preparation sets companies up for various negative consequences. In the competitive marketplace for executive talent, these companies perennially scramble to fill unexpected openings, especially those for financial executives who can adapt more readily to different industries than their counterparts in sales, marketing and operations.

Because of this mobility and existing demand, Smith expects to see significant movement among chief financial officers as the economy recovers. Proven CFOs are "highly sought after," he says.

A CFO at a company whose stock has dropped to nothing may be uncertain about how the company will do in the new economy and may not want to take a risk by hanging around with a low stock price, Smith says. "That's [equity-based] compensation they're not going to get, and may be thinking, 'I'm a good player, and I want to be on a superb team' and because of this, they want to make a change," he adds.

Accordingly, some companies are focusing more sharply on the potential for internal candidates to step up to CFO. This means taking a close look at treasurers and controllers. It also means evaluating those below them as candidates for resultant openings.

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