Managing the Risk of a CFO Transition-Part 2

Think Again Before You Terminate

If your company is considering a change in CFO leadership, make sure you thoroughly understand the facts and reasoning behind this decision. Are you in need of a CFO transition, or are you just “shooting the messenger?” During the economic downturn, most companies cut budgets and reduced staff sizes, adversely impacting the depth of financial talent on which the CFO could rely. However, the organization’s needs have not lessened. In fact, CFOs are under pressure to accomplish more than before due to increased financial risk. Most have more objectives, priorities and initiatives than they can realistically deliver.

CFOs aren’t the only ones suffering as the result of economic pressures, but they are often held accountable for poor results. The decision to terminate a CFO because of financial challenges is premature in many cases and misdirected in others, often addressing the symptom and not the underlying problems.

A costly termination and a lengthy, expensive search often exacerbate the problems instead of solving them. This is especially true if the new CFO inherits a situation identical to—or worse than—the one held by the predecessor. If the CFO role has turned over two or three times within one CEO’s tenure, the issue may not be performance but rather an impossible position.

Every audit committee should consider an independent evaluation of the entire finance function (the office of the CFO) to ensure that the existing CFO has been given appropriate support around information systems and corporate governance, including the qualified resources to get the job done. A terrific CFO who lacks proper resources and support can put the company in jeopardy, and the audit committee should take action to mitigate this risk.

Come back tomorrow for part 3 of this series, Align the Role to the Organization’s “Life Stage” Needs.