New-to-role CFOs who develop a strategic approach to relationship building and stakeholder management are up to 50% more likely to experience a successful transition, according to Gartner, Inc.
Gartner research has found a correlation between strong market performance and a higher number of CFO exit events, primarily through retirements. Additional Gartner research has found that 50% of new leaders underperform in their roles. A poorly managed CFO transition can be particularly disruptive for organizations, resulting in knowledge transfer gaps, employee disengagement and increased turnover.
“New CFOs are often forced to self-navigate their transitions while facing a barrage of competing tasks and priorities,” said David Akers, analyst and senior principal at Gartner. “The most successful transitions share common traits, and these can be adapted to any context, from embarking upon a turnaround situation to following a highly successful retiring CFO.”
Gartner surveyed more than 120 CFOs and conducted additional qualitative research, including interviews, to uncover the key commonalities that successful CFO transitions had in common. From these successful traits, Gartner has developed a “CFO in Transition Framework” adaptable both for new and veteran CFOs entering a variety of different organizational contexts.
Prepare for change
A CFO’s ability to manage contextual risk factors is a key component in successful transitions. The context in which a CFO enters a new role is dependent on both the department and organization’s current state of performance. Gartner’s research identified three contextual risk factors that most negatively impact CFO transition success: role uncertainty, a history of frequent leadership changes and team resistance to change.
“A first-time CFO taking over a smoothly sailing ship will have distinctly different priorities than a veteran external hire who needs to turn things around in a hurry,” said Mr. Akers. “Having a firm grasp of context and preparing accordingly will make execution much easier down the road.”
CFOs who take a collaborative communication approach and empower team members to own the implementation of changes can convert resistance to buy-in. CFOs who adopt such an “open change” strategy can increase their chances of a successful transition by 24%.
Building strategic relationships
New CFOs should take a deliberate strategy in building the right relationships early in their transition. Gartner research on CFO personal effectiveness found that the most effective CFOs have strong strategic relationships with their CEO and board, as well as building direct relationships with business unit leaders. CFOs should also focus on building team trust and establishing a personal brand. CFOs who follow these practices are up to 50% more likely to have a successful transition.
“A new-to-role CFO doesn’t have capacity to meet with everyone and operating by ‘gut feel’ is a good way to miss opportunities to strengthen critical relationships,” said Mr. Akers. “Instead, CFOs should develop an intentional process for identifying the business partners critical to their future success, assessing the health of those relationships and investing time and resources accordingly.”
Assess current capabilities, then act
Externally hired CFOs face additional challenges in assessing the current capabilities of their new departments, but these challenges can also be opportunities to realign talent capabilities with the priorities of the business. New CFOs should assess their team by reviewing performance, costs, process maturity and alignment, all of which can likely be adjusted in light of the new CFO’s understanding of business priorities and personal objectives based on the organizational context.
Once a new CFO has assessed current capabilities, it is critical to establish a clear, forward-looking vision for the function. Articulating such a public strategy is a hallmark of personally effective CFOs. A mission statement should also be backed by a practical roadmap for how the finance function will accomplish its stated goals, taking into account factors such as the team’s talent and knowledge base, process and policies, technology and decision-support capabilities.
Gartner for Finance clients can access relevant research and insights in CFOs in Transition — Accelerating Time to Impact.
Non-clients can learn more in Succeed as a New CFO.
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