How CFOs can ensure the future viability of finance: CFOs are finding increased expectations for oversight and transparency, along with rising stakes to grow the business faster. As a result, they must build leadership depth and breadth in their staffs, tapping people with the capability of balancing these competing tensions.

Carol, a senior vice president running a large division for a global information services company, abruptly lost her CFO of 18 years to another company. Carol was shocked by his sudden departure.

Internally, her division was growing at a 27 percent clip, and was in the midst of a significant reorganization that would provide it with increased confidence that it could generate sustainable growth. Externally, customers were concerned with product pricing and how they would be impacted; the CFO had been the visionary and a significant, trusted relationship connection to Carol's customers.

The immediate problem she faced: There were no strong internal finance candidates with the leadership capability to replace him. Carol was forced to look outside, and, with the help of an external search firm, found a replacement--but not for six months. She managed to keep the wheels on the bus, mitigating risk damage with junior members of the finance team along the way. Nevertheless, the opportunity cost was high, and in retrospect, she calculated that the finance integration and the growth predicted by the reorganization were delayed for about a year.

Why was this otherwise successful company unprepared for such a critical vacancy? Insufficient focus by senior management resulted in failure to develop succession or talent management as a core business process.

There are some hard messages in this for CFOs: Of all the other tensions of the job and responsibilities you must balance, add these to your list--and not at the bottom:

1. There are financial risks to leadership vacancies. The cost of poor talent management may not show up as a line item in the expense column, but it does impact performance and it spreads systemically through the organization.

2. Best practice companies get this right and are using talent management as a competitive advantage. All the demographic data indicates that talent competition is about to heat up in the U.S. If your company is operating from deficiency gaps, things are about to get worse, not better.

3. Talent management is a responsibility that must be owned by the CFO and not delegated. One of the most significant barriers is the failure of senior leaders to be personally involved and deeply committed. As it is in so many other ways, the CFO role is pivotal to the success of a company here, too.

The current business literature is filled with compelling arguments supporting the need to actively manage talent succession for future viability, and research shows that most CFOs and senior C-level executives agree. Yet, there is a significant gap between belief and action, as measured by the number of companies who have actually implemented talent programs. Two critical factors can bridge the gap. One is a fundamental mind shift; the other is knowing what to build.

CFO as Architect of Talent Management

CFO leadership is an inflection point that cascades down into the organization's behaviors and actions. Fundamentally, talent management must be integrated into CFO thinking as a natural course of business and strategic planning, as well as day-to-day management of people. By asking the question, "Do we have the talent we need?", the CFO models behavior.

For some, this requires a mind shift. If it isn't present in your mental horizon, it probably won't show up in finance's organizational blueprints, and others will not know to build it for you.

The CFO owns the full and ultimate responsibility to architect the talent management process that creates the right environment in finance. While that process differs for every organization, the authors' experience, as well as strong benchmark data from several studies, suggests these core design principles are critical:

* Senior management must be personally involved and deeply committed. Partner with HR to co-manage support processes, but own it yourself.

* Establish a culture of leadership.

* Keep strategic succession management processes simple and flexible; ensure that they are:

a) integrated with business plans and strategic discussions; and

b) aligned with monthly, quarterly and annual business rhythms.

* Ensure ownership cascades down. Senior management must identify developmental goals for individuals, line managers and executives, and hold them accountable.

* Use a Leadership Profile to identify leadership attributes; review and update regularly.

* Identify a pool of high-potential leaders early; regularly evaluate and develop their progress against attributes; involve all levels of the organization.

* Utilize three complementary methods of leader development opportunities in parallel: Experience-based, feedback and relationship, and education-based.

Over time, it is critical to move talent management out of a reactive, "deficiency mode" and into a proactive mode. In a deficiency mode, executives like Carol are forced to think of talent as risk management, typically uncovering a series of gaps that go deeper and deeper into the organization. These gaps include such risks as: a sudden vacancy, transitioning leadership smoothly and quickly, not having internal successors available, not having talent in the organization.

If there is no program in place today, reality dictates that you may need to start by addressing gaps and risks. But, recognize that this is not an effective way to lead talent management over time.

In contrast, best practices firms follow these design principles to build a proactive and systemic process deep into the organization, anticipating future needs and developing talent from within. They invest in talent as a competitive advantage, assuring themselves of breadth and depth.

Building finance talent as a competitive advantage represents a great commitment on the part of CFOs and the organization as a whole. Use these design principles both to assess your organization and build what is needed. View any unexpected vacancy risk as an opportunity to drive more systemic change. As you move finance toward change, however, be aware of the following common barriers in organizations.

Common Barriers to Growing Finance Leaders

"It's all about culture," says a senior vice president of a large technology company. He goes on to say that for finance executives to have a meaningful seat at the business table, they have to bring more than a numbers orientation; they need strong business acumen and partnership skills.

A CEO in the insurance industry says: "What gets in the way of fully developing leadership skills in finance is an unrelenting drive by finance leadership on short-term accounting. Excellence in finance is a given; I need that, too. Beyond that, CFOs need to step up and act the way they want their people to act; establish a culture of leadership for their finance function. Leadership is something that's driven from the top."

These executives hit the nail on the head in identifying these common barriers to growing leaders:

* An organizational culture that minimizes or under-values leadership;

* Low priority on leadership development given by senior management;

* Insufficient resources;

* Inadequate rewards for management initiative or risk;

* Limited mobility within finance or into the business units;

* Lack of adequate role models; and

* Beginning core leadership development too late in finance career.

Any one of these issues can derail the best intended efforts.

Success Profile for Finance Leadership

One of the initial building blocks for any talent management program is deciding what it takes to lead finance--the leadership profiles and attributes. Regardless of any other barriers ahead, this work can be put in motion today.

The suggested framework below is the result of a cross-industry benchmarking study requested by the CFO of a large technology company and the authors' experience advising C-Suite executives. The emphasis is decidedly on leadership talent.

1. At no level does astute finance skill become unnecessary, but technical skills, while not abundant, are not the limiting factor. Leadership skills are.

2. Most candidates are initially hired into finance on the basis of technical skills. Leadership attributes typically evolve over time and are identified on the job, in the line of fire.

3. Truly differentiating leadership attributes are typically less well understood and certainly less clear-cut than technical finance skills.

The CFO is often the front-runner for CEO succession, and with good reason. The ideal CFO profile requires a scope and depth that parallels the business itself. Some individuals who have been both CEO and CFO say CFO is actually the tougher of the two jobs. The line of succession extends directly from CEO to CFO to all finance leaders. For all these reasons, it is critical that finance chiefs shift their talent management focus to leadership attributes that include:

* strategic thinking

* people management

* influence

* effective communication

* analysis and business planning

* diverse business experiences

* organization agility

* partner/advisory skills

* impact/results focus

CFOs must manage their own people for efficiency and effectiveness. They must align finance resources to support the multiple and varied parts of a vast, complex (sometimes global) organization. Finance chiefs must understand business process, an organizing principle that underlies financial decisions.

Finance leaders are called upon by the wider organization to drive process reengineering in support of strategic and organizational change. Today's CFOs must grasp an organizational systems perspective and learn to be architects of infrastructure.

CFOs must be exceptionally skilled communicators, influencers, mentors, collaborators. The ability of the finance chief to articulate a clear and compelling business case, weaving numbers to strategy, has a direct impact on investor confidence. It is the backbone of strategic guidance from the C-Suite that brings internal clarity and focus to the organization's ability to execute.

Start Early

Once these attributes are clearly identified, the next step is to ensure they are being cultivated in your finance people. It is important to start the leadership development process early. Through our work with Fortune 500 CFOs, we have observed differences in what finance leaders are held accountable for, even within the same organization.

Far too many staff stay in the comfort zone of tactical issues and weekly, monthly and quarterly historical reporting, for which they are valued and rewarded. CFOs must institute experience-based development opportunities. For example, a couple of large technology companies have created "mini-CFOs" within their P & L divisional structures, replacing controllers.

These mini-CFOs are responsible for a full range of activities, from accounting to compliance to market analyses to business planning to building alternative profit models. They are responsible for not only providing leadership to their finance teams, but have accountability to the divisional business heads as well.

CFOs who want to ensure high productivity and strong results need to ensure that strategic succession management and talent management represent a core business process in finance. Building competitive advantage through a proactive talent program requires work, but is critical if finance is to have the business impact demanded in today's environment.

John Boyle ([e-mail]) and Roy Maurer ([e-mail]) are Partners with The Clarion Group, a boutique management advisory firm with offices in West Hartford, Conn., and Seattle, Wash.

RELATED ARTICLE: takeaways

* The cost of poor talent management may not show up as a line item expense, but does impact performance and it spreads systemically through the organization.

* Talent management in finance is a responsibility that must be owned by the CFO and not delegated. One of the most significant barriers is the failure of senior leaders to be personally involved and deeply committed.

* Over time, it is critical to move talent management out of a reactive, "deficiency mode" and into a proactive mode that looks to the future.

* Far too many staff stay in the comfort zone of tactical issues and regular historical reporting.