Does your organization have a credible CFO succession plan in place?

The sudden departure of Lockheed Martin’s CFO as depicted in a WSJ article authored by Nina Trentmann and Doug Cameron is a reminder for the board of directors to have firm succession plans in place for their top executive roles. 

WSJ describes this departure as follows 

“The Bethesda, Md.-based company said Tuesday that John Mollard, its vice president and treasurer, would step in temporarily for Ken Possenriede, who became CFO in February 2019. Mr. Possenriede will retire immediately for personal reasons, Lockheed Martin said. The company declined to comment further. The move comes ahead of the company’s previously scheduled investor day on Thursday.”

Lockheed immediately promoted its treasurer who is a four-decade veteran of the company. The article also mentions this could be a temporary replacement which could indicate a succession plan was not ready to be deployed. When key executive vacancies become available the company should take a step back and conduct a proper search to ensure the best possible candidate is being installed. This can include conducting interviews with outside candidates as well as internal executives who have been groomed for the role as part of a succession plan. Other companies may already have zeroed in on their next in line to be CFO and they feel there is no reason to beat around the bush and pretend to have a selection process. Other organizations may have a preferred candidate in mind as part of their succession plan but must allow for due diligence to take place to ensure to all company stakeholders that the best possible candidate is being selected following a thorough evaluation.  There is also the question of whether a company is privately held or public. Privately held companies may have more leeway to install key executives more quickly without a drawn-out process. 

T. Rowe Price Group announced their CFO succession plan in July stating their current CFO is due to retire at the end of the year. 

While T. Rowe Price is managing a planned departure; the CFO vacancy at Lockheed was more unexpected. How much effort should organizations place on succession planning, especially as preparation for surprise departures? At some organizations, the CFO has been at the helm of the finance department for so long that they are considered an institutional part of the company. It is a good practice to remember these executives are still human, and health, family, and many other personal and career reasons can lead to a sudden resignation.