Transitions in Finance Leadership Can Be Challenging. Here Are Some Ideas.
By Stuart Gay
At any organization, unplanned changes in financial leadership create knowledge gaps that take time to fill. No less is this true at charter management organizations or public school districts. In particular, many CMOs are relatively small organizations with limited finance capacity other than the role of the CFO. Larger districts have a deeper bench, but often lack an individual with a strategic perspective who can pinch-hit for a departed financial leader. If not managed properly, transitions in key financial management roles can have severe consequences.
On the other hand, successful change to new leadership can be a genuine benefit. New finance leaders bring new perspectives. Even before a hire is made, districts and CMOs can plan a transition and review financial management practices and operating procedures with new rigor.
Recently, Afton worked with the Algiers Charter School Association (ACSA)—a New Orleans charter school management organization with over 4,000 pupils in six schools—to support a transition to a new CFO, working closely with the board’s finance committee and the CEO. Our work at ACSA reminded us of some critical steps for successfully navigating such change. These include planning for a transition that may last longer than a district or CMO would like, documenting the “three Ps” of practices, policies, and procedures, and instituting training to help all finance personnel understand one another’s roles so they can pinch-hit as needed in the future. Above all, managing such a transition requires the involvement of the board or its finance committee.
Establish Realistic Timelines
The first step in a successful leadership transition is to set a realistic timeline. The more senior the person being replaced, the longer a transition process may take—whether the replacement is internal or an external hire. Moving an existing employee into the CFO role, for example, requires an adjustment period, as does teaching someone about her or his previous responsibilities. And despite the best efforts to fill a management role quickly, recruiting, interviewing and hiring a new employee can require anywhere from three weeks to six months, assuming viable candidates are available.
ACSA required a local and national search for candidates for its CFO position. To assure a seamless transition, we helped the CMO gauge what time would be necessary to conduct such a search, calculating the length of discrete process steps.
At ACSA, the organization’s CEO prepped the board on the process and the anticipated timeline, and kept the committee informed at every step, from determining needs and qualifications of candidates to recruiting and hiring. This sponsorship allowed for swifter decision-making and more confidence in making a hiring decision.
We also sought to determine what assistance would be needed in the interim. It’s important to examine what the organization’s goals are during such a transition period—including tasks that must be performed as a part of the academic year. An organization in a similar situation will want to consider whether initiatives such as a change in purchasing processes or budget reporting will be possible in light of diminished capacity, and what it will take to bring ongoing initiatives to completion.
Document Systems and Processes
It’s an unfortunate reality at many districts and CMOs (especially at smaller organizations) that the “How-To” manual for certain financial processes is often only in the head of one person—and that’s the person walking out the door.
To minimize the loss of historical knowledge in such cases—and mitigate financial and operating risk—organizations need to document policies, procedures, and their own organizational practices on an ongoing basis: the “Three Ps.” This also entails laying out a schedule of tasks and duties in the finance role, along with required external reports or submissions. The compliance and reporting work is constant and evolving so maintenance of clear processes and supporting calendars will help in the production of usable data. Organizations that lack competent and diligent staff to support key processes quickly find themselves creating workarounds and output data that doesn’t reflect best practices and strategy.
Implement Cross-Training for Key Personnel
At a larger organization, in the event that a CFO leaves, its controller and budget manager are essential to maintaining the most basic financial functions. Any one of these three key individuals could represent a critical loss of organizational knowledge. At smaller organizations, keeping the organization on a steady financial course might fall to a board member, to the finance committee, to outside consultants or part-time staff, or a combination of all these.
At ACSA, after the CFO’s departure, it was decided that finance staff would be cross-trained in the future on processes to avoid a loss of knowledge if certain personnel were to leave. Any organization can plan for this, by identifying resources to train and support personnel who may have added responsibilities while leadership positions are being filled. CMOs typically operate finance and accounting departments with minimal staff, so the importance of cross training can’t be overstated.
A Note of Caution: Expect Incremental Costs
In the period between when financial leadership departs and new personnel are brought on board, organizations should expect incremental expenses. Tangible costs may include those for employing consultants and temporary staff necessary to manage ongoing work and organizational efforts. Intangible costs include the costs of staff who may be working without direction, allowing critical reporting to lapse. Another intangible cost is that of the time that will be spent rebuilding relationships with the many stakeholders that exist in public education (board, funders, principals, community members, etc.).
A lack of management in the top financial role can also put the organization at risk for missing deadlines or losing momentum toward achieving its goals. Preemptive planning for revised reporting structures and immediate tasking can help mitigate a loss in productivity. ACSA, for example, decided to use consultants for specific projects, including their audit and budgeting process and to continue advancing key initiatives.
Like many other challenges faced by a CMO or district finance department, transitions in personnel and leadership can be better managed with careful foresight and planning. It may seem difficult to spend time in advance planning for such a change, but this time is well repaid with lower transition costs, faster decision-making, and less loss of organizational knowledge.
Executive and Board Involvement Is Critical
When a CFO leaves, an organization often is losing its only strategy-oriented finance resource. This points to the need for executive-level involvement—and that of the board finance committee. Expectations should be clear at the outset; communication between CEO, the remaining finance team, and the finance committee is vital. Key organizational goals need to remain at the forefront of those communications to align remaining capacity and/or temporary capacity to the goals while the transition is occurring.
Finance is a key pillar to a successful academic organization—and change in the finance function’s leadership can mean opportunity alongside the challenges. Our experience at ACSA, as at other organizations, teaches us that such transitions can be navigated successfully if certain key precepts are kept in mind.
Stuart Gay is a Director at Afton Partners, which supports America’s public education organizations by advising on and implementing financial strategies that sustain effective educational programs. Stuart is based in New Orleans.