The resignation of a FC or FD draws a lot of attention internally, and externally, and can be problematic for your business.
This is particularly the case for SMEs where the FC is an important part of the senior management team and advisor to the business owner and/or MD. The most damage is generally generated from gossip and conjecture. People will make assumptions about the reasons behind the resignation and these are usually sinister. People rarely assume the best! It’s not that they’re negative or nasty. It’s in our biology. The primary function of our brain is to ensure survival. Few nice things are going to kill you, so it looks out for the bad stuff. The imagined reasons behind the resignation will usually be that there is poor financial performance, disappointing earnings, or some accounting scandal.
There can be adverse effects on the existing finance team (some of whom may leave), other key management personnel, and external stakeholders such as banks, shareholders or investors, and key suppliers and customers. If you haven’t already got a succession plan in place with your incumbent FC, your first concern when receiving their resignation needs to be PR and communication. Don’t let them leave your office until you have agreed what, and how, you are going to communicate the message to your team and external stakeholders.
Why are they going?
You will need to explore the real reasons behind their departure before you proceed. This will help you to make any changes that may be necessary before going out to market for a new hire. In my experience, convincing the individual to stay generally results in merely delaying the inevitable. Industry research supports this, showing that 80% of candidates who accept a counter offer leave within 6 months, and 9 out 10 within the following twelve-month period. Once agreed, your communication needs to be immediate and clear.
Meeting with the whole finance team (even if that is just one or two people) and telling them that there may now be opportunities for one, or several of them, to progress within the department, will help to keep them on side. When any member of a team leaves it is a fantastic opportunity to see where talent from within can emerge. Giving an existing employee a new challenge and chance to progress is a great way to encourage loyalty and improve retention. This also helps to reduce hiring costs. It can often be more cost-effective to develop talent from within and back-fill the more junior position. You can ask for their input on how they might restructure the department and who will take on which responsibilities while a new team member is found. People just love their opinion and input being valued and excellent solutions often come from those at the coalface daily. This meeting should also reassure the team that there is nothing untoward going on.
Talk to your team
Communication is also key to reassuring other departments, the rest of your senior management team, and external parties such as suppliers and customers. If we assume that the parting of ways is amicable, it is useful to involve the outgoing FC in talking to these parties and helping with the transition. Being an integral facilitator in the transition and succession planning for a company helps to build the credibility and professional reputation of the individual leaving too. Ensure that the message is agreed, clear and consistent across all channels. Don’t flower things up. Keep it simple and not open to interpretation or ambiguity.
If there is some tension involved, it may be best for all parties to have garden leave and remove them from the business for the notice period.
It may be useful to involve your external accountants at an early stage so that they can advise, or even take up some of the slack in the interim. At the very least you, as the business owner or Managing Director, must familiarise yourself with the financial cycle to ensure that you know who is responsible for what. This is where your accounts team will be the ones that keep the show on the road while you seek to fill the gaps. Don’t forget to change passwords, security codes, bank mandates and cancel signatory authorities.
It is inevitable that businesses will lose some key personnel throughout their lifetime. With finance at the heart of all business operations, the loss of a Financial Controller has the potential to be extremely costly, and disruptive, and may also have a negative impact on the reputation of the business. Some of this can be avoided if you work with your current FC to plan for succession. This can be good for their own career and will future-proof your company to some extent.
If the worse happens
If that horse has already bolted and your FC has recently resigned then you need to concentrate on damage limitation, business as usual, taking the opportunity to realise improvements, and filling the skill gaps in the department. If you don’t have the time to handle all of this while running your business, a good PR consultant can help with the communication of the right messages, as can an HR professional who is experienced in managing change and employee engagement. We have some excellent contacts in both these fields of expertise and would be happy to recommend them.
We can also source interim and permanent talent to complete your finance team whether that be a new FC, FD or an Assistant Accountant, Management Accountant, or transactional role to back-fill when internal candidates have been promoted.
If you have any questions, need the contact details for a good PR or HR professional, or need to recruit, please call the Finance Team on 01902 717581 or email firstname.lastname@example.org.