Profiles in Contemporary Corporate Practices Talent Report-5...TOP TALENT DEVELOPMENT IN THE FINANCE FUNCTION Profiles in Contemporary Corporate Practices Prepared By Jonathan B. Schiff

TOP TALENT DEVELOPMENT IN THE FINANCE FUNCTIONProfiles in Contemporary Corporate Practices

Prepared By Jonathan B. Schiff for the

Finance Development & Training Institute

Distributed by CFO Research Services

CFOR E S E A R C H S E R V I C E S

MAY 2003 © 2003 SCHIFF CONSULTING GROUP

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TABLE OF CONTENTS

Acknowledgements and Dedication

Introduction—Why Study Finance Leadership Development?

Methodology

Executive Summary

Participating Company Profiles

Practice Descriptions (Companies A-K)

"Greenfield " Considerations: A Framework for Initiating Discussion on Systematic Development of Finance and Accounting Leaders

Appendix A: Characteristics of Primary Interviewees for this Report

Appendix B: Interview Guide

Appendix C: About the Research Report Author

This report is published by Schiff Consulting Group, 127 Route 59, Monsey,NY 10952. www.schiffconsulting.com

Distribution is courtesy of CFO Research Services, a unit of CFO PublishingCorporation, 253 Summer Street, Boston, MA 022210. www.cfo-research.com

May 2003

Copyright © Schiff Consulting Group, which is solely responsible for itscontent. All rights reserved. No part of this report may be reproduced orstored in a retrieval system or transmitted in any form or by any meanswithout permission

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ACKNOWLEDGEMENTS AND DEDICATION

I am grateful to all of the people who encouraged me and supported thisimportant research project. I offer my thanks to the former chairperson of theFinance Development & Training Institute (FDTI) consortium, Rich Delcore ofProcter & Gamble, for his leadership, initiative, and interest in the CFOLeadership Development Practices subject. I am also grateful to the currentFDTI chairperson, Alan Hencky of Intel, for his support of the project and his valuable comments on early drafts of the report.

I am also grateful to the non-FDTI member companies that participated inthis study and generously provided exhibit material to enhance the practicaluse of the report. These companies include: Cargill, Caterpillar, Conoco,DuPont, FleetBoston, Northrop Grumman, Nortel, and Sprint.

I also want to express my thanks to the Financial Executives-InternationalResearch Foundation and its staff, Marla Markowitz-Bace and Bill Sinnett, fortheir interest in and logistical support of the project, as well as to AllisonMurray and Dr. Bobbie Moore for their help in bringing this project to fruition. I am also grateful to both Lisa Nelson and John Fischer for formulating and executing the graphic design of this report.

On a personal note, I dedicate this work to my wife, Bryna.

Jonathan SchiffMay 15, 2003

INTRODUCTION

WHY STUDY FINANCE LEADERSHIP DEVELOPMENT?The consortium of large U.S.-based companies that comprise the FinanceDevelopment & Training Institute (FDTI) viewed the topic of talent developmentin the finance function as important for four main reasons:

1. Recently companies have realized that in order to achieve a higher level oforganizational productivity and effectiveness that results in competitiveadvantage, a consistent, coherent, and comprehensive approach to developingfuture leaders is required. Companies can no longer afford to apply a casualor ad-hoc approach to identification, screening, selection, and placement ofkey executives within the CFO function.

2. There is a sharper focus on succession planning within the corporate community. Some of this focus stems from public attention that has beendrawn to succession planning in the context of internal controls, corporatestewardship and governance perspectives. The question that is being asked is:Are we bringing the right number of people through the ranks with appropriatevalues, experiences and skills that are up to the complex and challengingtasks encompassed by the work of a contemporary CFO organization.

3. Although leadership development issues pertaining to executives withresponsibility for general business management have been thoroughlyresearched, there has been very limited research available on how companiesidentify, select, develop and retain top talent within the office of the CFO andthe overall finance function.

4. In a broader sense, the definition of management talent is under review atmany companies today. This is the result of the recent spate of high-profilebusiness failures and public concern over the integrity of business leaders.Indeed, respected academics from Columbia and Yale Universities haverecently challenged some of the assumptions and wisdom that, over the lastdecade, popularized the “talent mind-set” concept that came to dominateleadership development practice in many well-known organizations. Formore on this important and evolving debate, see the article, “The TalentMyth,” by Malcolm Gladwell in the July 22, 2002 issue of The New YorkerMagazine, pp. 28-33 or go to www.newyorker.com.


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METHODOLOGYThe methodology used consistently throughout this report involved a series ofinterviews grounded in a detailed interview guide that is included in the appendixsection of this report. The interviews were augmented by a series of “drill-down”face-to-face practice-sharing sessions that were held in Chicago and in Boston.

HOW WE GOT STARTEDThe FDTI consortium is an alliance of 11 global companies that was foundedby Schiff Consulting Group in 1994 with the assistance of ChryslerCorporation. The FDTI consortium currently includes the corporate membersdetailed in Exhibit 1 (see below). The consortium regularly conducts focusedresearch and benchmarking with its members and with others.

Exhibit 1: Finance Development & Training Institute Member Companies

■ American Express

■ Cisco Systems

■ DaimlerChrysler

■ Dow Chemical

■ Intel

■ Liberty Mutual Group

■ Merck & Co.

■ Microsoft

■ Procter & Gamble

■ Verizon

■ Williams

In the fall of 2001, four of the FDTI companies formed a sub-group and began to focus on the identification, selection, development and retention oftop managers within the CFO function. Following the development of aninterview guide, a benchmarking session was held on this topic.

Building on that valuable initial exchange of practices and issues, the sub-group sought to continue the research and asked Schiff Consulting Groupto draw several other companies into this research process. These additionalcompanies include: Cargill, Caterpillar, Conoco, DuPont, FleetBoston,Northrop Grumman, Nortel and Sprint.

TOP TALENT DEVELOPMENT IN THE FINANCE FUNCTION

© 2003 SCHIFF CONSULTING GROUP MAY 2003

EXECUTIVE SUMMARY1. The goals associated with CFO Leadership Development are very commonacross the industry for large global enterprises, however the approach toreaching those goals varies dramatically. Some of the variation is a functionof company culture, some is attributable to the level and quality of humanresource services available to the CFO community, and some is attributable toan evolving perceived importance of people management within the financeand accounting function.

2. Most of the companies participating in this study have moved finance leadership development to the front burner in reaction to chronic successionplanning issues, sudden departure of high-potential managers, and the lackof a documented process for identifying, selecting, developing, and retainingdesirable finance and accounting staff. This often results in costly “churn”and related disruption in key finance leadership positions. It is ironic thatonly a few of the companies participating in this study have a legacy of focusing on these issues in the context of building competitive advantage fortheir companies.

3. It is heartening that in many cases the people participating in this study areactually internal practice leaders, relative to other function managers, withintheir organizations. Although often not viewed as innovative, particularlywhen it comes to developing staff potential, in several instances the CFO community is the role model for change and the test bed for new humanresource practices within their respective organizations.

4. Company culture has significant impact on the nature of CFO LeadershipDevelopment practices. This influence is evident in several contexts:

■ The degree to which finance people are encouraged to share in out-of-function rotations

■ The role that finance plays as a feeder for general management positions,and

■ The significant rotations that are a virtual must-have “feathers in one’s hat” for anyone seeking top positions within the company.

5. Some of the most effective CFO Leadership Development practices includea clear distinction between development and performance managementobjectives. This distinction is most often enabled by a detailed competencymodel—a lexicon covering the gamut of relevant skills—including technical,leadership, and business acumen categories. The effective models providesufficient detail to support a variety of common decisions regarding selection,training needs, recruitment specifications, and succession planning across theentire finance function.

6. Finance leaders in some of the companies “talk the talk,” but fail to “walkthe walk” with respect to transparency of their CFO Leadership Developmentpractices. There is a perception in some organizations that this process is stilla “locker room” exercise, cloaked in mystery, intrigue and misinformation. Itreflects a politically infused environment where “who you know is moreimportant than what you know.”

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7. People responsible for finance leadership development have a varied back-ground; see Appendix A, “Characteristics of Primary Interviewees.” We didnot detect any significant correlation between background, reporting line,and effectiveness. The key values that seem to be common among the moresuccessful individuals are their passion for the task at hand and personalcommitment to sustained positive change. It is clear however, that a central,unified focus for CFO Leadership Development is key to successful outcomes. Ifresponsibilities for training, succession planning, recruitment, and developmentare not tied to a focused responsibility, authority and accountability center, positive results are difficult to expect.

8. For many organizations a structured focus on CFO Leadership Developmentis counter to the prevailing traditional culture in finance (and often across thecompany). Therefore, it is critical to appreciate the change management andinternal communication needs before one begins to make changes in the statusquo, independent of how inconsistent, ad-hoc, or reactive these practices mayhave been in the past.

9. In the contemporary business setting, there is a critical need to restore confidence and credibility in finance and accounting practices both internally and externally. It is even more important to systematically andtransparently identify, select, develop, and retain individuals with the requisite temperament, values, personality, skills, and experiences. These arethe people who can help companies reduce their risk profile, attract andretain the best talent, and improve decision quality with a view towardenhancing worth to their owners.



PARTICIPATING COMPANY PROFILESCompany Profile

A Company A is a leading manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines. The company is a technology leader in construction, transportation, mining, forestry, energy, logistics, electronics, financing and electric power generation.

B Company B is an international marketer, processor and distributor of agricultural, food, financial and industrial products and services.

C Company C supplies the computing and communications industries with products that are the building blocks of personal computers, servers, networking and communications products.

D Company D markets more than 250 products to more than five billion consumers in 130 countries.

E Company E is a fully integrated energy company. It is involved in every aspect of the oil and natural gas industry, including worldwide exploration, production, transportation, marketing, refining and power.

F Company F is a major US retailer focused on pharmacy, consumer products and general merchandise.

G Company G is a global chemical company, delivering solutions in markets such as food and nutrition, health care, apparel, home and construction, electronicsand transportation.

H Company H is a large financial holding company. They offer a comprehensive array of financial products and solutions to 20 million customers in more than 20 countries and territories.

I Company I is a global communications company serving 26 million business and residential customers in more than 70 countries.

J Company J is a global aerospace and defense company. It provides technologically advanced, innovative products, services and solutions in defense and commercial electronics, information technology, systems integration, and is the world's largest shipbuilder. Company J has operations in 44 states and 25 countries, and serves U.S. and international military, government and commercial customers.

K Company K delivers networking and communications services and infrastructure for customers in more than 150 countries, including established carriers, new network operators, leading wireless service providers and enterprises.

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COMPANY ASettingCompany A has recently appointed a new Corporate Controller. Since thisappointment there has been an increased focus on strategy-based peopledevelopment in the function. Like many other contemporary organizations,Company A’s finance function historically was consumed with detailedtransaction processing, but is transforming into a recognized center of excellenceand a sought-after business partner.

The accounting and finance community at this global manufacturer has atotal of 1,200 staff divided equally between locations within and outside theUS. This Company uses the title Business Manager to describe the financeleader who is an advisor to the operating vice president in each unit of theorganization. There are about 30 to 50 of these positions, equivalent in otherorganizations to a business unit, division or sector–level financial executive.Company A has also embraced Six Sigma as their primary process improvementand performance management tool. Six Sigma is used across the value chainat Company A, extending to all administrative functions including accounting.

Their new Framework, as depicted in Exhibit A-1, has been in place for justover a year. The response from the internal customer base for accounting andfinancial services has been strong with respect to achieving the “businessadvisor” role. Although accounting and financial services staff are pleasedwith the feedback, they also think that they have more value to deliver to thebusiness and that they can improve their internal processes from a Six Sigmaperspective.

The focus on top finance development stems from an emerging challenge tofill many top positions within their function because of the impending retire-ment of an entire “class” of leaders. An attractive early retirement packageturned out to be more popular than anticipated, exacerbating the leadershippipeline issue. This Company’s pipeline issue also extends to the “feeder”levels just below the top 50-position level. At this “feeder” level there is currently not a sufficient number of “promotable” individuals to fill positionsat the next level without potential risks associated with not fielding thosewith requisite experiences.


“We really want to be the‘go-to person’ to help ourleaders run their organizationfrom a business perspective.”

“Six Sigma is working well for us and even humanresources processes foraccountants at our companyare being looked at under the Six Sigma microscope.”


The company has made its first move to formalizing a systematic structuredapproach to top development, company-wide, by establishing a College of Leadership to address the needs of the top of the organization first. As abasis for the College, the Company developed a generic, cross-functionalleadership competency model and assessment tool. They also retain an outside advisor to supplement their internal interview process and 360º reviews for top development selection. The outside review focuses onidentification of skill and competency gaps in top development candidates.Like other functional areas, accounting participates in this corporate program.This corporate program supports both the selection and development of thefuture finance and accounting leadership pool, aimed at the top 5% of theCompany’s staff. The expectation is that in the near future this structuredapproach will cascade downward and also be customized and detailed toaccommodate specific functional characteristics and needs, including thoseunique to accounting and finance.

Recently, business management leadership has stepped forward and over athree-year period developed the College of Accounting. The College providesa framework to educate their associates, using online delivery, in a variety oftechnical skills, including product costing, internal controls, and businessmeasurement.

Company A has a group of top business managers who meet on a quarterlybasis to talk about the people in their accounting pool. One of the responsibilities they have on an annual basis is to provide a “promotability”or a “potential” indicator. The approach is systematic. Four different levels can be assigned to an employee based on their long term potential.With respect to mentoring of high-potentials, there is no formal program;

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Exhibit A-1

“In the past, the importantthing for accounting andfinance was to close the booksand make a profit for theCompany. If there was timeleft to develop people afterthat, great!”

“When things go well in thispractice space it is becausetop leadership decided thatthey need to continually andproactively prepare leadersfor the positions that theycurrently hold…It has tobecome apparent to the lead-ership that this will not hap-pen as a result of the “luck ofthe draw.”


Corporate accounting services strategy framework

VisionTo be the recognized center of excellence and sought after business partner

MissionProvide valued accounting, related shared services and decision support to help the company achieve its

goals utilizing our core expertise

Values•Trust/Integrity•Sense of urgency•Teamwork•Respect•Accountability•Stretch improvement

We believe people should be able to work in a continuouslearning environment where all are shown respect, given

responsibility, demonstrate integrity, and are provided theopportunity to perform meaningful, enriching work with the

support and encouragement of others

People

We believe people should be able to work in a continuouslearning environment where all are shown respect, given

responsibility, demonstrate integrity, and are provided theopportunity to perform meaningful, enriching work with the

support and encouragement of others

People

We provide insightful analysis and proactively lead peopleto solutions. We are not afraid to highlight difficult issues

and ask tough questions

Enterprise Value

We provide insightful analysis and proactively lead peopleto solutions. We are not afraid to highlight difficult issues

and ask tough questions

Enterprise Value

We are recognized for providing significantly value-addedor the lowest cost services, in support of the enterprise

strategy

Customer

We are recognized for providing significantly value-addedor the lowest cost services, in support of the enterprise

strategy

Customer

We use 6 Sigma to ensure our internal processes andenterprise processes that we manage are robust, efficient,

and are improved continuously

Business Process

We use 6 Sigma to ensure our internal processes andenterprise processes that we manage are robust, efficient,

and are improved continuously

Business Process

Critical Success Factors

• We must increase the value of CAS to the enterprisethrough cost effective delivery of quality services.

• We must be proactive in providing insightful analysisand guidance on financial issues, including top tiermetrics

• We must actively communicate key issues to all whoneed to know in a timely manner

• We must proactively provide a continual learningenvironment and prepare our organization for change

• We must continue to attract and retain top talent forCAS and facilitate the recruitment and placement oftalent worldwide

• We must develop common methodologies &processes that are consistently applied within CASand across the enterprise

• We must implement and leverage appropriatesupporting technology

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assignments depend on whether the mentor has innate skill for mentoringand/or has some high-potential people as direct reports who request beingmentored.

There are three perspectives considered whenever there’s a job movement orplacement—the individual, the business unit, and the enterprise must all beconsidered.

Company A has always moved people about in the accounting function in aplanned and systematic manner, although there is understandable resistanceto this practice in some divisions.

At Company A, “potential” is dependent on whether an employee may be department head someday and would generally report to the facility manager of divisional vice-president. In this context, an employee may needdevelopment to achieve these levels, but otherwise, a person may be well-suited to the current job and might not be moved around. (They become thetechnical experts by default.) Annual performance evaluation is done on anumeric scale, and only bears reference to the current job. This practice hasrecently been implemented at Company A, and there is no automated way togather the information yet. Company A’s ERP information system will easethe administrative burden of this practice. Looking at a potential candidate,selectors asked “what were they rated this year?” It wasn’t promotability thatwas the issue--it was their performance.

Performance ratings are based on objectives and behavior. Objectives aretasks associated with performing the job that year or on a continuous basis.Behavioral criteria are based on how you do the job rather than what you doon the job. In the Corporate Controller’s Division there is a performance levelevaluation criterion that helps employees understand how the performance(objectives) and behavioral criteria will be evaluated. It is a one page matrixthat provides a way to determine whether your performance is in the “valuedperformance” category, which is the backbone of Company A, or whethersome goals are being exceeded or not accomplished. Performance may becompared to that of peers. On the behavior side, Company A has 16 or 17 job related characteristics, similar to skills. For example: analytical skills, communication skills, and accountability skills.

“Some of our folks that arestill not on board say: I’m notgoing to let my best people gountil you can provide me withsomebody who is a highpotential employee.”

“I recently expressed my concerns about the stream of future accountants for my organization to the chairperson of the local university accounting department. He told me that this past semester, 23 business school studentsmet with him to change their major to Accounting!”


COMPANY BSettingAbout three years ago, the leadership of this diverse global organization that the talent and leadership pipeline within the CFO function was “drying

up.” This became even more important when the company’s leadership, as a whole, began to focus strategically on the “top talent” issue and its relationship to producing and sustaining a competitive edge in support oftheir businesses.

Often organizational leaders begin to focus on succession planning issues as a direct result of experiencing negative effects of inattention to peopledevelopment matters.

For example:

1. When high performers leave the company precipitously.

2. When individuals with a limited skills portfolio, often with a strong technical focus, find themselves promoted to leadership positions for whichthey are unsuited, and performance issues surface.

Before focusing on CFO top leadership development, Company B first set outto better understand its own culture and climate and conducted detailed cultural assessments. One of the significant findings deriving from thisassessment was “the amount of discontent and cynicism towards senior management present in the finance job families.” This finding significantlyaffected the CFO top development plan and practices.

Identification & SelectionBased upon a multidimensional assessment developed by the finance leadership, the company identified the 50 top finance managers, within theirpool of 450, and 8-12 of these were identified as the next generation financeleadership group.

Company B-Talent Development Definitions:Next Generation Leader: Demonstrates the potential and performance track record to lead asubstantial and complex business unit or function, within the next three to five years.

High Impact Performer: Individuals who may meet the description of the next generationleader, but are more likely to move into that group in five or more years. The HIP categorymight also include individuals with critical subject matter expertise who would be difficultto replace.

A new element in Company B’s development process is the FinanceLeadership Forum, a rigorous 3-year program that focuses on identification ofcompetency in future finance leaders. A key take-away from this programis that a surprising number of people who were initially identified as futureleaders are not viewed as “inspirational” or “visionaries,” in spite of possess-ing high-levels of “technical ability,” “integrity,” and being “results oriented.”This finding reinforced the results of the initial climate/culture survey.

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“The top seven guys (in theCompany) realized that theyhad an Achilles Heel withrespect to our top talentpipeline.”


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Incentive plans are designed to reward key contributors to results. For financeprofessionals, this occurs when an individual holds a position that has threeelements: impact, complexity, and freedom to act. This tends to occur withsomeone who has been in the workforce for at least 6 years.

One drawback of this approach is that individuals who develop strong leadership characteristics and potential earlier in their career may slip throughthe cracks and may leave the company, sensing an unstated, but virtual, agerequirement for key leadership positions.

Open Issues■ One current challenge is that some of the highest potential individuals within

the top development pool at this company are in far flung locations aroundthe globe. This results in a challenge to ensure both development consistencyand adequate attention from corporate headquarters.

■ The balance between financial or accounting technical knowledge and leadership attributes is also coming into play. There is a need to detail allof these competencies with a view toward an improved leader identification process.

Company B’s Identification & Assessment Guidelines


Exhibit B-1

Learning Capacity• Curious passion to learn

more than taught• Adaptable, nimble• Broad perspective• Conceptual strength

Knowledge• Deep & practical business

acumen• Macro economics &

political trends• Marketing• Finance• Risk management• Technology• Supply chain management• Change Leadership

Execution Capacity• Keen sense of priorities• Relentless determination &

courage to make thingshappen

• Manage/coach for highperformance

• Energy/passion forexcellence

• Optimistic• Compelling/authentic

communicator• Resilient

Behaviors• Discuss, decide, support• Respect, candor,

commitment• Customer knowledge &

insights• Pursue & reinforce

collaboration• Ensure & accept

accountability• Challenge, innovate, change

PassionCourageIntegrity


COMPANY CSettingCompany C is a global leader in the manufacture of components intrinsic tocomputer and communication products. The Company’s Finance function ispresently a well-developed business partner, as indicated by other Companyorganizations’ tapping Finance for senior roles in their functions. In addition, theCompany enjoys a reputation of both fiscal conservatism and high integrity.These two indicators taken together suggest that the Finance function balancestechnical expertise with business influence competencies.

Nevertheless, an increasing proportion of the Company’s revenue is derivedfrom operations outside of the continental US, a trend that is highlighting theneed for Finance leaders with “depth and breadth” operating around theworld. Company C’s top development practices, therefore, reflect its concernwith ensuring that there is an adequate pipeline of Finance leaders to addressfuture needs. The primary emerging issue, therefore, is accelerating thedevelopment of potential senior finance leaders.

The Company’s vision for Finance is to be a “full partner in business decisionsto maximize shareholder value.” Developing “effective leaders and partnersthrough career opportunities that foster improved performance and professional growth” is a key element of the Company’s Finance Charter,which supports the Finance vision. The Charter is included as Exhibit C-1.

Competency model:The vision for Finance is also reflected in a well developed set of Finance leadership competencies, which are part of a competency model for Finance.

The Company’s leadership competencies for Finance include:

■ Create a shared vision of success

■ Organization development

■ Foster innovation

■ Leadership excellence

Each of these competencies is defined with four levels of behaviors thatdescribe a performance gradient from Basic to Advanced.

As a supplemental tool, the Company employs an externally provided toolevery 12 to 18 months to provide feedback to individual leaders about theirleadership behaviors from subordinates, peers, and the individual’s directmanager.

Identification and SelectionCompany C has taken pride in its “free-market” approach to internal jobapplication, and open access to development opportunities, regardless of position or level in the organization. Part of the free-market approach consists of open job posting for positions up through CFO staff—1 levels.Decisions on filling CFO staff level positions are made by the CFO in consultation with existing staff members.

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“While it is not expected that asenior leader will be performingat the Advanced level in everycompetency, the model providesa common language for a leaderto discuss his or her performancewith their manager, and links toresources that can aid in developing areas for improvement.”


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Performance reviews are conducted annually, and yield quartile rankings of employee contribution to the Company for the year. Leadership and promotion opportunities are not restricted to those in the highest quartilesbut consistent performance at that level is a key consideration for hiring

managers in filling open positions.

Extent of participation in stock options is a further indication of employeepotential at Company C. As part of the annual performance review process,an assessment of the employee’s long-term potential for contribution to theCompany is made by the employee’s immediate manager. The company targets approximately 25% of employees to receive share levels that are roughly twice the base level that are awarded to other recipients. Themanager’s assessment, while subjective, must be defensible among peers and the company’s 25% target provides suitable performance tension to the discussions.

RetentionTrends and practices already mentioned have helped Company C to positivelyaddress retention challenges. There has been ample opportunity to contributeto the Company’s growth; in combination with variable incentive compensation,including the emphasis on stock options for high-potential employees, opportunity has kept top talent in the pipeline. In addition, the CFO has beenpersonally involved in coaching senior leaders, which has engendered loyalty to the CFO. Retention of CFO staff has received the highest attentionfrom Human Resources staff, with corrective actions prescribed and takenwhen negative trends are identified.

DevelopmentHistorically, there has been strong commitment from the top downward fordevelopment of managers and leaders at Company C. In recent years, gap filling efforts have focused investment on entry- and middle-level managementdevelopment programs. There is now increasing emphasis on training anddevelopment for the top level.

As part of the performance review process, development needs for eachemployee are systematically identified. Employees are expected to work withtheir manager to create an action plan that addresses development needs; itcan include assignments, coaching, training classes, and other developmentalexperiences jointly regarded as appropriate by the manager and the employee.

Development opportunities go beyond new positions, and have includedcoaching and mentoring for those considered top talent. More recently thesenior finance leadership team is looking at the skill of “coaching others forleadership”, going beyond basic coaching skills, and a pilot group of seniorleaders has received training on the concepts. Additionally, certain executive-level leadership training opportunities, including discussion forums andaction learning, have been made available to levels just below the executivelevel, and across the company.

Mentoring is a well-established part of the Finance culture at Company C. Assuch, it is an accepted responsibility of leaders in the function to mentor those



coming up in the ranks, often from the time a new employee arrives at the Company.

Finally, Finance staff know that they are expected to take on projects or taskforces that contribute to the health of the greater Finance organization,beyond the scope of one’s own position. The expectation is not limited to thetop of the Finance hierarchy; it extends to an expectation that Companyfinance leaders model Company values. For instance, leaders are expected totake an active role in teaching culture classes and the leadership developmentcurriculum. Other opportunities consist of holding forums, sponsoring“brown-bag” lunch topics, holding operations reviews, and conductingcyber-chats.

Open IssuesGiven the pressing need to keep the worldwide development pipeline well-supplied with potential executives, several dilemmas may present themselves.

It is anticipated that there may be some tension between the existing “free-market” philosophy of staff development and a possible need to focusmore on a “high potential” approach. Likewise, tension may be observedbetween the desirability of placing senior expatriate Finance professionals innon-US locations and the desire to develop local talent to fill those positions.In addition, the post-Enron regulatory environment puts added tension onthe balancing of Finance technical and compliance efforts with Company C’sFinance Vision to be a “full partner in business decisions.”

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Exhibit C-1

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Finance CharterFinance Charter

• Maximize profits by providing effective analysis, influence,leadership and control as business partners.

• Keep the Company legal world-wide while maintaining highstandards of professionalism and integrity.

• Protect shareholder interests by safeguarding the assets of theCorporation.

• Deliver world-class services and productivity.

• Develop effective leaders and partners through careeropportunities that foster improved performance and professionalgrowth.

Demonstrate the capability, mentality and leadership to beeffective partners, managers, and contributors..

It is all in the Charter.


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COMPANY DSettingThis global consumer product giant has a legacy of rigorous selection anddevelopment of future finance leaders. The Company has well developedgeneral leadership development practices, as well as those specific andunique to the finance and accounting function. The finance function is aninternal practice leader with respect to people development practices.

Selections for top development are reviewed annually with the CEO and his leadership team, with each of the 12 business units. These reviews are conducted quarterly, three business units at a time. The primary result derivingfrom this selection and review process is identification of the subsequent oneor two assignments associated with this high-potential pool. There is currentlyno specialized corporate training, recognition or public identification of theseindividuals.

Selection & DevelopmentFrom a corporate perspective the Company identifies the top 250 people (of atotal of about 105,000 employees) from all functions. It is interesting to notethat although finance and accounting represent only 5% of the headcount,they are disproportionately selected (15%) for the top development pool, representing about 8% of the eligible population (associate director and above).

In this context, the finance and accounting organization identifies its 60 topdevelopment candidates, with a view toward placement in one of the dozen orso top positions within the subsequent 5-10 years. This Company’s top devel-opment group includes the direct reports of the CFO, but also includes key linebusiness CFOs. These 60 represent about 15% of the eligible managementgroup (associate director and up) and make up about 1% of the entire financeand accounting staff. These candidates are handpicked by the finance leader,in this case, vice presidents, of the business unit and are surfaced initially toidentify any “vetoes” from other vice presidents familiar with the candidate.The selection criteria mirror those of corporate selection criteria highlighted inthe sidebar above. The selections are reviewed annually with the CFO leader-ship team. Individuals can “roll” on or off in any given year. The individualsselected for top development within the finance and accounting function…

■ Know that they have been identified and selected,

■ Receive regular exposure to top management,

■ Are “first-up” for the most challenging, broadening, and high risk/highprofile assignments and projects,

■ Are provided with specialized training, and

■ Receive aggressive salary management and option awards.

DevelopmentCertain rotations and job assignments have been identified by Company D as critical for top development. They include leadership positions in: investor relations, international finance leadership-country specific, global shared servicesand key product line CFO. This select group is also assigned special sponsors and mentors, as well as outside coaches to aggressively address specific deficiencies.


“The candidates for top development in our Company are selected based on performance, potential, experience and skills, in that order.”


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An outside resource provides a detailed multifaceted assessment, addressingpersonality, behavior, and leadership dimensions, based upon a series of simulations. This exercise has been very well received by the target group.The individualized reports deriving from this assessment have provedinstrumental in systematically structuring tailored individual developmentprograms for the top development group. The program has also providednew, valuable insights regarding the candidates that had not surfaced viainternal processes. The outside supplier of this program uses a research-basedapproach to identify 6 dimensions in describing the contemporary ”crisis” insuccession planning as shown below:

■ Attrition-Most companies will lose one-third of their executive staff in the next five years.

■ Turnover-58% of top talent change jobs in less than five years.

■ Cost-On average it costs about $1 million to replace an executive in the first year.

■ Lack of Skills-Weakness in key leadership skills: including innovation and change.

■ Shareholder Expectations-Corporate boards expect a systematic, visible leadership development process.

■ Readiness-Less than one-third of companies are confident that they are fully prepared.

This Company’s development and training approach for future finance andaccounting leaders begins at the early career stage. Every finance andaccounting staff person entering the company is part of their Finance &Accounting Development Program. The program is run primarily within thebusiness units. As they progress, strong technical performance is rewardedthrough recognition in the CFO Circle. A select group, representing about 10%of top performers from the early-career program, is selected for theAccelerated Development Program (ADP). This group usually possesses 2-6years experience with the Company. Acceptance into the ADP is based uponthe employee’s results, skills, business experience and potential for growth.

The ADP includes 80-90 new entrants per year. The ADP is the pathway for the first appointed position, Associate Director. The ADP is a carefullymonitored “up or out” high potential program. Less than half will make it tothe Associate Director level. The ADP’s objective is to develop future businessand organizational leaders for finance and accounting and to build broadeningskills and experiences such as multiple geographic and multiple businessexposures. The ADP provides a series of rotations averaging 15-24 months inlength. However, these assignments are almost exclusively within theaccounting and finance community. The ADP has won high marks for itsselection consistency and transparency, valuing top performers, forcing business unit leaders to share (and develop) talent, distinct recruiting advantage-- specifically for MBAs—and taking the mystery out of careerpathing. The program has provided for a unified global approach to early-career development. One of the key enablers of the program’s success isan internally developed detailed finance and accounting skills dictionary,together with a computerized program for its use, that has provided for a consistent language and measurement platform supporting a variety of critical leadership development decisions and training priorities.

“To be selected for the ADP,they must demonstrate proficiency in both analyticand people development skill blocks and must meetminimum requirements in the other skill areas. Theymust also show measurablecontribution to businessresults and be “top” rated in aforced ranked rating process.Finally, they must have seniormanagement potential.”



It should also be noted that from a development perspective, one of theCompany’s “must haves” is individual exposure to business experiences out-side the US. Although this experience is an emerging requirement at some ofthe companies included in this study, Company D is the most exacting inrequiring multiple differentiated global experiences from its CFO top devel-opment pool.


COMPANY ESettingThis finance function has a history of leading the way with staff developmentinitiatives that have been emulated by other functional areas across CompanyE. The primary finance leadership theme has been pursuit of transformationfrom a primarily transaction processing role to a business partnering role overthe last ten years. They believe that consistency of message is critical to thefocus of their transformation process.

Because this company was “spun-off” several years ago, the finance functionhas become more externally focused. Also because of this change, certain keypositions and related skills sets needed a quick fix, including treasury, tax,internal auditing, external financial reporting and compliance, as well asinvestor relations. With respect to bench strength, these practice areas continue to challenge the Company.

The current finance leadership pipeline at Company E is strong with respectto technical skills and stewardship skills, but lack current depth in what theycall “dynamic leadership.” However, they are encouraged by the fact thatincreasing numbers of high-potential finance staff are being selected to participate in Company E’s exclusive enterprise executive development program run by MIT’s Sloan School of Management.

Selection & DevelopmentHigh-quality “raw material” is critical in fueling the top talent pipeline.Company E attributes its success in competing for incoming talent to its 12-week program for new recruits. This rigorous program is pass/fail for participants and exposes recruits to the Company’s finance and accountingpractice, as well as to its core business operations on a first-hand, experientialbasis. Other company functions have adopted finance’s lead.

The company has a challenge in leadership development because traditionally,once an individual joins a function, be it engineering or finance, the employeealmost always stays in that function for their entire career. The current feelingis that this mode does not help in building the kind of leadership team needed,either functionally or for the company as a whole. Well-planned, structured,and systematic cross-functional movement will be critical to meeting theCompany’s leadership needs for the future.

High-potential finance managers are identified on the basis of their ability tomake a series of upward promotions within the shortest time span—forexample, how many upward moves can this person make within the next tenyears? Conclusions about high-potential status are based on evaluation ofperformance in jobs that average about two years in length. Annually,Company E evaluates all those in the high-potential pool to see whether theyshould remain in the pool. Members of this elite group are regarded as “corporate promotables”.

21

“Our CFO wants the futurefinance leaders to:

■ have exposure to many facets and locations of the company’s business

■ be externally focused

■ be technically strong

■ be strategic and visionary

■ be knowledgeable about ourbusiness inside and out

■ bring diversity of thought within our team.”

“Functions in our company areoften like the ‘Roach Motel’They check-in but they don’tcheck-out.”



There are several dimensions to Company E’s development practice for “corporate promotables” including:

■ Annual development discussions and objectives

■ Regular exposure to high-level executives

■ Exciting and challenging “stretch” rotations

■ Invitations to participate in “internal university” programs

■ Rotation in a foreign subsidiary

Bench strength testing within the context of the 1,400-member finance andaccounting team is a front-burner practice at Company E. Of this population,less than 10% are included in the top development pool. Their success in thispractice space is attributable to a combination of online information and toolscombined with a significant commitment to on-going dialog and humantouch. Their assessment process for future finance leaders is called theirTargeted Development Program. This assessment covers technical and leadership skills, as well as personality traits and values. One of the mostinteresting aspects of this Company’s practice is that they bring in an externalresource, the executive search firm Russell Reynolds, to evaluate their CFOTop Development candidates. The outside firm has been very helpful to Company E in identifying new risks and issues with respect to several candidates that did not surface via the internal process alone. It also enhancesthe objectivity of the process.

Perspective on Future DirectionCompany E will need to focus on several actionable items in the future tokeep moving ahead. Finance leadership is planning to broaden cross-functional development opportunities, as well as provide opportunities forincreased external exposure for finance people. They also want to gain insightinto the attributes that should characterize the next Corporate Controller,Treasurer, Tax Director, or Director of Internal Audit. Finance Leadership alsointends to make better use of rewards and recognition as a component of theirfinance leadership development program.

“One of the best things tokeep anybody interested inworking in a company is toprovide them with an interesting “stretch” job.”


COMPANY F SettingThe finance and accounting organization of this large national retail chainincludes about 400 staff, mostly located at the headquarters. Total employeeheadcount exceeds 50,000 and they operate thousands of stores nationally.They are the largest retailer in their category. Historically, the developmentculture has been focused almost exclusively on future store sales and serviceleaders. The interview guide associated with the research project (a copy isfound in the report Appendix) created an opportunity to discuss the futurevision of finance with the CFO. The CFO expressed a vision of a financeorganization that would be “more of a strategic partner providing analysis tosupport key business objectives, specifically when it comes to mergers andacquisitions, partnerships, and benchmarking, and to be more involved inmajor decisions and have more of an outside, financial analysts’ perspectiveon the company.” For example: The CFO would like to see the finance teamhelp address and solve typical problems like inventory ‘shrinkage’ at thestore-level linking financial and business issues, managing M&A activity, andimproving investor perceptions. Such functions would of course be added tothe traditional roles of stewardship, transaction processing and financialreporting.

Selection & DevelopmentToday, Company F is a long way from achieving the CFO’s stated vision forfinance, both in terms of skills and culture. They have initiated the process oftransformation by re-organizing the finance function with a new segment calledthe strategic analysis group. The new group consolidates analysis capabilityacross the finance function. However, Company F’s business is very transaction-intense by nature. Today, the Company’s finance function spends about 60%of their time in transaction-processing; 30% in compliance activities; and theremaining 10% in business decision support services.

The company’s Finance HR practices have been informal in recent years, and a morale opportunity has been identified by making plans more formal,specific and internally “public”.

To address these issues, Company F has started a process of competency identification to support career pathing and begin a formal, structured succession planning process.

The Company has also initiated the use of a performance and potential meas-urement convention. It is used both to validate performance recommendationsand to surface candidates for promotion and special assignments.

Currently Company F has conducted a formal approach of identifying anddeveloping top talent within the CFO function. However investor relationsand other select finance positions are used as “job share” opportunities forbrief rotations that have been well received. This practice has helped toaddress some of the company’s retention issues below the Director level;these issues arise because of the extended tenure of individuals in seniorfinance and accounting positions.

23

“Within three years, we expectour business decision supportactivities to grow to 30% ofour resources, in contrast toonly about 10% today.”

“The exit interviewing processprovided us with very strongfeedback with respect to howimportant lucid career pathingtools are to the most desirablestaff people.”

“It is interesting here, we havea lot of senior people whohave been here for a long timewith a lot of loyalty andlength of service, but in somecases you see some ‘blocking’of development and somehave been in the same positionfor too long-Our communitycurrently does not value lateral moves that would provide breadth of knowledgeand increased exposure.This, with a view towardbroadening their skill set inpreparation for promotion.”


Company F

Organizational and Management Review Performance and Potential Assesment Matrix

Organization:

Date:

Development Strong OutstandingRequired Performer Performer

High

Potential

Solid

Potential

Remains at Current Level

Performance and Potential Assessment Matrix

Definitions

Potential

High Potential: Possesses high growth potential; capable of moving up two or more levels OR into senior management ranks OR moving further within the senior level ranks

Solid Potential: Has the potential to assume larger responsibilities beyond current position or move laterally to increase breadth of contribution; capable of moving up at least one level

Remain at Current Level: Has limited potential for upward mobility; may continue to provide valuable contributions at current level

PerformanceOutstanding Performer: Frequently and consistently performs well above expectations

Strong Performer: Consistently displays solid performance; occasionally performs bove expectations

Development Required: Requires development in one or more areas in order to consistently perform at or above expectations (This may include a high potential person who is new to their position or someonewho exceeds in certain areas but performance development in other areas is needed to be considered a Strong Performer)


Exhibit F-1


COMPANY GSettingAt Company G there has been a focus on a new vision for finance over the lastfive years. The challenge in maintaining this vision is the impact of changesin strategy and structure that are significant enough to render a fixed or static vision ineffective. The Company has recently concluded that althoughwhat finance will do in the future is about 75% of what they are doing today,25% of their work will change, often radically, in an accelerated fashion. As aresult, finance leadership has maintained that there should be a unifiedfocused people-development strategy and practice across their diverse business units globally. Historically, the Company’s approach has been apreference for “make” vs. “buy” in leadership development. There is also astrong consistent culture of integrity.

Identification & SelectionWhen there is a business unit CFO opening, the business has 49% of the voteon selection and the finance leadership has 51%. Due to the rapid evolutionof Company G’s business, the rest of the identification and selection processis imbedded in the following section.

DevelopmentFinance participates in the company-wide top management developmentprogram that is focused on the top 8 or 9 people who have been selected andare in line for top slots within the CFO organization. However, the Companycame to the realization several years ago that although they had effectivelydeveloped future leaders with a variety of useful skills, they were chronicallylacking in the levels of technical acumen required for advancement. As aresult, about three years ago, the Company launched the corporate FinanceUniversity. The University currently contains seven distinct Colleges including:

■ Accounting

■ Business Analysis

■ Credit

■ Internal Audit

■ Mergers & Acquisitions

■ Tax

■ Treasury

In the first three years 12,000 people have been through the University. Itshould be noted that about 25% of those are non-finance and accounting staffseeking development in accounting and finance skills. A new program, theeighth College, is being created to focus specifically on CFO development.The CFO of the Company is the “Dean” of this new program. The colleges areconsistently competency-based using a detailed model. A robust CFODevelopment College will help support the identification, selection anddevelopment process.

Company G has promulgated a quality standard for the Finance University.A description of their Finance University Quality Standard follows:

25

“With respect to finance’s rolein integrity, let’s make surethat we are as pure as Caesar’sWife in all respects.”

“Finance is the strongest competency across the company in terms of developing its people.”

“Our Company’s FinanceUniversity consists of a number of Colleges that provide financial competencytraining and development toall employees to enable eachof them to perform and understand their roles andresponsibilities better. Theresult of this is proven to be of compelling value to ourCompany.”


26

Company G’s Finance University Quality StandardOur Quality Standards cover All Areas of Operation: Course Design, Development, Delivery,Administration, Enrollment, Career Pathing Tool, and Continuing Professional EducationMeasurement & Reporting

University courseware is delivered using traditional, online, and blended systems around the world.

The company-wide Targeted Development Program (TDP) complements theFinance University. Unlike the technical focus of the Finance University, theTDP is focused on developing leaders based upon the Company’s detailedleadership model.

The Company uses a process with very clearly defined criteria for the selectionof employees to participate in future leader development opportunities.Aside from specialized areas like tax, the approach to development is stillgeneralist-oriented; future finance leaders need to experience a variety offinance and accounting jobs across the CFO function to be considered for top development. Although international experience is not formally required, many of the high potential managers rise to the top of the list because they possess that experience and have also managed departments with large headcount. Another important criterion for selectionrelates to the significant commitment—referred to as “energy”—required forthe top development track.

There are four levels in their “promotability" ranking:

■ Ready for senior or executive vice president

■ Ready for vice president level

■ Ready for director level

■ Ready for senior manager rank

Company G uses an equation to measure the effectiveness of their successionplanning process. They like to see 1.5-2.0 times the number of “promotables” foreach position. This results in creating a very strong “bench.” This quantitativeapproach derives from the Company’s engineering culture and legacy.

This company values rotational assignments outside the finance function forfuture leaders, most often occurring early in staff careers. At Company G, itbecomes more difficult to build such out-of-function rotation later in one’scareer. An emerging consideration that has bearing on selection is the degreeof involvement in the Finance University. This involvement is perceived to bea very important demonstration of an individual’s commitment to both technical competency and people growth.

One of the key rotations used to develop high-potentials at this Company is arotation in their mergers and acquisitions unit. This rotation is considered highlyvaluable because it requires both technical acumen--in tax, treasury, financialaccounting and reporting, and information systems--and expertise in strategicplanning, team building, and communication. An M & A rotation can be a veryrich experience, often featuring a global context and significant time pressure.



27

RetentionThis company has found that their commitment to job rotations is the bestdefense against sudden departure of future finance leaders. Both exposure to company officers and the “psychic reward” of being invited to assist the Finance University cultivate competencies that can act to mitigate theretention issue.

Open Issues■ As the company continues to evolve as an entity there will be ongoing pres-sure to maintain and grow a common finance culture across the company.

■ As the quality of the finance staff has strengthened, more of the best arebeing invited to join other functions. This effect was anticipated, but not tothe degree currently experienced.



COMPANY HSettingThe CFO’s stated vision for this large, diversified financial services companyis to become a world class customer service organization, coupled with acommitment to integrity and professionalism. Interestingly, the Companyrecently circulated and socialized the FEI’s Code of Ethics throughout theirfinance organization.

The current finance leadership pipeline is regarded as being in very good condition. Because of the very dynamic nature of the Company’s business,employees’ skills have consistently been enhanced through exposure to avariety of positions, responsibilities, and challenges. In addition, theCompany has embraced an organic growth strategy, resulting in increasedpressure to leverage internal resources to achieve goals.

Selection and DevelopmentCompany H’s finance function leverages several corporate programs for leadership development, one of them is their Organizational ManagementReview (OMR). The OMR and its major process steps are described in ExhibitH-1 and H-2.

Rankings are made up of two components, performance and potential. Thosepossessing the highest levels of both components surface for increased attention and development. Forced ranking is employed in the context of theOMR process. The OMR process cascades down through the organization andhas been fully embraced by the company.

The OMR process is coupled with another process that they call StrategicStaffing. This Strategic Staffing process takes those identified as the highestpotential and the highest performers within the organization and matchesthem with assignments and opportunities that will provide them with thetype of experience and skills that they need to move forward. The StrategicStaffing process has been very successful within the finance function, but hasmet more limited success in moving people out of finance and into other functions for rotation. The focus of the Strategic Staffing process is about 10%of the total 1,200 headcount in finance in this Company.

The top performers across the Company are invited to participate in theCompany’s “Senior Leadership Forum.” This rigorous program focuses on strategic issues, and was designed using an action-learning model. The individuals in the Senior Leadership Forum are not graded or ranked but it isviewed as a key experience for high-potential/high-performers in CompanyH. An overview of the program is described on the following in Exhibit H-3.

In this company, retention has surfaced as an issue recently. The companyaddresses retention in several ways. Some efforts focus on compensation, butleadership also thinks that they’ve mitigated retention issues because of theircommitment to work/life integration, and their well-publicized commitmentto diversity. They also feel that their development programming and stretchrotation are attractive propositions and act to retain the highest potential staff.


Recently, the Company has gone further in its development process in thefinance organization. Finance leaders have been asked to identify their top 10direct reports by considering the top 10 people that “you cannot live without.” This process should identify not necessarily the most senior people,but those most critical in taking the business forward and making sure thatthere is a retention strategy at the individual level for key people.

Company H

What is OMR?The Organization and Management Review (OMR) is a process to ensure Management leverages the talent potential in place to meet current and future business objectives; tofacilitate cross-organizational, forward staff planning; and to maximize the effectiveness ofemployees. Specifically OMR is a process to create retention, succession and developmentplans for high potential individuals.

OMR Phases

Phases 1 – PreparationThe direct manager prepares by assessing his/her direct reports so that they may bethoughtfully discussed during this OMR meeting.

Phase 2 – OMR Meeting:Business Partners from HR and Learning & Development facilitate a discussion with managersaround a business unit’s talent with regard to:

■ Business challenges and opportunities (12-18 months);

■ Current/anticipated openings;

■ Capabilities of individuals and the team;

■ Development and performance management action plans, and

■ Succession planning.

Senior Leadership ForumBusiness managers and senior level managers who have responsibility for shaping strategyand business results for business units, departments, or regions.

Program Outcomes:■ Achieving new corporate strategies using current business scenarios;

■ Leadership implications for these businesses;

■ Challenges and barriers to leadership;

■ Personal responsibility as a leader, and

■ Modeling “one step ahead” leadership.

Provides self-discovery through experiential learning, links leadership themes across management, and aligns leadership to corporate priorities and actions.

29

Exhibit H-1

Exhibit H-2

Exhibit H-3


30

COMPANY ISetting:A new Chief Financial Officer has been in place for almost a year. His focus is transitioning the Company’s finance function to be more of a business partner and play more of an internal consultative role to the business whileremaining uncompromisingly faithful to the objectives of financial steward-ship. This is a balancing act that the new CFO regards as crucial to the successof finance, both in supporting business decisions and in assuring the integrityof accounting, financial and business practices.

Although this Company’s bench-strength with respect to succession planningat the manager and director level is considered both “strong and deep,” thebench-strength at the most senior level in the finance organization is currentlya concern—resulting in the Company’s interest in this study. Several seniorlevel finance managers are nearing retirement age, resulting in a strongerfocus on succession planning. One of the changes driven by the new CFO is asignificant focus on the strategic value of the development process to thewhole finance organization. Finance development will shift from an ad-hoc approach to a more enterprise-wide and systematic process for talentidentification. There are several reasons, aside from the new CFO’s interest,which have prompted the focus on leadership identification and developmentfor the Company’s CFO community. These include:

■ The entire Company’s approach to talent identification and development

■ Interest in attracting diverse top-flight talent from outside the organization

Selection & Development The CFO Top Development Program includes:

■ Assessments from several perspectives

■ Assignment to an executive coach from outside the Company

■ Formulation and regular review of an individual development plan

The Company-wide approach to senior leader succession planning and development is sponsored by the CEO and COO, and the development offinance executives is sponsored by the CFO.

The Company I leadership model includes six competency dimensions,which are consistently used in the performance management system, performance appraisal, and succession planning, and which are integratedwith a 360° survey. In terms of identification of promotion candidates, extensive work has been done with respect to succession planning at seniormanager, director and officer levels. Two categories exist—“executive candidate” or “highly promotable.” Out of their pool of approximately 1,200eligible managers and above in the total finance organization, 75-100 are identified as either “executive candidate” or “highly promotable.” However,there is not yet a focus on an early-career identification practice; the processcurrently only begins at the senior manager level.

Five or six of the most senior level individuals receive the highest level of development services in order to prepare them for senior vice presidentpositions. A regular succession planning and talent review process has also


“With respect to top management development, I would say development in the past that’s been handled in what I might call ad-hoc fashion. In contrast, startingabout a year ago, there was aconcerted effort to really lookat how deep are the pools of talent across the organizationfrom an enterprise-wide perspective.”


been initiated to assure continuity across finance and the Company. From adevelopment standpoint, there is also an Executive Academy designed tofocus on common development issues of newly appointed directors. About30% of eligible candidates currently take advantage of this learning event.

Open IssuesCompany I has:

■ Established a more consistent approach in its selection of targeted futureleaders

■ Improved by consistently offering appropriate assessment and developmentactivities for the developing leaders.

There is room for improvement in how the company defines and measuressuccessful completion of the customized assessment and development activities. In addition, Company I will continue to focus on the developmentand communication of short- and long-term measures of success. Thesemeasures will illustrate the impact on the individual’s performance and thecompany’s performance. The measures can be consistently communicated tothe future leaders’ executive sponsors.

In terms of new development opportunities, 3 to 6 month assignments forhigh-potentials are being sought that can be action learning projects focusingon business problems addressed by cross-functional teams. Leadership alsoacknowledges the need for significant cultural change in finance toward amore leadership-development oriented culture, as distinguished from the traditional technical focus. Another issue that is significant to this company isa lack of success meeting diversity objectives on the part of the finance lead-ership team.

31



COMPANY J Setting:Company J is a large-cap diversified defense aerospace contractor that provideshigh technology products and services across the entire procurement spectrum of the Department of Defense of the United States and those of itsglobal friends and allies. During the past ten years, its remarkable top linegrowth has been achieved primarily via acquisition. From a managementstandpoint, the Company’s vice president and chief financial officer is responsible for the traditional finance and accounting functions. In addition,the office of the CFO is responsible for strategic planning, mergers andacquisitions, and contracts pricing and administration. The term businessmanagement has been used to characterize this group.

Each of the company’s seven business unit sectors is headed by a president towhom each sector CFO reports. Responsibility for development and trainingfor all sector personnel, including sector business management people, is delegated by the sector presidents to the human resources functions withineach sector.Generally speaking, each sector HR function designs and deliverstraining and education as needs are determined based upon close interactionand liason with affected disciplines, including business management. In theaggregate the business management community includes approximately3,000 professionals and managers, 250 directors and 50 officers, of whichabout ten are corporate level officers. The vice president of finance and CFO,the vice president and controller, and the vice president and treasurer areelected officers.

Identification & SelectionThe identification and selection of business management officers is part of aformalized process within each sector, under the auspices of the sector presi-dents, with participation by the corporate vice president of finance and CFO.The identification and selection of corporate level business management officers, including the vice president and CFO, is a similar but different for-mal process administered by the corporate HR function under the auspices ofthe office of the chairman and CEO. The corporate vice president of financeand each of the eight sector CFO’s prepare succession plans for their positionsand oversee the preparation of succession plans for each of their directreports. These plans are reviewed and updated annually. Three categories ofcandidate readiness (now, 1-3 years, and 3-5 years) are used to rationalize the candidates. Strengths, needs and a development plan is set forth for each aspart of the process. This process is supplemented by a Company-wide busi-ness management talent pool that contains not only these candidates but alsoindividuals that the CFO’s believe possess high potential for becoming can-didates within the next 3-5 years. Each of these individuals also has a formaldevelopment plan that has been established by their various superiors. Takentogether, the candidates and high potentials add up to about 100 people.

DevelopmentResponsibility for development of Company J people is delegated to the sectors and administered through their respective HR organizations. Whilethis applies also to business management people, the business managementcommunity, in some of the sectors, performs a strong lead role in developmentinitiatives such as rotation, mentoring, and diversity.

“Going forward, the skill sets requisite for effective financial leadership are likely to be quite different in thenuances from the skills nuancesthat characterize today's CFOsbut the basics probably won'tchange as much.”


In addition, these sector business management organizations devote considerable effort to training and education, having designed a number ofin-house training courses that range from basic accounting and finance topicsto various specialized offerings applicable to such functions as cost accounting standards, government procurement regulations, InternationalTraffic in Arms Regulations (ITAR), and courses in contract pricing, negotiations, and administration.

The spate of acquisitions in recent years has strained the resources availablewithin the sectors for training and education and has added to the challengeof achieving and sustaining a single culture with respect to the Company Jbusiness management community. In recognition of this strain, the corporatevice president and CFO, along with the sector CFO’s, are committed to movetowards an environment in which the development of business managementpeople is done according to a more common approach and criteria. Efforts areunderway to identify best practices within the company and to share themacross all sectors. This may and probably will include education and trainingefforts of business management people.

RetentionRetention, to the extent it can be influenced by a Company, is a function of theeffectiveness of people development efforts, primarily within the sectors.These are designed to attract and retain top caliber business managementpeople. In general, the company has experienced retention issues only in periods of defense spending cuts. These periods, the last of which endedabout two years ago, create an unavoidable atmosphere of uncertainty andrisk for employees. This causes some to seek other employment opportunitieswhere the risks and uncertainties are more to their liking.

Open Issues■ Whether the decentralized approach to business management people

development continues to be appropriate for a Company, like Company J,that has attained substantial growth and people via acquisition in a relatively short period of time.

■ The identification of a suitable alternative in the likely event that thedecentralized approach is determined no longer to be appropriate.

■ The rate of change toward the optimal alternative should the Company decide to move away from the decentralized approach.

33


COMPANY K SettingThe finance organization has developed and disseminated “overarching values and guiding principles.” Instead of a stated mission or vision, it is agraphic image that is divided into four components: people leadership, customers, competition, and processes. Exhibit K-1 provides a perspective anddetail on the rapid evolution of the Company’s finance culture.

These are the four items that managers are held accountable for. This graphicmodel is unique to the finance function, although it parallels in concept models in use by other functions. Shareholder value is at the bull’s-eye. Thisapproach has been in place for over four years; it was developed in responseto the perception that finance needed to become more customer-oriented. Onepositive manifestation of the change is that finance now only spends about10% of their time in transaction processing activities with the balance available for compliance and regulatory services and for business decisionsupport. Company K, because of the nature of their business, is going throughits roughest time in its history. Consequently, finance is challenged to bothsustain the integrity of their systems and accounts, and at the same time support the business. Supporting the business means increasing effectivenesswith customers and improving productivity as well as profitability.


“In finance we have somethingcalled Accountability Alignment.It is actually a tool that we useto assure the accountabilitiesand objectives of the financeleaders are in alignment withleadership accountabilities.”

Exhibit K-1 Company K’s Finance’s Guiding Principles and Values

Competition

Customers People

Wesucceedwhen ourcustomersucceedsWe bring

the A-Teamto every

deal

We drive“win-win”

deal closure

Processes

ShareholderValue

We learnfrom our

competition

We focus onthe drive for

marketshare

We competeto win

We valuespeed andflexibilityWe expect

effectiveand timelydecisionmaking

Our Financialprocesses are

forward-thinking, time-sensitive & add

value

Wecollaborate

& learnfrom each

other

We provideopportunitiesfor career and

personalgrowth We expect

open andhonest

dialogue

We reward theoutcomes that we

influence


35

Two years ago, Company K developed and rolled out a new model for managing the company, called Key Accountability Leadership roles. Theyidentified the top line accountability for outcomes for every leader in theCompany. Outcomes are aligned with the income statement. This process is supported by an intranet online tool. The reason for developing this approach was rapid growth in a large matrix-type organizational structure.Responsibility became less than transparent and roles were confused.

Identification & SelectionWithin the CFO community there are 15 key leadership roles. Company Kconsiders the finance leadership pipeline to be very strong. There is anintranet web-based tool in place for succession and development planningglobally, and the process is fully documented. Finance has also historicallyserved as a source of leadership for other functional areas of this Company.The finance area has launched the Global Leadership Network, an enabler forlocal and regional leadership development for the finance function across theglobe. The Global Leadership Network rolls up to an organization called theTalent Council that is made up of the CFO and key players on their CFO’scabinet. The infrastructure provides a framework and administrative aid thatspeeds the decision process. This process is detailed in Exhibits K-2 and K-3on the following page.

Every six months, Company K does salary planning and evaluations.Employees are placed into one of three buckets: Top talent, core, and needsimprovement. They identify the top 10-12% of their staff. Senior managersneed to corroborate the recommendation of someone considered for the toptalent rank. Company K’s online Priority system provides performance infor-mation from both internal and external customers’ and colleagues’ perspec-tives regarding an individual. In order to surface talent, yet another onlinetool, Talent Reviews, is used. This tool provides insights about the strengths,and weaknesses, interests, and aspirations of individuals. The tool alsoincludes information about what is important to the person, for exampleinterest in travel abroad or interest in staying close to home. This informationis rolled up and helps to identify talent that may not be surfacing through themanagement channel.

Exhibit K-2


How Do Feeder Pools Fit?

1. Identify 2. Connect 3. Develop 4. Retain

Talent Segmentation Support Tool

SKILLS & EXPERTISE PERF. & CONTRIBUTION ATTRIBUTESDepth Breadth Range Skill External Beha- OutputSustainedAppliedChangeCust. Ldr- P&C TotalAction

Employee NameM/FJCIOthExpertiseExpertiseExperienceNeed Avail. vior Contrib.Learning Orient. ship ScoreScore Code

Francis Potter 1 5 4 3 2 5 5 6 4 4 5 6 16 50 2

Pat Harrison 7 3 2 4 3 6 4 3 2 6 3 4 13 47 4

JJ Brooks 1 3 2 2 6 6 6 5 2 2 6 3 17 44 3

Jo Smith 3 4 1 1 3 4 4 2 2 4 4 2 10 34 5

Overall % For Item 43% 54% 32% 36% 50% 75% 68% 57% 36% 57% 64% 54% 67% 52%

Completed By (manager/leader name): Anthony Leader Employees Entered 4Average Performance & Contribution Score 4.7 (Calculated Automatically)

Average Total Performance & Contribution Score14

Talent Segmentation Feeder Pools

Identify, Develop & Retain Leaders

Priorities

IVP

•Deliver IndividualValue Proposition(IVP)

•Challenging Work

•Rewards- financial/non financial

•Recognition

•Document GoalsandAccountabilities

•Create IndividualValueProposition (IVP)

Leadership Edge

06/02/20008

Key Job Bench StrengthOrganization Name

Key Jobs

President Sales & Marketing

Joe Bloggs

VP Internet Sales

Mary Doe

VP Optical Marketing

Harry Hussein

VP Optical SalesJane Title

VP Wireless Internet

VP International Sales

Ready Now 6-12 Months 12+ Months

ExternalCandidatesIdentified

J.L. Curry

J. Cameron

F. French

GAP

GAP P. Kerns

J.P. DenchP.J. Smith

S.L. Domon S.P. Air(Microsoft)

R. Gustavson

Emerging Key Jobs

Current Key Jobs

ILLUSTRATIV

E

NORTEL NETWORKS CONFIDENTIAL

Talent Reviews

Page 3

Talent ProfileAcceleration Pool Development Checklist (Sample)

Name:

Current Role:

Mentor:

Global Leader

Business Leader

Performance Leader

Leadership Edge

Key Experiences On -the Job

Fix- It Projects Yes � No � Yes � No � _________________

Start -Up Projects Yes � No � Yes � No � _________________

Large -scale Projects Yes � No � Yes � No � _________________

Project Management Yes � No � Yes � No � _________________

Policy/Strategy Formulation Yes � No � Yes � No � _________________

Merger & Divestiture Yes � No � Yes � No � _________________

Cross-Functional Roles Yes � No � Yes � No � _________________

International Assignment Yes � No � Yes � No � _________________

P&L (profit & loss) Accountability Yes � No � Yes � No � _________________

Had experience before? Need more experience? Comments

Education and Training

MBA/ graduate -level education Yes � No � Yes � No � _________________

LBS/HBS Strategic Leadership Yes � No � Yes � No � _________________

Solution Selling/ABE Yes � No � Yes � No � _________________

Other Yes � No � Yes � No � _________________

Has completed before? Recommend attaining? Comments

Acceleration Pool Category:

06/02/2000

10

JosephineBROWN

Global ID:

Strengths:

Current Role:

Summary of Key Contributions& Impact on Business (last 1 -2 years)

Manager:

Next Assignment(s) TimingKey Experiences:

Location:

BU:

Sponsor:

Mobility:

Individual Value Proposition:

Future Potential

Attrition Risk:

ILLUSTRATIVEDevelopment Needs

NORTEL NETWORKS CONFIDENTIAL

Leadership

Architecture: KALR

identification

Back-upBack-up


DevelopmentCritical to development are several key rotations that require excelling infinance support within the business unit context, but just as important is asenior level rotation at the corporate level. Candidates also need a strongappreciation and understanding of key aspects of treasury, customer financ-ing and audit. The Company has increasingly become creative in reducingdevelopment cost by focusing on internal resources to the extent feasibleusing internal instructional resources, internal mentors, and rotational assign-ments. Those identified for top development participate in the LeadershipEdge program. Success in this program leads to participation in theAccelerated Development program. These programs are general leadershipprograms in which finance participates. Those at the very top are assessedindividually by an outside resource, and tailored development programs aredesigned for them.

RetentionSince the decline in the economy and more drastic effects in Company K’sindustry, retention of staff as an issue has mitigated. It is not being ignored,and the online tools are helpful in reducing the incidence of losing highpotential top development candidates.

Open IssueA significant challenge going forward will be the ability to sustain the “peo-ple centric” focus during increasingly challenging and turbulent times.

Exhibit K-3

–

–Messages and initiatives

Fix-roles Account Mgr., Sales

-

)

-

Talent Pool Development Strategy

Assessment Experiences Formal Training Coaching/Mentoring

Leadership Edge Development Strategy

Finance Development Program: 3 year of rotation/specialized training

EmergingKAR Leaders

(acceleratorpool dev’t

LE Track 2

Leaders in other parts oforganization

Leadership DevelopmentCoach

Executive Sponsorship – KeyAccountability Leader

Determined by individualneed

IDP Continued

GEL specialty courses

roles, Sales Director, IPTLeader, PLM, NPI

Manage Track 1 initiatives

Build Leadership Culture inNortel Leadership

Novations Stage 4Assessment

IVP

Assessment Centre

having the potential tomove into a KeyAccountability role within 23 years.

Track 1 alumni whodemonstrate real potential+ others who demonstratepotential

12

Top Talent Leaders readyfor a move to Key

months with some targetedAccountability Role in 6

development.

Track 2 participants feeder

demonstrate potentialpool + others who

Job Challenge Profile

Novations Stage 4Assessment

Accountability ProfilerIVP

It/Turnaround possible

Director, R&D Director,International Assignment

- Leaders in other parts oforganization

Leadership DevelopmentCoach

Determined by individualExecutive EducationalExperience

–

Novations

– –

One-on-

become a Leader at Nortel

LE Track 1

Top Talent (or feeder poolfor TT) identified as havingstrong leadership potentialearly in their careers andthe willingness to make thepersonal commitment to

Networks

Job Challenge Profile

Stage 3Assessment

IVP

Priorities

Project and Task forceleadership

Line to Staff switches

Networking Opportunities

Action Learning Projects /Leader for Hire

possible rolesmarketing, finance,business development, EA,Business Development

Individual Developmentplanning Workshop anddiscussions withmanager and HR primedefine formal andexperiential trainingrequirements GEL,Business courses, LEtraining events

Group mentoring with AdvisoryCouncil (Executives) members

one mentors LE Track2 and Emerging KAR Leaders

HR Prime / Coach

A subset identified as Job Challenge Profile possible roles Functional

“We asked finance people whythey wanted to stay with theCompany. Surprisingly, theanswer wasn’t financial. Theanswer was that they wanted tobe in a company that woulddevelop them and give themopportunities for the top jobs.”


37

Greenfield Considerations—A Framework for InitiatingDiscussion on Systematic Development of Future Finance andAccounting Leaders

At the suggestion of the former chairperson of the FDTI, Rich DelCore,Director-Global Finance HR, Procter & Gamble, the following “Greenfield”Considerations are offered in assessing existing CFO LeadershipDevelopment strategies, programs and practices, as well as to provide guidance for organizations considering formulation of new CFO LeadershipDevelopment practices. This section is presented in question format with a viewtoward enabling and facilitating internal dialog on this important practice space.

1. Who owns finance and accounting talent?

2. What are the skills and competencies that are critical to our function andorganization’s success?

3. Should top development candidates know that they have been “selected?”

4. When should the leadership development program begin?

5. On what basis should individuals be selected for early-, mid-, and seniorlevel positions?

6. How should we communicate regarding leadership development withinthe CFO community?

7. Who should own the “talent?”-The function, business unit or corporation?

8. What is the objective of our training offerings? Are they aligned with CFOTop Development objectives?

9. Is our succession planning process understandable and explainable?

10. Is our assessment process objective and does it yield valuable insights intogaps in need of closure?

11. Are gap-closing activities articulated with the assessment processes?

12. Does your CFO Top Development program produce a competitive advantagefor your enterprise?

13. Is your leadership development program attractive to the quality of positioncandidate sought?

14. Does your leadership development program address diversity issues?

15. What tools are at staff’s disposal to help them understand and managetheir careers?

16. How capable are our supervisors in developing their staff and surfacingtalent?

17. Is the finance leadership development process aligned and articulatedwith the general leadership development process?

18. To what context should finance and accounting “feed” other functionswith talent?

19. To what extent should we leverage existing internal technological capabilities to support CFO leadership development?

20. What dedicated resources do we need to support our CFO developmentprocess?

21. How can we identify valuable rotations that will enrich our future leaderswith needed skills and experiences?


38

Company Primary Reporting Line Personal BackgroundCFO/Controller HR Dual Finance HR Blend

ReportingA X X

B X X

C X X

D X X

E X X

F X X

G X X

H X X

I X X

J X X

K X X

Totals 42% 25% 33% 50% 42% 8%

100% 100%


APPENDIX ACharacteristics of Primary Interviewees for this Report


APPENDIX BCFO Top Development Practices ResearchInterview Guide

1. Why is the topic of CFO Leadership Development of significant interest toyour company and its leaders at this point in time?

2. What specific issues need to be addressed in CFO Leadership Developmentin your organization?

3. What cultural aspects in your company influence CFO Leadership Development practices?

4. How is your current finance leadership “pipeline” viewed both internallyand externally?

5. Have you formulated a finance leadership and/or general leadershipmodel? If so, please describe in detail.

6. What impact have issues surfacing from the Enron debacle impacted CFOLeadership Development?

7. What is your organization’s leadership vision, with respect to top management development?

8. What is the CFO’s vision with respect to top management developmentwithin his/her span of control?

9. Please describe and document CFO Leadership Development practices atyour company, with respect to:

(a) identification

(b) retention

(c) development

10. To what extent does CFO Leadership Development practice leverage and/or participate in general top management development practices including:

(a) identification

(b) retention

(c) development

11. What is working well, with respect to practices in this space in your company?

12. What aspects of CFO Leadership Development practice present challenges in both the short-and long-term?

39


40

APPENDIX CAbout the Research Report Author

Jonathan B. Schiff

Jonathan is the author of over 50 articles and research studies on accounting,controls, leadership development, performance management, CFO practicedevelopment, and cost management. He is also the founder, in 1995, of theFinance Development & Training Institute (www.fdti.org) a twelve-membercompany consortium, led by Intel. He has worked with some of the most recognized global companies in a management consulting role including:AT&T, American Express, Amgen, DaimlerChrysler, GE, Glaxo SmithKline,Home Depot, J.P. Morgan, Johnson & Johnson, Microsoft, Nabisco, NBC,SNET, Turner Construction, and Williams Companies. Jonathan has served aschairman of a Nasdaq-listed company audit committee and his unique view-point and perspective are sought regularly and quoted in the national businessmedia, including most recently in Business Week and in The Washington Post.

Jonathan received his Ph.D. from New York University. Before completing hisMaster’s degree in accounting at NYU he worked as a staff auditor with PriceWaterhouse. Recently, Jonathan completed collaboration on a new HarvardBusiness School Case with Professor Robert Kaplan on business turnaroundand completed a sponsored research study for the Consortium for AdvancedManufacturing-International, titled, Enhancing Research and DevelopmentProductivity Through Aggressive Financial Management. Jonathan is also aregular commentator for the Financial Management Network monthly videoand e-learning service sponsored by the Financial Executives-Internationaland the Institute of Management Accountants. The series reaches over 950companies.

He is also the author of The Conference Board Research Report, NewDirections in Internal Auditing. He was also lead author of the COSO(“Treadway Commision”) sponsored Study, Guidance on Internal Control. The Wall Street Journal referred to Jonathan as “an authority on corporateinternal controls.”

Jon has served as visiting professor of accounting at Columbia University’sSchool of Business and taught in their MBA and executive MBA programs.Jon is also tenured professor of accounting at Fairleigh Dickinson Universityin New Jersey.

His firm, Schiff Consulting Group, is the developer of FinanceAchieve™ thefirst intranet-based skills management and decision support programdesigned specifically for CFO community transformation.

For more information, go to www.schiffconsulting.com or call (845) 371-0700.



Documents

Profiles in Contemporary Corporate Practices Talent Report-5...TOP TALENT DEVELOPMENT IN THE FINANCE FUNCTION Profiles in Contemporary Corporate Practices Prepared By Jonathan B. Schiff