A Key Financial Person Left, Now What?
It can be a cause of dread, confusion and even panic for many entrepreneurs. A trusted, tenured and essential financial person in your business just quit. You will replace them, but do you know exactly what you are looking for? And how difficult a transition might be?
When a key finance team member leaves a small business, it often lays bare a number of underlying issues that can become a much bigger setback than just filling a role. So how do you get the next hire right, and set the right expectations to position yourself for much less disruption the next time it happens? Start with understanding what may be going on under the surface.
Over-Reliance on the Human Brain
Especially in situations with longer-term team members, the systems within the financial function can become very human driven. Worryingly, this can be a very hard problem to identify, because while the person is in the seat, things can appear to be working just fine, and it is only when their brain is detached from it that things falter. This is not always an intentional evolution either, it can be the result of developing comfort zones. A quick test is to study what happens when that team member goes on a vacation of any length. How much changes? That can be a sign of how dependent the whole function is. Are there documented consistent and scalable processes in place? Ask. If not, they need to be. The alternative is that when that brain walks out the door, so do the key processes in your business. And by the way, this same need for documented processes applies to all key positions in the organization. We just find in the businesses we have worked with over the years that the financial side of the business is the least understood while also so critical to day to day operations.
One step further, does one key person, that is not you, have administrative rights to key systems? Sadly, I know of a recent example where a Controller had a sudden health issue and was the sole administrator on the company’s accounting system and bank software, and was the only user in multiple other systems. It took precious time, sweating bullets along the way for that CEO to gain control, piece things together and resume normal operations.
The Wrong Organizational Structure
A question I love to ask an entrepreneurial CEO is how would you design your org structure today if you started over? The answer is almost universally different from what is in place. Now this does not mean you blow up your current structure. What it should do is just raise awareness. Is there a clear, documented delineation of roles and responsibilities? Who does what on the team? Is it transparent? And logical? Or worse, is it a game of whack-a-mole with all hands always on deck. You should not assume anything until you dive in and understand. Too many org structures are dependent on the leader of the department actively playing puppeteer, as opposed to letting the system work and managing it while operating key functions. Is that happening in your case?
Seek outside help as well. How are similar companies structured? Don’t just ask one business, ask many, and ideally with some similarities in size and industry. Use the themes you gather to potentially apply in your business. Where do you observe potential bottlenecks. That can be another sign of a need for change. Perhaps collections are consistently slow, or invoicing takes way too long. That can be a sign. Leverage other outside experience too, such as seasoned fractional resources to help provide best practices in roles and responsibilities. These same resources can also help you fill gaps and build the function of tomorrow.
Turnover is inevitable in any business. You can mitigate the disruption. The financial function of small businesses can end up looking like a house that has had a room added on four different occasions. The house may have been great at first, and even now serves its utility, but at some point you need a different house. And you want to move on your terms, not because you have to. Ask questions, peer under the surface and protect yourself from severe disruption.
