Interim Financial Management

What to Do When a Key Employee Leaves

Entrenched employees are a vital part of any company’s success. That said, many companies are left unsure of what to do when a key employee leaves. What needs to happen when a long-term employee is departing, and how do you prepare for what comes next?

I recently completed a project that included several different workflows including a new system implementation, an internal control review and a diagnosis of the accounting department’s processes. Many of those things had been in place for a long time with little or no oversight.

Part of the issue with the accounting department’s lack of oversight was that the Corporate Controller had been in the seat for a long time and was so competent she could do the job with her eyes closed. The company counted on her experience to ensure that everything from monthly closes to annual audit preparation was always completed on time and without error.

Unfortunately, when this long-term Controller announced her retirement, it became obvious to everyone on the accounting team that finding a replacement would be a challenge. It was not going to be easy to train a new Controller in all the nuances of the role. It was going to be equally difficult to transition institutional knowledge to the new Controller and other members of the team who had never been exposed to many of the daily responsibilities of the role.

What are the signs that change is in the air?

Sometimes employee departures are planned and announced in advance. A long-term employee may be ready to retire or slow down a bit. These types of situations can provide longer lead times and lots of transition planning.

Other times, the key employee plays it closer to the vest and announces a departure with less fanfare and more surprise. This scenario requires a nimbler solution. In our modern, hybrid, low-unemployment world, a company should always be thinking about transition planning and staying ahead of the curve when it comes to backfilling a key role.

The long-term Controller from my recent project announced her retirement six months in advance. She let management know that she would be willing to not only train and help any new hires, but she would also be available if any problems arose after leaving the company. This is an ideal situation that not every company will enjoy.

Compare this to a previous client, who ignored the warning signs of a long-term Director of Finance who maintained her department practically on her own and who was suffering from work burnout. They were left holding the proverbial bag when she announced her intention to leave the company with only a two-week notice. She had voiced her concerns about too much work, a dwindling team of subordinates, a burdensome system implementation that added to her daily work responsibilities and, most importantly, the cycling out of other key employees which left a very unstable work environment. These signals should have been more than enough to raise a red flag, put a transition plan in place and work to prevent interruptions in the company’s operations and reporting.

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Here are steps to take upon the departure of a key employee.

Change is constant as the saying goes and nowhere is this more obvious than when a long-term employee retires or leaves for another position. In this case, several things need to happen immediately:

Determine the exact amount of time you have before the departing employee is no longer accessible as a resource.

I have been on projects where there was little or no notice given, and conversely, one situation where a departing Development Controller worked on weekends and evenings with her replacement to ensure that everything transitioned smoothly. (She even made recorded videos of her work process and covering where to find relevant files on the company server.) This certainty around timing will make it easier to make a transition plan.

Verify that all processes and protocols are memorialized and verified.

Whether in video form or written form, this step is extremely important when transitioning a long-term employee out of the role where most tasks have long become rote.

Many business owners may assume that all accounting processes are written down and ready for use by a new employee, but this is not always the case. Take advantage of the outgoing employee before departure to ensure that all specific tasks, detailed instructions or company-centric workflows are outlined and easy to follow. This will:

  1. Give the new employee a fair start when learning the role,
  2. Give the departing employee a chance to button up all loose ends and
  3. Allow the transfer of as much institutional knowledge as possible in the time remaining.

Look at a lower-level person on the team who may be ready for elevation to a higher role.

This type of internal promotion will allow the business to flatten the curve on institutional knowledge transfer. It also creates a more seamless transition by leveraging an internal employee and known quantity as opposed to a new person from outside the company, who will require time to adapt and learn how the company and team operate.

If a lower-level person cannot fill the role, explore interim management before searching for a new employee to do the job.

Long-term employees, especially in the accounting realm, tend to do things in a very specific way, month after month. There are deadlines to follow, third-party partners with whom to engage and a rather robust list of items that must be completed repeatedly without missing any steps to deliver accurate reporting to management. In this case, the departing employee is extremely valuable in understanding and explaining the daily, monthly and annual processes that must be followed for the business to operate.

Ensuring access to that knowledge base is key. A departing employee quickly becomes a lost resource. If you are caught unaware or can’t find a replacement in time, leveraging an interim financial management consultant can support the transition of work and cover the impending departure. A consultant can also improve the hiring process by realigning the role to the strategic needs of the business if needed, prior to the new hire.

Continuity matters when a key employee departs the company.

A replacement employee will certainly adapt and perhaps even improve internal controls, processes and output in due time. However, when possible, the company will benefit greatly by ensuring a smooth transition when a key member of the accounting team departs.

Continuity is also important for the remaining members of the team. If processes are documented and knowledge is transferred, the daily and monthly task list will be familiar and comfortable. The new employee will also have a roadmap to follow as s/he learns the new role and the financial systems in which work is completed. Advanced planning for how to transition to a new employee without a lot of chaos and confusion is the best way to find this continuity.

Other Thoughts

Ultimately, companies will have to deal with the departures of key employees as an ongoing part of doing business. Change itself should not be the factor for a smooth transition. The key to a smooth transition, whether from retirement or an unexpected departure, is to be prepared for change when it comes. Keep job descriptions and workflow tasks updated, and cross-train team members on each other’s responsibilities. Also look out for the warning signs that a change is coming, and do not stick your head in the sand or look the other way when you think that a key employee may be thinking about leaving.

Most importantly, expect that change is a possibility in the first place so that the element of surprise is not a factor. To learn more about some of the best practices to support transition and continuity, download our free health check:

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Additionally, if you need support from our team of financial consultants, who can help with both financial project execution and interim financial management, contact us! We’re ready to help!

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