Tuesday, September 18, 2012

Here, hold my wallet, my hands are full!

Hiring a Chief Financial Officer, or CFO, is one of the most gut-wrenching, anxiety producing and confusing processes you will ever experience as a hiring manager.  Often times, the harried and inexperienced CEO will hand this process off to their Investors or Board to make referrals.   Occasionally, they may also task an HR resource to find a talented financial leader.  Using any of these approaches alone is a big mistake!  Why?  Well, first of all, the person managing the company money;  revenues/profits, investments, taxes, compensation, budgeting, financial reporting, expenses, and funding  (whether personally or privately funded by investors) and the key banking relationships will not only have primary accountability, they will also tell you what you can and can't spend money on.  This can be a good or bad thing depending on your spending habits.  However, any financial failures still belong to the CEO if something does not go according to plan, and they will be left holding the bag at the end of the day.  That’s the most obvious concern.  Just as critical, however, is the knowledge and understanding of how financial resources are being used to grow the business, operate the business, and support the business.  This is where your partnership with the CFO gets interesting.

Many sharp and capable CEO’s fall short when it comes to grasping the basics of maintaining healthy financial fitness.  That’s why the person making daily financial decisions is the CFO, the CEO’s most critical co-pilot in driving the business.  While the CEO should know how to interpret complex financial information, that can alter the overall strategic picture, this is often not the case.  The company’s most senior executive is focused on myriad other “critical” daily demands.   For most companies, the majority of the strategic financial decisions will be made by the CFO, and so that person will be either the greatest ally, or the biggest obstacle, to carrying out the vision crafted by the management team.  When someone else is holding the purse strings, they must advocate for the CEO's vision, implement strategic financial plans and know how to mitigate risk for the long-term health of the company, especially as it pertains to spending.  And, sometimes, a good CFO may have to say "No" even if they want to say "Yes"! 

So, how does a busy CEO go about hiring a CFO if no great referrals are offered, or their professional network bears no fruit?  There are a couple of different approaches one can take to ensure proper calibration on technical talent, ethical reliability, strong caliber and chemistry across the table from their candidates.  The right hiring resource, such as an experienced Human Resources team or Executive Search firm specializing in CFO placement is a good first step.  An Executive Search firm will have a ready network of passive and active CFO candidates waiting for the right opportunity to emerge.  Designing the right profile will depend greatly on the goals, regulatory requirements and the size of the organization.  Every company has unique needs and so knowing the growth trajectory and aligning with the experience required to be successful in carrying out those goals, will be important to consider before embarking on a search.  Before contracting with a search firm, ask for recent references on how many CFO's they have placed, what company(s) they have hired for and whether the individuals placed are working out well for their new employers.   

Another approach is to hire an "On-Demand" CFO.  This is a strategic financial partner contracted by your company through an outside resource, committed on average from 10 and 40 hours per week, until a permanent CFO is identified and hired.  The length of a typical contract is about 90 days or more, but can actually be a lot longer if the company decides not to hire a full-time CFO.   The benefits of contracting a consultant CFO or Controller are many and can pay great immediate dividends if the CEO is interested in learning about what makes a great CFO before they hire one.      

"On-Demand" CFO's are typically very experienced strategists who have sophisticated knowledge of corporate finance and often with a background in public company auditing.  Wherever they may have received their training, their expertise is in big picture planning and route-mapping to navigate a company through tough or calm seas.  Often they will partner with the CEO to present ideas or insights to the Investors at Board Meetings, sharing critical details and articulating complicated financial information with confidence.   

The CFO consultant is also a knowledge transfer expert, able to dig in and assess the company’s financial health and challenges quickly and efficiently.  They are usually just as fast and effective with the hand-off to the new CFO, and will stay on as a consultant until the new financial leader has come up to speed.

Hiring a CFO with both the strategic skills and strong technical capabilities that keep a company in balance is only one aspect of the search.   Their fit with the team cannot be under-rated either.  I have witnessed many CFO’s who’s brilliant financial performance was downplayed considerably by their inability to bridge the communication gap with co-workers, or lacked good interpersonal skills.  

 A bit of distance between finance and operations is not uncommon, and can be required to maintain confidential or ethical boundaries.  But in social situations, a CFO who distances themselves from the team, or doesn’t take an interest in getting to know their co-workers, is in danger of alienating themselves from resources and influences governing the political forces of the organization overall.  

 Employees who have the CEO’s ears and interests in mind may have a direct impact on the direction of the company, and that includes decision-making around financial leadership.  If you have found you are not connecting with your co-workers, never underestimate the power of a smile and a cup of coffee.

So, before handing your wallet and your company’s financial reins to someone, make sure you know exactly what you need, how well they share your vision and whether they can execute effectively.  Learning how to identify and hire your most critical financial partner is a short term investment that offers a big ROI!

To learn more about the advantages of partnering with a search professional for your most critical strategic hires, contact me directly at karen@greensearchpartner.com. 

*For more information and insights into "On-Demand" CFO’s and Controllers, please visit:  www.nextstagesolutions.com.