Recruiting a Major League VP Finance for Your Aspiring Triple “A” Team

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Every big company used to be a small company. Some of the biggest names in business, Apple, Amazon, Disney and Harley Davidson (among others), literally started out in their founders’ garage. And as these companies evolved from start-ups to market disrupters to market dominators, their executive teams not only became larger but much more sophisticated as well.

No doubt some of those executives were in on the ground floor and their management chops grew in lock-step with the growth of their companies. But many of those executives had developed their skills in larger, well-established companies and were recruited by the up-and-coming market disrupters.

Famously, Larry Page and Sergei Brin hired Eric Schmidt as CEO of the pre-IPO Google. Schmidt had experience with start-ups (first software engineer at Sun Microsystems) and had run large, public high-tech companies (Novell Inc.).  In every sense Schmidt had “been there and done that” and was able to provide tremendous value to the organization, seizing on opportunities and avoiding pitfalls that Page and Brin may not have recognized.

There comes a point in many owner-managers’ careers where they realize that if they are going to take their company to the next level, they’re going to have to recruit more qualified, sophisticated people for their executive team.

And more often than not, the position they really need to up their game with is the VP Finance spot.

There are three major considerations when recruiting someone from a larger, more sophisticated company into your mid-size business.

  1. What added value will they bring to the position and your business?
  2. Will they fit in with your corporate culture?
  3. Can you afford them?

Adding Value to the Busines

If you’re recruiting your first experienced, qualified VP Finance or CFO, perhaps to replace or oversee an incumbent controller, you’re going to see a host of changes and improvements to the finance function. I won’t go into them here; I explored the difference between controller and a CFO in a previous article: What’s the Difference between a CFO and a Controller?

Besides the improvements to the finance function, you’re also looking for the “been there, done that” factor. Areas you may want to explore include

  • Have they worked in a high-growth company?
  • Have they done an ERP selection / implementation?
  • Have they been involved in new product launches?
  • Have they quarterbacked a green-field facilities build-out?
  • Do they have connections in finance?
  • Have they taken a company public / orchestrated a company liquidity event?

Ideally, your new VP of Finance should be able to act as a strategic advisor to you and the rest of the executive team, helping you seize on opportunities or avoid pitfalls you may not have seen on your own.

The All- Important Fit

Often, the person you’ll want to recruit for your VP Finance spot is someone who’s worked for both large companies and small.

VPs of Finance with big company experience will be very familiar with systems and processes used to manage scale, which will come in handy if you’re experiencing rapid growth.

They will have a solid understanding of issues that smaller companies may be unfamiliar with, such as communicating with stakeholders, managing increased complexity, and optimizing organizational design.

Someone with large company experience may have excellent contacts they can call upon who may allow you to attract new business, acquire new lines of business, work with new partners, etc.

But keeping in mind that you are still an owner-managed business and not IBM, you still need someone who can get their hands dirty and will be comfortable working in an environment that sometimes lacks clearly defined processes and might not be all that sophisticated yet.

Show Me the Money

Owner-managers who are upgrading from a controller to a fully qualified VP Finance with an impressive resume often experience some sticker shock. If you were paying your controller $125,000 and your prospective VP of Finance is asking for $200,000 plus bonus, that can be a large pill to swallow.

Often, what makes it such a hard pill to swallow is that you’re used to thinking about the finance function as a cost centre, not a profit centre. Your previous controller may have been a necessary sunk cost, but your new and improved incoming VP Finance should be able to add significant value to your top and bottom line. In fact, even if your incremental uptick in cost between your old controller and new VP Finance is $100,000, you’ll get that back many times over in the next few years.

Think about an LTIP

One way to defray the short-term cost of recruiting a VP of Finance is to have a long-term incentive plan (LTIP) in place. This could take the form of a grant of restricted stock or a cash-based long-term incentive plan that mirrors the payout under an equity-based plan. Typically, private company LTIPs vest over a five- to ten-year period and are tied to both company growth and pre-determined performance metrics.

If you think you have a good chance of doubling or trebling in size and / or if your plan is to be taken out by a strategic buyer sometime down the road, a potential VP Finance may be willing to take less salary up front if they believe there could be a significant upside in the future. Having an LTIP in place that could potentially pay off big in the long term will often be incentive enough to make up for any of the shortfall in the VP Finance’s compensation in the short term.

If you think you may be in the market for top financial talent in the next few months, call me direct or email me, for a no obligation consultation.

(416) 567-7782 [email protected]

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