There’s no “one size fits all” formula when it comes to hiring a CFO. But there are some traits and qualifications that you should be looking for when you’re putting together your hiring criteria.
The more senior a finance professional gets, the less they are defined by their accounting knowledge and the more they’re defined by their industry knowledge. Bio-pharma, software, auto parts manufacturing and many other industry segments all have operational and accounting issues that are particular to their industry. For example, as much as someone from outside the auto parts manufacturing industry can in time figure those issues out, at the executive level it makes much more sense for an auto parts manufacturer to hire someone who’s already had firsthand and extensive knowledge of whatever those issues happen to be. Not only will they get up to speed quickly, they may also be able to bring some fresh operational insights to the table.
Expertise in accounting and finance should be a given for any CFO. However, the CFO can and should be able to function as a utility player and take charge of duties and projects that fall well outside of the world of finance and accounting. In most owner-managed businesses, the CFO also oversees human resources, IT, administration, facilities management as well as any special projects that happen to crop up.
A CFO who understands the organization at both the granular and macro levels is in a unique position to come up with strategic insights on how to improve operations. At a tactical level, the CFO can help other members of the executive team understand the real time operational and financial consequences of their decisions. The CFO can advise operational management on issues such as realizing cost and corporate efficiencies, systems changes, vendor selection, contemplated capital expenditures and new business initiatives.
Sales executives may speak sales, logistics executives may speak logistics, manufacturing executives may speak manufacturing but finance executives need to be able to effectively speak to all of those line executives in their own language. If the CFO can’t speak the language of the rest of the executive team, their ability to influence behaviours or add value to operations will be severely curtailed.
Strong Technical Network
Although the CFO position demands a very high level of expertise in any number of areas, no one knows everything, and financial executives should be willing to reach out to the appropriate experts to help out when necessary. When a CFO knows a range of technical and professional experts, it amplifies the scope and effectiveness of their position.
Credibility with Outside Stakeholders
In many ways, your CFO is the face of the company to your stakeholder community. This is the person that deals with the CRA, your bank, suppliers, major customers, auditors and shareholders. They need to have the ability to deal equally well with a wide range of stakeholders and present themselves in a positive, professional light. Above all, they need to be, and be perceived to be, competent with a high level of integrity.
The top finance person in any company should be able to act as a trusted advisor to the CEO and the rest of the management team. The real added value that a CEO should be looking for in their CFO is the ability to help shape the strategic vision for the future of the business and implement and monitor the plans that will help realize that vision.
Whenever you contemplate hiring a CFO, whether it’s a newly created position for your organization or replacing an incumbent, you should always think about filling not only the position you’re recruiting for now, but also the position this will become in the future. If you own a company that has historically been growing slowly and you don’t anticipate that to change, anyone you hire who does as good a job as your CFO in the short term will very likely still be doing a good job for you five or 10 years from now.
However, companies experiencing or anticipating rapid growth need to ensure that the person they hire today has the ability to morph into the CFO they’ll require in the future. If your company is currently earning $40 million in revenue and has been growing at a rate of 20% a year, don’t hire for what you are today, hire for what you’re going to be three to five years from now. At a year-over-year 20% rate of growth, your company will be a $100-million business five years from now. You should hire someone who can help you achieve that milestone and who has the skill set and aptitude to be comfortable as the CFO of a company of that size.