What You Need to Know About Hiring Your First Controller

November 4, 2020
by: Lance Osborne
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My practice specializes in recruiting for the top financial position for Canadian, mid-market, primarily owner-managed companies. I work with companies as small as $5MM in revenue and companies as large as $300MM in revenue. If I had to pick the sweet spot of my market, where more than 70% of my searches come from, it’s companies with revenues in the range of $50MM–$150MM.

Companies come to me to fill their top financial spot for one of four reasons:

  1. A well-regarded incumbent is leaving – often due to retirement.
  2. They want to replace an underperforming incumbent.
  3. They’re upgrading the top finance position from Controller to Director of Finance or VP Finance.
  4. They’re hiring their very first qualified professional to head up the finance function.

If it’s reason number 4 – they’re hiring their very first qualified professional to head of finance, most of the time the company will want to hire a Controller.

A Primer on Titles

Before I get into defining the Controller position in detail, let me give you the Coles Notes look at the four most commonly used top finance position titles: Controller, Director of Finance, VP of Finance and CFO.

Controller: essentially looks backwards, tells you where you’ve been and where you’re at finance-wise.

VP Finance: essentially looks forward, involved with strategic decisions, helps seize on finance driven opportunities and avoid potential finance problems.

Director of Finance: elements of both Controller and VP Finance – hands-on but heads up.

CFO: like the title says – the Chief Finance Officer. Could be any of the above but is most commonly associated with the VP Finance title. As in: VP Finance & CFO (just like your title could be President & CEO).

That Was Then. This Is Now.

So back to the owner-managed company hiring their first qualified professional to head up finance. This usually occurs because whatever resource the company has been using to this point to take care of their accounting needs is no longer adequate (bookkeeper, accounting firm, friend who knows QuickBooks, etc.).

This is almost always a function of company revenue growth, increase in operational complexity and financial sophistication.

Just to list a few issues associated with growth: banking arrangements are more complicated, there’s added head-count, keeping a close eye on cash flow is more important, foreign exchange may become an issue, there may be an increase in capex, there may be new SKUs and markets – as Yul Brynner famously said in The King and I: “Et cetera, et cetera, et cetera…”

All of a sudden there’s a lot of balls in the air and the owner-manager(s) is having a heck of a time keeping track of everything. So they need to hire a Controller.

It’s possible that they need more than a Controller, maybe a Director of Finance could be what they’re looking for, but that’s the exception, not the rule.

The only time I see companies hire at the Director or VP Finance level right out of the gate is when they’ve gone from let’s say $10MM in revenue to $50MM in revenue virtually overnight and they anticipate that they’ll be at $100MM in the next two or three years. In which case, the plan is to find them a Director or VP Finance and then recruit a Controller under that position to look after the day-to-day accounting duties.

In a previous article (https://www.osbornefinancialsearch.com/what-exactly-does-a-controller-do/) , I detailed the job function of a typical Controller in a mid-market owner-managed company, so I don’t need to get into it again here.

This article is about what you need to know about hiring your first Controller.

Show Me the Money

First things first – what do you need to pay them? This is usually a function of your size and complexity of your business.

Here’s a decent rule of thumb:

  • Revenues $5MM–$15MM – $80K-$100K
  • Revenues $15MM–$25MM – $100K-$115K
  • Revenues $25MM–$50MM – $115K-$140K

I didn’t include salaries for companies with revenues of over $50MM because at that level, the top finance person is usually a Director or VP of Finance with either a Controller or Accounting Manager under them who handles the day-to-day accounting.

These numbers are not carved in stone – they’re a guideline and there are a number of factors that apply which will influence the salary up or down.

For example, if you already have a Director or VP Finance in place and the Controller is not acting as the top financial person, their salary may be lower than I suggest. If you and your management team are going to be putting various demands / special projects on your Controller’s desk or you need someone with first-rate presentation skills, it will influence the base salary higher.

Expect to have to pay a bonus as well. Variable pay components for Controllers tend to fall between 5% and 15% and once again, it’s usually a function of the company’s size. Someone earning a base of $80K will usually be happy with a bonus between 5%–10% while a Controller earning $125K will expect a bonus between 10%–15%.

What to Look Out For

If you look at the world of Controllers in the mid-market space, the first thing you’re going to notice is that a lot of them will have had a lot of jobs. As in when you look at their resume, they seem to move every couple or three years. Sometimes this is just due to the vagaries of working for owner-managers (change of ownership, drop in revenues = layoffs, etc.) but more often, it’s a function of the candidate. Accountants can have a journeyman mentality when it comes to work and they’re not necessarily looking for a better career; they’re looking for a better job. So they move because the next job is closer to home, has better hours or pays a few bucks more. You need to ask yourself, if this person has averaged two and a half years per job for the last four jobs, why will they last five years or more with me? The short answer is that they probably won’t, so why chance it.

The other thing you need to know about Controllers is that most of them are fairly linear in their thinking and approach to the job. Which is actually a good thing. A well-run accounting department is all about good organization, schedules and check lists. A leads to B, leads to C, leads to…etc.

So, if that’s all you need, most of the Controllers you interview will fit that bill. However, if you live in a world of curveballs, slapshots and Hail Mary passes (when was the last time you saw three sports analogies mashed together?), then the linear thinker may not be able to handle the ongoing need to adjust their routine.

Off the Rack or Made to Measure

As much as I try to keep these articles informative and not self-promoting, in this particular case I’m going to shamelessly make a pitch for why you should let me help you recruit your first Controller.

What I’ve written about above is all good stuff, but there’s a whole lot of nuance that I don’t have room for in these articles (and you wouldn’t have the patience to read anyway). And more than anything, what defines who would be the perfect first Controller for your business is very much a function of you and your company.

We’re very good at teasing out the search criteria that will make a difference and will advise you on exactly how much horsepower you really need in a Controller. We’ll help you define the issues and make sure that you don’t just hire for the Controller you need today; we’ll make sure you hire the Controller you’ll need three years from now.

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 lance@osbornefinancialsearch.com

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