While FLG is not in the executive search business, we are often close to the events leading up to a change in a C-level position, particularly the Chief Financial Officer. In fact, it’s not unusual for a CEO or board member to tell us that their current CFO is going to be fired on Friday and request that FLG supply a replacement by Monday. And clearly, the hiring of a CFO is not the time for taking shortcuts and/or not doing your due diligence. The transactional costs of firing a CFO and replacing him or her are significant. The direct costs of recruiting fees, severance payments, and escalating compensation packages can easily exceed a million dollars with additional indirect and hidden costs on top of that.
Fortunately, after years of screening, interviewing and referencing top quality chief financial officers, FLG’s experience hiring executives in strategic financial positions provides us with unique insights about how to hire the right chief financial officer – not just a chief financial officer.
So, as the CEO, what should you do when preparing to conduct a search for your chief financial officer?
Here are 10 recommendations for setting yourself up for success when hiring the right CFO for your specific company situation:
- Engage an experienced search firm with strong Board and industry relationships and networks. Make sure the executive search partner conducting the search isn’t overloaded with assignments.
- Take the candidate’s reference list and double or triple it from other sources. Make sure it includes former board members, outside counsel, and audit partners. It’s a rare person who in the course of their career hasn’t rubbed someone the wrong way; ask to speak to these references.
- Develop a carefully thought out internal hiring process including interviews with members of the Board, finance team members and cross functional peers, then follow it.
- Use Board relationships and industry relationships to externally vet your candidates.
- Extend your research into candidates’ job performance, leadership track records and key accomplishments as far back as at least five jobs.
- Don’t farm out reference phone calls to your executive recruiter or their teams. Make most of these on your own so that you will be able to pick up tone of voice, any hesitancy to answer a question, the degree of enthusiasm in a reference’s responses. You also want to be able to ask spontaneous questions relevant to the conversation. Always ask who else you should talk to at the company.
- Engage a third party to do a full background check on your candidates including credit histories, civil and criminal backgrounds, educational degrees, professional licenses and certifications, employment verification, national sex offender registry, SEC, property liens after receiving written consent from the candidate.
- Create a thorough and very specific set of criteria (critical skill sets, experiential familiarity, EQ and IQ tests) which identify the high priority attributes your CFO needs for your unique company sector, phase of development and situation. What a startup or emerging growth company needs for example, differs considerably from a mature operating company. Private companies are not public companies. Biotech company requirements are totally different from venture-backed technology companies.
- Line up your internal and external (Board and industry) interviewers based on their fit with this roadmap of requirements. Be clear with them how to draft questions which clearly focus on the issues you need to address in interviews.
- Finally, ask the candidate some hard questions that probe professional ethics and leadership dilemmas, such as “Tell me about when you were in conflict with your CEO/Audit Chair/Audit Partner and how you resolved it.”
We follow these CFO hiring recommendations ourselves at FLG Partners before we bring on a new partner to our firm and we hope you will too because hiring the right CFO just couldn’t be more important for your company.