What to Look for in CFO Recruiting
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- CFO’s importance increases in a high interest rate environment.
- A CFO recruiter should have hands-on knowledge of finance.
- The recruiter should understand the skills required, the candidate’s experience, cultural fit, compensation expectations, and geographical limitations.
- Financial Management: Oversee the company’s finances, including budget, cash flow, and financial planning.
- Strategic Planning: Work with other executives to set strategic goals and develop plans to achieve them.
- Accountability: Ensure other stakeholders abide by the budget as part of the strategic plan.
- Risk Management: Identify and manage financial risks.
- Reporting: Oversee the preparation of all financial reports.
- Investor Relations: Serve as the primary point of contact for investors.
- Leadership: Lead the finance team and work with other departments to ensure the company is working towards its financial goals.
- Compliance: Ensure the company complies with all financial regulations and laws.
- Capital Structure Management: Decide on the best capital structure for the company.
- Mergers and Acquisitions: Oversee the financial aspects of potential deals.
- Performance Tracking: Track the company’s financial performance and compare it to its goals and benchmarks.
CFO Qualifications at Different Scales:
- Experience in financial management roles.
- Broad financial knowledge.
- Leadership skills.
- Strategic thinking.
Medium Sized Businesses:
- More years of experience, often in leadership roles.
- Advanced financial skills.
- Communication skills.
- Certifications like CPA or CMA.
- Many years of experience in executive-level roles.
- Industry knowledge.
- Advanced degrees like an MBA.
- Strong leadership.
- Regulatory knowledge.
- Strategic vision.
What to Look for in CFO Recruiting
CFO Recruiting is a nuanced endeavor whose outcome is critical to the financial health of the client in question. The CFO’s importance rises in a high interest rate environment as the tradeoffs between cash, debt, and risk managements change. Investment decisions become more nuanced. Strong stakeholder communication and strategic planning can help a successful company move from strength to strength.
Because each of those skills sets cross the line between hard and soft skills, it’s important to have a CFO recruiter that has hands on knowledge of finance. A degree in finance, years of experience in the finance industry and a strategic understanding of industry best practices are critical to being able to interview for those skills.
This article is intended to guide businesses on what to look for when recruiting a CFO.
The CFO Recruiter
An intrinsic understanding of FP&A or Financial Planning and Analysis is going to provide a better outcome and a more insightful presentation to the CEO or Board of directors when they review potential candidates in a presentation. Anyone who has experience in a board meeting knows that coming unprepared or with a limited understanding of the topics being presented is a recipe for disaster.
Understanding the skills required, the experience that’s applicable, the culture of the organization they are from and how it translates to the destination client, assuring the compensation expectations and geographical limitations are all baseline requirements for a successful CFO recruitment.
Maintaining expectations between the client and candidates is critical, especially with sensitive searches. A long recruitment process can create frustration if the candidate doesn’t have a transparent understanding of the interview process. Maintaining the expectation of confidentiality is another explicit agreement that a company must make with the CFO recruiter who should ensure confidence that they will communicate it to the candidates.
The Responsibilities of the CFO
Financial Management: The CFO is responsible for managing the company’s finances, including its budget, cash flow, and financial planning. They oversee the financial operations of the company and ensure that it is financially stable and profitable.
Strategic Planning: The CFO plays a key role in strategic planning. They work with the CEO and other executives to set the company’s strategic goals and develop plans to achieve them. This includes financial forecasting and modeling to predict future financial performance.
Accountability: The CFO has a responsibility to oversee the creation of the budget as part of the strategic plan, but they also must make sure the COO and other stakeholders and abiding by it, which is most often accomplished though the buy-in during the development process.
Risk Management: The CFO is responsible for identifying and managing financial risks. This includes everything from economic risks to operational risks. They develop strategies to mitigate these risks and protect the company’s financial health. A candidate with an passion for economics will add nuance to quarterly and semiannual presentations and inform senior management of historical trends related to leading and trailing economic indicators and what the implications are for the business.
Reporting: The CFO oversees the preparation of all financial reports, including income statements, balance sheets, and cash flow statements. They ensure that these reports are accurate and comply with all relevant laws and regulations.
This is an opportunity for insight. Not only does it relay the financial health of the organization, but it’s also an opportunity for greater communication regarding the budget. The year over year results and seasonal adjustments from a smoothed budget can be adjusted for, but a significant delta from predicted expenditures can offer an opportunity for a deeper understanding of the operational experience and how it affects the budget.
This also represents an opportunity for the candidate to express their financial communication skills. They should be able to communicate financial realities in finance, accounting, and layman’s terms, making complex concepts digestible for those that aren’t as numerate.
Investor Relations: The CFO often serves as the primary point of contact for investors. They communicate with investors, provide them with financial information, and work to build strong relationships with them.
Executive presence means different things to different people, but interpersonal skills and communications are where the lines blur between the hard and soft skills. The language a candidate uses to express the financials is critical to engendering respect from other institutions and respect leads to deeper partnerships and lowered cost of capital, in financial terms.
Leadership: As a member of the executive team, the CFO provides leadership for the company. They lead the finance team and work with other departments to ensure that the company is working towards its financial goals.
Leadership is another amorphous concept that has its roots in the day-to-day operations of the organization. Being the subject matter expert, strongest player and most dedicated employee are all going to translate to greater productivity in your finance and accounting departments. Inquiry into leadership philosophy will be critical to culture fit, which will translate to increased productivity and reduced turnover.
Compliance: The CFO ensures that the company complies with all financial regulations and laws. This includes tax laws, securities regulations, and other relevant financial regulations.
Contracts are the links in the business chain and a CFO that maintains a clear understanding of the contractual obligations of the organization can have a tremendous effect on long term cash forecasting accuracy. Forgetting to account for payment schedules and late fees is a recipe for cash mismanagement which, in turn, affects the marginal cost of capital.
Capital Structure Management: The CFO decides on the best capital structure for the company, balancing the use of debt and equity financing. A recruiter with a background in finance, accounting, and hands on experience in the industry can dig in on the process the candidate uses to identify the optimal allocation.
Mergers and Acquisitions: The CFO plays a key role in mergers and acquisitions, overseeing the financial aspects of any potential deals.
Performance Tracking: The CFO tracks the company’s financial performance and compares it to its goals and benchmarks. They use this information to make recommendations for improving financial performance.
CFO Qualifications at Each Scale
These are general guidelines for the three simplified enterprise scales. It should be noted that the most important of any of these and at every level is integrity. No amount of reporting is going to replace accuracy. Thes job is fundamentally the accurate presentation of past, and projected results to the best of the CFO’s knowledge.
The complexity of financial systems necessarily increases as the organization grows. When the company is small the systems are the most fundamental, but this is the opportunity for the greatest long-term effect on the company. A strong foundation offers long term scale opportunities in things like ERP selection and implementation. Other small organization qualifications include:
Experience: Small companies often require their CFOs to have at least several years of experience in financial management roles. This is because the CFO may need to handle a wide range of responsibilities, from strategic planning to day-to-day financial operations.
Broad Financial Knowledge: Given the breadth of responsibilities, a CFO in a small company needs to have a broad understanding of all aspects of financial management, from accounting to financial planning and analysis.
Leadership Skills: Even in small companies, the CFO will need to lead a team and work closely with other executives and stakeholders.
Strategic Thinking: The CFO will need to contribute to the strategic direction of the company, which requires strategic thinking and planning skills.
Medium Sized Business
When the company matures and the accounting systems become more complex because of increased diversity of offerings, cash flows and the transition from cash accounting to accrual based accounting (When transactions are recorded in the books of accounts as they occur even if the payment for that particular product or service has not been received or made) the skill set of the CFO will need to be different to include:
Experience: Medium-sized companies typically require their CFOs to have more years of experience, often in leadership roles. They may also prefer candidates who have experience in their specific industry.
Advanced Financial Skills: The CFO will need to have advanced skills in areas like financial modeling, risk management, and strategic planning.
Communication Skills: The CFO will need to communicate with a wider range of stakeholders, including investors, board members, and external partners.
Certifications: While not always required, certifications like the Certified Public Accountant (CPA) or Certified Management Accountant (CMA) can be beneficial. The increased complexity of the accrual model and an awareness of SOX or the Sarbanes-Oxley act of 2002, which was a result of the Enron debacle, is necessary as the risks to the business of violations of financial regulation increase.
Strategic Thinking: At each level, strategic thinking is critical to the role. As the organization becomes more successful, the opportunities for strategic advantage, leveraging increased revenue to acquire synergistic companies as subsidiaries becomes more common. The transition from medium to large organization can happen with one acquisition and the CFO needs to have a plan for integration of the acquired company and an understanding of what that entails.
A strong CFO candidate will lay the groundwork for the expansion into a larger organization and prepare the chart of accounts and business systems to be able to handle even greater financial complexity like consolidation of financials from subsidiaries which is the hallmark of a larger company.
Experience: Large companies typically require their CFOs to have many years of experience in executive-level roles. They often prefer candidates who have experience as a CFO or in a similar role.
Industry Knowledge: The CFO will need to have a deep understanding of the industry the company operates in and the specific financial challenges and opportunities it presents.
Advanced Degrees: Large companies often prefer CFOs who have advanced degrees in finance or business, such as an MBA. The focus on a CPA may be less pronounced as Accounting and Finance become more distinct. The corporate controller may be the highest-level CPA. The CFO of a large company may come from a large company background that hasn’t had an integrated accounting and finance department, as the silos at larger organizations serve as a more granular division of labor.
At this point, a CFA may be more desirable. A CFO from a large organization may never have been an accountant at all, having started their career as a financial analyst, then progressing to senior financial analyst, to finance manager, and then to division finance manager and rising to CFO through that route, never having done a bank reconciliation in their entire career, but being wholly forward facing.
The division between accounting and finance is at the end of the month. When the accounting department finishes their month-end close and the books are approved and official closed, once the CFO has interrogated them and gotten all feedback from the controller, the finance department picks up.
The numbers from the previous month are immaterial until all the reconciliations for the month are complete and certified as accurate. At that point, the finance department can begin the task of FP&A of Financial Planning and Analysis.
The finance department may be heavily siloed in the larger organization, where a finance manager at Microsoft may be responsible for one line in a P&L. That line will be the combined revenue and cost from myriad sources across the globe. The job is the same: analyze the projected vs actual results for the period as confirmed in the month end close and adjust the projections to account for any deltas or deviations from expectations.
Abstraction: These numbers are the dollar equivalent to a story of the operations of the company for the month and the ability to tell that story in a way that is comprehensible across disciplines as well as actionable across divisions is where the competent and the talented diverge.
While true at every scale, the increased complexity of a large organization requires even greater interpersonal skill and specificity as well as crystal clear communications skills. The executive defines the culture for the rest of their organization and an antagonistic relationship can easily develop between colleagues that have distinct skill sets.
The most common disconnect occurs between marketing and accounting. One being rooted in the empirically provable, mathematical trail of transactions in various currencies, and the other being the promise of leveraging existing dollars, pounds, euro or yuan to greater revenues in the future.
Strong Leadership: The CFO will need to lead a large team and work with a wide range of internal and external stakeholders. This requires strong leadership and management skills.
Having a CFO that can clearly communicate across that divide and provide the employees with a clear understanding of their role and how they affect the larger picture, and the integration of the various parts provides the employees with empowerment, empathy and shared identity.
Regulatory Knowledge: The CFO will need to ensure the company complies with all relevant financial regulations, which requires a deep understanding of these regulations.
Strategic Vision: The CFO plays a key role in setting the strategic direction of the company, which requires a strong strategic vision and the ability to make complex decisions.
This is where mergers and acquisitions play a larger role. The transition from Medium to Large is likely to occur along a gradient and the impetus for increased complexity is a combination of integration of non-native financial systems and organization change within two companies finding an equilibrium to drive success.
Now that you understand the importance of recruiting the right CFO for your company and the complexities involved, it’s time to take the next step. If you’re ready to find a CFO who can navigate the financial landscape, drive your strategic vision, and lead your company to new heights, we’re here to help. Fill out the form below to start the process. Let’s work together to find your company’s financial leader who will not only meet your expectations but exceed them. Don’t wait – your company’s financial future starts today.