Hiring for any executive leadership position can be a complicated process, but a CFO brings its own unique set of challenges. Organizations that downplay the importance of a thorough job description or attempt to rush through the steps can end up needlessly prolonging the search process or settling for a candidate that does not fit their needs.
Hiring a CFO hinges on writing an effective job description for the position that outlines not only the required qualifications for the role but also the expectations for someone acting within the role. And while this is a foundational piece of the search, it is only the first step in the process. Once the role of a CFO is defined, the active process of hiring a CFO begins. Each subsequent step must then be undertaken with an understanding of how it will build on previous steps and make additional progress toward finding the best candidate for the role. From identifying key decision-makers and setting a hiring timeframe to talking to a recruiting firm and evaluating your hire, each step is integral to the overall process.
So, how is today’s CFO hired exactly? Our executive search team answers your most common questions to explain the process.
Who Should have Input in the Hiring Decision?
Determine who the decision-makers will be and include them throughout the hiring process. In an owner-run business, the CEO is often the sole decision-maker, consulting with others when needed but making the final hiring decision independently. However, in other cases, more people may be given a voice.
Identifying who to lean on when making a hiring decision will depend on who has a controlling interest in the company. The CEO will typically get the final say on who to hire into the CFO role, but any of the following groups may be included as well:
- Essential members of the leadership team
- Board members
- Other owners or investors
- The head of HR, audit, or finance
- Key committees (in nonprofit organizations)
Remember, the more decision-makers you have, the longer the hiring process will take. So, include as many perspectives as are needed to make the right hiring decision, but do not just frivolously include additional people.
What is the Average Hiring Timeframe?
As you might expect, a fractional or project CFO can be hired much more quickly than a full-time CFO. While a part-time CFO hire takes an average of one week, a full-time CFO typically takes three to four months.
When a fractional CFO or controller is brought in to address an urgent pain point like cash constraints, a hire can be made very quickly to get the problem resolved (sometimes in as little as 24-hours). However, in other cases, the hiring process can take as long as 10-14 days. A longer hiring timeframe for a fractional CFO can occur when:
- They are hired to address a broader underlying issue like a lack of financial visibility
- The scope of the engagement is larger
- Multiple stakeholders are involved in the decision-making process
Similarly, the hiring process for a full-time CFO can take longer than usual when:
- The role requirements are so exhaustive that the pool of candidates is very small
- Many people are involved in the decision-making process
- Some or all of the candidates are out-of-the-area
- The person being hired is not available immediately
The more of these complicating factors that a company is facing, the longer the hiring process will take. When dealing with most or all of these, the company may need to hire an interim CFO until a permanent hire can be brought into the role.
Should We Use a Recruiter or Executive Search Firm?
Executive recruiting firms are accustomed to working with CEOs, so they understand a CEO’s needs in their next CFO. Additionally, an executive search firm will have far more experience than anyone inside the company in communicating with, interviewing, and evaluating executives, making them the best choice for finding your next CFO.
But even among executive search companies, specialties exist. Look for a recruiting firm that has specific experience in the executive role you are looking to fill. When it comes to hiring a CFO ask yourself, “Who knows CFOs better than a team of CFOs searching for a CFO?” Seeking out this kind of specialization ensures that you will be able to communicate your unique needs while the firm imparts its expertise in looking for someone for that role. Without both sides of this equation a strong partnership cannot be created.
How Can We Determine if Our Hire is a Good Fit?
When a CFO is a good match for the company, a comfort level quickly develops among the individual and the rest of the organization, building rapport internally. This sentiment will often echo up to the CEO with reports that the CFO is helping other leaders manage their departments more effectively. Furthermore, investors, bankers, and other external parties will indicate that they trust the CFO as well.
The CEO, especially, will build a mutually trusting relationship with the CFO in which they can broach almost any business topic and get honest feedback. A CFO that is a good fit for the role will candidly contribute feedback on how the company is operating and what can be done to improve it.
What is The Cost of a Bad Hire?
Like any bad hire, there is a significant cost associated with finding a new CFO when the individual and the role or the company are a mismatch. However, when it comes to a key financial role, the cost can be much steeper because if a CFO is doing sub-optimal work, poor decision-making can occur, resulting in poor financial outcomes.
The cost of a bad hire in a CFO role is also wide-reaching, negatively affecting business perception, efficiency, and morale across the accounting and finance groups.
A damaged company reputation is the most significant cost to the business.
When a CFO comes in with a strong positive reputation and a good network of contacts and ends up not being a good fit, the public perception is that the company is the problem, not the CFO. While this could be true of any executive leadership role, it is far more damaging in the CFO role because the CFO is viewed through a lens of integrity. When a CFO does not work out, it casts doubt on the integrity of the entire business.
Aside from brand perception, there is also a very tangible administrative cost when a CFO ends up being a bad hire. The CFO role is so engrained in business infrastructure through banking agreements, insurance, and other business policies that it creates a huge corporate headache when the CFO leaves.
The CFO is given the keys to the kingdom, so when they leave the locks need to be changed, which creates a massive administrative hassle.
When the CFO is a fractional or project CFO that has been placed by a consulting-recruiting firm, a mismatch can be managed by working with the consultant or the client (or both) to facilitate better communication and address their needs more effectively. If a fit still cannot be achieved, the client may be transferred to another consultant at the firm to avoid a disruption. This is a benefit of working with a consulting-recruitment firm because companies that use their own HR teams to hire for the role will need to start their search again from the beginning, requiring a substantial time investment and incurring additional expenses.
Whether an actual expense or potential liability the steep cost of a bad hire in the CFO role is reason enough to work with a recruiter or an executive recruiting firm to assist in the hiring process. When you are ready to start the conversation around hiring a CFO, in either a full-time or interim capacity, please reach out to us. We would love to help get you started on the path towards stronger financial leadership to fuel your future growth!
