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Thoughts About Successful CFO Hiring

I was recently interviewed by Jack Sweeney for his podcast series called CFO Thought Leader. This was the second time I was interviewed by Sweeney, and I enjoyed the conversation. I believe you may find the conversation interesting and relevant.

Here are some of the things that were discussed. (You can find the listen to, download or find the iTunes link below)

  • Helping companies hire their next CFO with the correct chemistry for the company.
  • Key reasons a company needs to work with an executive search firm to hire their next CFO.
  • The courtship process in hiring a new CFO.
  • Young CFOs who are “Jumping the curve”.

“Patience is a virtue, and CFOs need to be virtuous.”

“Today’s CFO is all encompassing. CFOs have to be involved and responsible for everything. As CFO, you need to know what you can and cannot do. The importance of the complete finance team allows you to be as successful as possible.”

  • Private Equity firms and the influence they have over the placement of CFOs in mid-size market.

“The CFO is a significant part of the valuation of a company.”

  • The CFO career path – jumping to larger ship vs. niching down.
  • CFO Hiring – from within the same industry or outside the industry?

If any of these topics are of interest to you, you will find this podcast to be worth listening to. (23 minutes)

Which comments resonate most with you? Let me know what you think below, or privately by email.

Download | Subscribe to CFO Thought Leader Podcast series on iTunes | Link to the CFO Thought Leader web page with more details about this podcast

 

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CFOs, Are You Doing Your Job?

As an executive search professional that focuses on the office of the CFO, I am involved with the hiring of Chief Financial Officers for companies. Unless I am working to help a company hire their first CFO, the mandate I have is to replace a current CFO or a Chief Financial Officer that has left.

While only having the time to work on a handful of CFO searches at a time, you may know that I track CFO movement on my CFO Moves Blog. When I combine my personal direct involvement with helping companies hire their Chief Financial Officer with my tracking of hiring and unhiring of CFOs across the US, Canada and the UK, I see many CFO getting replaced.

You can understand that this a topic that interests me. And if you are reading this, the topic probably interests you as well.

I came across a very interesting academic working paper, CFO Succession and Corporate Financial Practices, authored by Ellen Engel, Feng Gao and Xue Wang, that was published in October 2013. This paper looks at reasons and financial reporting consequences of CFO successions. The document is a properly researched academic paper, and makes for an interesting read if you are academically inclined.

Here is the Abstract of the document which summarizes the findings of the research:

We examine the determinants and financial performance consequences of Chief Financial Officer (CFO) successions. We argue that if internal monitoring mechanisms are effective, there should be a greater probability of forced CFO departures in firms with poor financial reporting and capital management performance, and resulting improvements in financial practices following forced turnovers. We test these hypotheses over the period 2002 to 2008. We find that

(1) the incidences of accounting restatements and debt covenant violations are significantly associated with the probability of forced CFO turnovers;

(2) firms are more likely to hire successor CFOs from outside the firm following accounting restatements, especially those due to irregularities;

(3) the hiring of outside CFOs is associated with improved financial reporting quality.

Further, these findings are concentrated in firms with majority independent boards, suggesting that outside directors play a greater role in monitoring CFOs than inside board members.

These findings are not surprising.

When CFOs don’t do their job, they get fired and replaced.

As CFO, are you doing your job?

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CFOs: Do you want to become a Controller? This CFO did just that.

Non-CFOs might think that CFOs are people that look backwards, not forwards. I speak with Chief Financial Officers every day, and I can tell you that they look are interested in moving forward with their careers. They want to improve, grow and succeed. They want their next career opportunity to be bigger, better and have more responsibility. Many CFOs want to be able to grow into the CEO role, and as I report each Monday morning in my CFO Moves blog, a number of CFOs do just that.

Cindy Kraft wrote a blog just yesterday called CFOs Really Can Move On and Up! which deals with how a CFO can position themselves for the CEO role. 

So this CFO Move last week really caught my attention. 

Courtesy of Xerox Corporation

Courtesy of Xerox Corporation

Luca Maestri, CFO of Xerox, let his company know that he would be taking a position with a new company. This is not an uncommon occurrence. 

He also informed his employer that he will be taking on the role of Controller at his new employer. This does not happen often. 

Now you need to keep in mind that the new employer is Apple. But it is not like he was working for a small company either as CFO. He was working for Xerox! 

So why would a CFO at one company become a Controller at another company? 

I have not had the opportunity to speak with Mr. Maestri about his decision. I’m sure he had good reasons. If Mr. Maestri was consulting with me about the move I would most probably tell him that I think it’s a great move. 

However, most CFOs are so focused on moving forward in their career and getting promoted that they often lose sight that the best opportunities for them may require ‘stepping down’ a little. 

Luca Maestri did just that.

As CFO, what can you learn from Luca Maestri?

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Different companies need different CFOs

© Copyright 2013 McKinsey & Company

CFOs are capable people. Sometimes, when a CFO is actively looking for their next opportunity, they are less selective in the type of company or CFO role that they choose. When they make a career choice that is not appropriate for them, they can spend years trying to repair the choice they made.

2013 has just started, and already there is new CFO oriented research that can help CFOs and the companies that hire them. Today’s CFO: While profile best suits your company?  (Note: there is no charge for the report, but registration is required to download) by McKinsey & Company, identifies four profiles of today’s CFO:

    1. The finance expert
    2. The generalist
    3. The performance leader
    4. The growth champion.

The McKinsey report, authored by Ankur Agrawal, John Goldie, and Bill Huyett, identifies which companies can best benefit from each of these profiles.

Agrawal et al. do realize that most CFOs do not fit precisely into each of these profiles, and have provided questions that CEOs and Boards should ask when beginning their search for their next Chief Financial Officer.

As an executive search specialist helping companies hire their next CFO, I find the report clear and concise. Reading this report can help CFOs better position themselves for the remainder of their career, and help CEOs and Boards hire the right person they need in the CFO chair.

What type of CFO are you?

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Top 12 Samuel’s CFO Blogs of 2012

20132012 sure has been an interesting year.

And I’m looking forward to 2013! I’m looking forward to:

  • Working with my clients at Stanton Chase and providing them with excellent service and value in retained executive search.
  • Staying close to CFOs in my network, and continuing to add value to their businesses and careers.
  • Continuing my blogging, both here and at CFO Moves. I find it humbling that I have people that are not only interested in what I have to say, but have signed up to ensure they don’t miss any of it.

It is customary as the year turns to a close to look back at the previous year.

Blogging is great, but sometimes people can miss out on some very valuable insights or content. So, to make sure you didn’t miss what other people thought was worth reading, I would like to share 12 of my most popular CFO Blogs in 2012.

12) Negotiating your CFO Employment Contract

11) 5 Steps to Building your Finance Dream Team (and 3 tips on how to get it done)

10) The Value of “Thank You”

9) 5 Reasons why Talent Development is a Challenge for CFOs

8) Road Map to Successful CFO Relationships

7) 5 Most Popular Names for CFOs (2012 Edition)

6) The First 90 Days of a New CFO

5) 1 key difference between your LinkedIn Profile and Resume

4) Dear CEO & Board: You can’t afford to hire the wrong CFO.

3) Investor Relations for the New CFO – 6 Steps for IR Success

2) 4 Reasons you should use an Executive Search Firm when hiring your CFO

And the most popular of Samuel’s CFO Blogs for 2012 is:

1) How a Recruiter sees a Candidate (You may not like the analogy)

If you like these blogs and want to ensure you don’t miss any of them, please click on the SIGN ME UP! button on the right.

Happy Holidays and all the best for an amazing 2013!

Samuel

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LinkedIn vs. Resume – The discussion continues

CFO Coach Cindy Kraft blogged CFOs and LinkedIn, the Evolution. The blog discusses the story of a recruitment firm that would only be focusing on working with CFOs that have a LinkedIn Profile.

My readers will know that I am a big proponent of LinkedIn for CFOs (or any other executive). You can read my previous blogs on the subject:

While I am a fan of LinkedIn for CFOs, I think that people that are looking to hire CFOs (search firms included) that focus solely on LinkedIn are missing a large pool of talent.

Today, it is easier than ever to find talent using LinkedIn. This makes companies and some recruiters (retained and contingency firms) take shortcuts to find talent.

Is LinkedIn a great place to find talent?

Absolutely.

Is it the only place to find talent?

Absolutely not. (Read: When hiring a CFO, is LinkedIn the place to look? )

Finding talent is easy. Finding the best talent to meet the needs of a company is not. Securing that talent is even harder. Ensuring that the talent is hired, stays and delivers multiples of the value of the cost spent on hiring and compensating that talent is why a company decides to work with a quality executive search firm in the first place.

What lessons can CFOs (or other executives) learn from this?

Executives that are not actively searching for their next opportunity beware: You want to be hired by a company that understands the value of executive search and is willing to retain a quality search firm to not only find you, but secure you and keep you for the long term.

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On the road to CFO, there are winners, and there are losers

A recent article caught my attention on this subject from The Sydney Morning Herald by Malcolm Maiden titled “Fegan exits Telstra after CFO snub” .

The article discusses Telstra’s recent appointment of their new CFO, Andy Penn. Mr. Penn, former chief executive at AXA Asia Pacific, was hired after a through CFO Search, from both inside and outside of the organization. It also discusses how Paul Fegan, an executive at the company, has left following the hiring of Mr. Penn, seemingly, as the article implies, due to Mr. Fegan being snubbed for the CFO role which he thought he was going to be appointed to.

While this story takes place in Australia, it is a common one in the United States and around the world. As executives jockey for position to move up the corporate pyramid, the closer one gets to the top of the pyramid, the greater the opportunity is for an executive to be ‘snubbed’.

Does it make sense to perform a CFO Search outside a company when there is a strong talent pool inside the company? Absolutely. If a company wants to hire the best for their very senior roles, not considering “outsiders” in the nomination process does the company a disservice. Hiring the best CFO is a strategic choice. In making these strategic choices, there will be winners and there will be losers.

Are the losers really losers? No. Strong financial executives who build their reputation and their brand can take their experience elsewhere and provide another company with top-notch leadership.

Does using an executive search firm help? Definitely. When faced with a difficult decision to hire the best CFO, using a search firm not only allows a company access to the best CFOs for consideration, it also provides the company with objective process and guidance to help make the best hiring decision possible for this very important role.

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I would like to take this opportunity to wish all my readers a very Happy Holiday season and a Happy & Successful 2012!

Samuel

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Executive Search: Do CFOs understand the difference between Cost & Value?

Last week I wrote 4 Reasons you should use an Executive Search Firm when hiring your CFO. Cindy Kraft brought to my attention a poll that was running in SmartBrief for Finance. These are the results of the poll.

I agree with Cindy’s analysis of the poll results. I find it interesting that it is OK for CFOs to call every Executive Recruiter when they are looking for their next opportunity, while close to half of those polled don’t see the value in using a Search firm when they need to hire.

Can’t say I’m surprised by the results.

I love CFOs. Heck, they are my favourite people.

Except.

Except too many CFOs worry too much about cost, and not enough about value. Unfortunately for these myopic CFOs, this statement applies not only to recruitment, but to many major decisions that they take as a CFO.

Another point I find interesting is that while 30% of CFO see the value in Executive Search, 1/3 of these CFOs don’t know how to sell the value proposition internally.

To the people that responded to this poll, here is my feedback for you based on your answer:

Yes, but I’m not sure there is a worthwhile ROI: Then you haven’t asked the right questions or your search firm isn’t explaining the value of the services you are reluctantly paying for. Either ensure you get value for the search mandates you give them, or work with someone that will give you value.

No, and we do just fine recruiting top talent without them: Congratulations on this accomplishment. Hiring top talent isn’t easy. Be aware that you could be hiring mediocre talent thinking they are top talent. Also keep in mind that while you may be able to attract top talent in some areas of your company, you may still need to hire using an executive search firm for key roles.

Yes, and they are worth every penny to get top talent: I love you. Call me at +1 (201) 961-0838 for your next executive search to receive even more value than you are getting now.

No, but I wish we did: If you took this poll and answered this question, email me to let me know WHY you wish you did.

Thank you Cindy for bringing the poll to my attention (It was in my email inbox, but I didn’t get to reading it). And if you are a CFO and you are not signed up for SmartBrief for Finance, you really should be.

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4 Reasons you should use an Executive Search Firm when hiring your CFO

As CEO, Board Member, or VP of Human Resources of your organization, you may find yourself in a situation where you need to hire a CFO. Some companies take the decision to perform a search for their next CFO by themselves. This is a mistake. In past blog postings, I have detailed the reasons you cannot afford to hire the wrong CFO, asked if it’s time to replace your CFO and how do you replace your CFO?

When you do a search for a Chief Financial Officer on your own, it is a misnomer to call it ‘search’. What you are really performing is a ‘look’. To find a needle in a haystack, ‘looking’ will not suffice – you need to do a proper, methodical search. And just because you find a needle, it doesn’t mean that it will be the right needle you need to get the difficult job done.

Searching for your CFO requires that you have the resources, network and capabilities to succeed. An Executive Search Firm that specializes in the Chief Financial Officer,

• Understands what you need,

• Knows how to find the CFO you need,

• Actively engages in a methodical and detailed search,

• Has the experience necessary to get your next CFO interested in your opportunity,

• Is intimately aware of the market and ensures that negotiations are fair to both parties, and

• Works after your CFO is hired to ensure that they have the right support in place to succeed.

When you look to hire a CFO on your own,

• You have not done a proper Needs Assessment. Do you really know what knowledge, skills and abilities your next CFO needs? Are you making an assumption, or has an expert made you think more about what you really need?

• You are missing the best CFOs. CFOs that are happy in their job are too busy to be looking at job postings. Without an active search, done by people experienced in gaining the attention of a busy CFO, you are missing what could be the best candidates.

• You are tapping in to your network. This is a good thing. Except does your network really have access to the best CFO that you need? Can they attract the right CFO for your needs that is currently working and happy at another company?

• The CFO you hire will not be a match. You’ve hired a square peg CFO to fit your round hole.

If you have the important responsibility of being involved with hiring your organization’s next CFO, it is important to be honest with yourself. If you are not using a Search Firm for hiring your CFO, you are probably resigned to the fact that any CFO will do.

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How do you replace your CFO?

Last week, I wrote about how you know it is time to replace your CFO.

So how exactly does a company hire their next CFO when their current CFO is still in his or her chair?

There are 2 choices.

1) Let the CFO go.

2) Look (confidentially) to replace the Chief Financial Officer while they are still employed.

Let the CFO go

I recommend letting the CFO go before replacing them, if:

1) The CEO and the Board has lost confidence in the abilities of the CFO, and

2) There is a senior finance executive (or sometimes, an experienced Board member) in the company that can take the reins on an interim basis.

Be aware that when performing your new search for your Chief Financial Officer, prospective CFO candidates will want to know what happened. I would recommend disclosing as much as you can, because CFOs can smell fertilizer from far away.

Perform a confidential CFO Search

A confidential search for a CFO is difficult because most CFOs pretty much know all the important details of what is going on in the company.

You can choose to do a Search for your Chief Financial Officer without a using an executive search firm. It is not a good choice, but it is still your choice.

I highly recommend using an executive search firm. (I always recommend working with a search firm when hiring a CFO, and even more so in this sensitive situation.) A reputable search firm understands the complexities of working on a confidential search, and knows how to attract candidates to you without word getting out on the street, or getting back to your current CFO.

One important issue to address when using a search firm is how you pay your retainer for this search. As the CFO may be one of the people signing cheques in your organization, the last thing you would want is the CFO to see an invoice for a CFO Search.

Contact Information

You can reach Samuel by:

Telephone
San Francisco: +1 (415) 738-2070
Montreal: +1 (514) 907-0925

Email: [email protected]