How to Hire a Chief Financial Officer

 

FEI conducts an annual Executive Compensation survey, which provides a year-to-year comparison of compensation for financial professionals in both public and private companies. The latest survey, releases in April 2009, found that the base salaries of CFOs remained proportionate to companies' annual revenues. For public company CFOs, the average annual compensation was $410,100, of which $296.800 was base salary. For private companies, the total compensation was $257,800, of which $199,600 was base salary.

Dig Deeper: What to Look for in a Chief Financial Officer

Hiring a CFO: Recruiting Candidates

Now that you have developed a job description and a budget for compensating your future CFO, you need to turn to the task of finding suitable candidates for your business.

The first question you need to decide is whether to use a recruiter or not. This is a difficult decision and one that should be decided by a cost/speed analysis, meaning weighing your budget and how quickly you need to fill the position. If you need to fill this job rapidly and the business can absorb the fees associated with using a recruiter, it makes sense to go that route. It is also a "buyers" market -- there are many more candidates than there are jobs these days -- and a recruiter can help you wade through resumes from people who don't have the right qualifications.

Benefits of using a recruiter:

  • Recruiters may already have a pool of candidates.
  • Recruiters know how to find suitable candidates, vet them, and close the deal.
  • It may be more time efficient to use a recruiter. "You hopefully get to the bulls eye faster than you could by yourself," Errett says.
  • The time you don't have to spend looking for CFO candidates you can spend running your business.
  • Using a recruiter forces you to develop a detailed job description for what you want in a CFO.

Downsides of using a recruiter:

  • The cost associated with recruiters is typically 30 percent of the CFO's annual first year compensation, Errett says. Included in this fee is the guarantee that candidates will be replaced if they do not work out within a three- to six-month period. But, still, that fee may be out of the range of many small businesses.
  • Not all recruiters are created equal. If you don't choose the right recruiter, you could burn up a lot of time not finding the right candidate.
  • If you're not clear about what you're looking for to the recruiter, you may also waste a lot of time -- or end up spending a lot of money to hire someone who isn't right for your business.

If you choose to not use a recruiter, using your personal and professional network to find the right candidate can be very effective. Developing a precise job description and circulating that to your network can reap positive outcomes. These days, that has become even easier with the help of online social networks, such as LinkedIn, Facebook, and Plaxo, Errett says. "In my everyday experience, when I'm looking at a deal or interviewing as a board member, it is very rare that I find a candidate for whom I don't know 10 people who know that person," Errett says. "This is where the power of social networking and community is fascinating." In addition, professional organizations, such as FEI, post job openings to members and those organizations may be worth contacting if you have an opening for a CFO.

Dig Deeper: Trying the Rent-to-Own Model to Hiring a CFO

Hiring a CFO: Interviewing Candidates

Whether you work through a recruiter or not, you want to come up with a short list of candidates to interview. Face-to-face meetings are essential to make sure that the CFO will be a personality fit with the rest of your company leadership.

The CEO must determine who are the right management team members and outside resources to conduct the interviews with candidates. Often, key team members that will work directly with the CFO are included in this process, as well as board members and any trusted external advisors, Errett says. She advises taking the following steps:

  • Determine interview content. Each interviewee should be given an interview outline that highlights the core aspects of what you are trying to learn from the candidate. This should include a technical skills assessment as well as a cultural fit assessment.
  • Interview feedback. Each interviewer should return a candidate assessment form in a timely manner and participate in a feedback meeting that discusses the strengths and weaknesses of each candidate. The outcome of this meeting will be a decision on the candidate of choice.
  • Reference checks. The reference check portion of this process is critical and should be the role of a recruiter if one is used. Whether or not a recruiter is not used, it is critical to thoroughly check references. You also want to use backchannels and personal references in checking up on a candidate, and avoid relying only on references provided by the job candidate.

"If everything checks out, often times you do a credit check and sometimes background checks are done," Hollein says. "You need to do due diligence, especially now."

Once you focus on your first choice to hire as your new CFO, the CEO should make the direct job offer and answer any questions/concerns that the candidate has. The positive chemistry between a CEO and CFO is really the key to a successful working relationship, Errett says. "These two jobs work so closely together that it is absolutely essential to have a very strong bond between the roles."

As in any recruiting effort, bringing a new employee on board in a positive way is critical to the long-term success of the person. When bringing in a new CFO, you most likely will draw up an employment contract spelling out what is expected of the candidate and how they will be compensated. Once, again, the CEO must take a leadership role and be out front in this process by positioning the CFO as a senior and important part of the company's management team and future. The more the CEO establishes their unwavering support for the CFO, the greater the chance of success.

"That's when the hard work starts," Errett says. "These are hugely important jobs. You're inviting someone into your family, your sandbox, and having a way to integrate them well is very important."

After all, you don't want to be recruiting a new CFO every year. "It's expensive to have to recruit. You don't want to do it frequently. You want to do it right and hire the right individual, even though there's never a 100 percent guarantee," Hollein says. "You want to make sure that the candidate will help achieve your goals, help grow the firm, and meet what your strategic goals area as well."

Dig Deeper: What to Pay Your Management Team

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