Poor hiring practices have a way of coming back to haunt you -- especially when you're trying to fill a top financial post, such as chief financial officer. That's what CEO David Feldman found out after his company, Ampro Computers, in Sunnyvale, Calif., had to terminate a few unsuccessful hires, including a CFO -- and got socked with wrongful-termination suits that cost $400,000 in settlements and legal fees in 1991 alone.
Over two years 30% of Feldman's time was spent on legal matters related to bad hiring decisions, he estimates. "When you've got a growing company, the cost of hiring the wrong person can be absolutely catastrophic," he says.
Part of the problem for CEOs who lack a financial background is confusion over job responsibilities and appropriate qualifications. "I spent a lot of time trying to find a good definition of a CFO just to figure out what we needed," Feldman says. For similarly challenged executives, here are some guidelines on what to look for in a CFO:
Shared values. "In hiring any top manager, including a CFO, you've got to look for someone whose goals, ethics, even chemistry fit with those of your team," says Feldman. At Ampro, employees have identified financial security and profitability as priorities. "We want someone who understands what we mean when we talk about ethical entrepreneurial growth," he adds.
Hands-on experience. "We don't want a CFO who comes from a big accounting firm but has never stayed awake nights trying to figure out how he or she's going to make payroll," says Feldman. He adds, "What I'm seeing within our organization is that we're getting flatter and flatter, rather than more hierarchical. We need managers who can work without large staffs or lots of clerical help. We look for managers who have already worked effectively in that kind of environment."
Potential to help your company grow. If you envision expanding through international trade or acquisitions, hire a CFO with appropriate experience. Similarly, if your profit margins need to be improved before the company can embark on an expansion campaign, look for someone who's helped manage a turnaround or two.
Technical expertise. Once your company has progressed beyond a size at which its finances can be managed by a bookkeeper, you'll need to hire someone who understands the basics -- accounts payable and receivable, and inventory control, for example -- and more sophisticated financial issues such as investment management and, if appropriate, international tax planning. The person should have good contacts with local bankers and with accountants at large regional or Big Six firms.
Now Feldman is convinced that the best way to fill management positions, especially in the financial area, is to rely on recruiting specialists to help define job responsibilities and evaluate potential candidates. But he'll be careful to supplement their advice with tips from Ampro's accountant, banker, and corporate lawyer.