How to Hire a Chief Financial Officer

The role of a chief financial officer has changed dramatically in recent years. In many growing businesses, the CFO serves as a partner to the CEO, helping outline strategy and drive the business toward its goals. Here are a few tips on finding the right person to serve as your CFO.

The role of a chief financial officer (CFO) has been evolving in business. No longer is the CFO only the senior finance guy or gal. In many growing businesses, the CFO is the partner of the CEO in helping lead the company to meet business goals. The CFO may supervise departments — such as human resources or information technology — in addition to handling the finances. The CFO may also help steer a company through mergers and acquisitions or an initial public offering. And, so, when hiring a CFO, it pays to really know what type of role you’d like the CFO in your business to fill.

“A great CFO is an integral part of creating a world-class management team that can make or break a business. Finding exactly the right person is a difficult task and requires a CEO’s ability to understand the most important skills you are looking for in recruiting this critical job.”

The following pages will cover how to determine if your business needs a CFO, what types of qualifications to look for in a CFO, and ultimately how to hire a winning CFO.

Hiring a CFO: Signs a Business Needs a CFO

  • Most small businesses don’t start out with a CFO. It’s often an overlooked role. In a small business, entrepreneurs and their staff do many jobs at once and someone usually takes responsibility for the finances. But as your business grows, there may come a time when the accounting, tax issues, and financial needs of your business necessitate hiring a CFO.
  • The big question is when a business needs to hire a CFO. Experts advise that there is no hard and fast rule but that business executives should look for certain signs.
  • Smaller companies often don’t have luxury of hiring one executive to only deal with numbers. They might also need that person to oversee operational pieces of the business, or to supervise departments, such as human resources or information technology. But the following are some guidelines for when your business’ financial needs may warrant hiring a CFO:
  • When your top-line revenue grows quickly. “When you start going above $5 million to $8 million in revenue, you start to have more complexity in your financial management,” Errett says.
    When you need a formal audit. Whether to satisfy your business’ stakeholders or a third party, such as a taxing authority or bank or venture capital investors, if you need to undertake a financial audit it’s best to have a CFO in place.
  • When you think your company might go public or engage in mergers or acquisitions. Audits are required by regulators and exchanges if a company wants to hold an initial public offering (IPOs). A CFO with experience with IPOs or mergers and acquisitions can help shepherd a company through the process.
  • When you have more than 30 employees. The larger your business, the more complex your financial operation. Staffing is often a sign that you’ve grown large enough to warrant hiring a CFO.

Hiring a CFO: The Qualifications

After realizing that your business needs to hire a CFO, it’s time to determine what qualifications you’re looking for in that role. Traditionally, a CFO was simply the senior financial manager, the person responsible for preparing the financial statements, dealing with banks and investors, planning your tax strategy, and developing budget forecasts. But the job descriptions for many CFOs have gradually broadened through the years to include more strategic planning in steering the business toward its goals. There has also been a growing requirement for the CFO to have more accounting acumen, with the push for more corporate accountability through such legislation as the Sarbanes-Oxley Act of 2002, and to include enterprise risk management among their duties.

Before starting a search, you should develop a job description. “You should meet with the CEO to see what that CEO is looking for in that CFO,” Hollein advises. “Sometimes that varies between companies if they are looking for more of a partner than an operational CFO. Determine your criteria and what the business needs are before deciding on the top qualifications.”

Qualifications that businesses might seek in a CFO:

  • Leadership skills. At the CFO level, these skills are paramount, as this executive will lead teams and manage people.
  • Experience in specific industry. This may be important to your business, although you may want to broaden these criteria to include hiring someone in a similar industry.
  • Accounting skills. More and more CFOs are certified public accountants (CPAs). One reason this qualification may be helpful to your business is due to the changing regulatory environment, both in the U.S. and the push for global accounting standards. But Errett stresses that CPA credentials may not be necessary for every CFO.
  • Communication and presentation skills. A CFO must have the skills to deal with a board of directors or outside investors to present complex information in a way that can be understood. This becomes more important if your business is considering going public, as the CFO will be presenting information to potential investors and the public.
  • Involvement in industry organizations. This is an important way for a CFO to benchmark your business against best practices in the industry.

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.
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.

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.

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.

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,. “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.”