Hiring a CFO

Do You Need to Hire a CFO?

In most successful small businesses, there comes a time when circumstances dictate a necessary change in the Finance department. The tell-tale signs include:

• The realization that your bookkeeper is not growing and developing as your company continues to grow and develop
• The financial reporting is inconsistent, concerning accuracy and/or timeliness
• The size of your company (revenue, number of employees, complexity of organization) will determine your need for a CFO
• When a company, especially a small to mid-sized company, has grown large enough to require accounting, treasury, and tax functions, as well as when strategic planning is needed for an organization
• When your top-line revenue grows quickly - hitting more than $5 million in revenue -  you start to have more complexity in your financial management
• When you have more than 30 employees. The larger your business, the more complex your financial operation.
• 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
• Audits are required by regulators and exchanges if a company wants to hold an initial public offering (IPOs), or be involved in a mergers or acquisitions

OK, So Who Do I Hire?

Determine which qualifications you believe to be most important to 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 corporate tax strategy, and developing budget forecasts.

But nowadays, business is more complex. A CFO must be a strategic thinker, an excellent communicator, an organized manager, have a strong business sense, and have exceptional finance skills. He or she must be able to lead the Finance Department, but also the wherewithal to speak frankly and convincingly to the CEO, especially when aggressive or radical change clashes with fiscal responsibility.

Here are some traits, characteristics, and experience that CEOs should carefully consider in hiring (or promoting) a CFO. The priority of these traits will vary from company to company, but all of them should be weighted significantly when making this very important hiring decision.

• Accounting and Financial Competence: This is a no-brainer, in terms of the first priority. Many CFOs are certified public accountants (CPAs) and/or MBAs. The ability to put numbers accurately in a business context is absolutely essential to what every business needs to be successful.
• Integrity and Ethical Standards: Again, another no-brainer. While these traits are important for any member of senior management, it is absolutely imperative for the CFO. The proper handling of an organization’s finances can make or break the business.
• Financial Vision and Foresight: A CFO must be in tune with the business’ market, enabling him or her to create and implement business plans, and to anticipate financial management issues.
• Deep Understanding of Business: This may be important to your business, although a CEO may want to broaden these criteria to include hiring someone in a similar, yet different industry. In Finance, best practices can often transcend industry lines, but a fundamental knowledge of business is always necessary for the CFO.
• Excellent Communication Skills: The CFO needs to be able to communicate the financial health of the company to all stakeholders, and present complex information in a way that can be understood by non-financial people. This becomes even more crucial if your business is going public, as the CFO will be presenting information to analysts, potential investors, and the public.
• Confidence: A CFO needs the ability to make decisions on behalf of the company with confidence and assertiveness. People can sense fear and trepidation. As much as the CEO, the CFO needs to be able to “walk the talk.”
• Leadership: It is all well and good for CFOs to have confidence in themselves, but they must also inspire that confidence in others. This requires demonstrating emotional intelligence, self-awareness, self-regulation, motivation, empathy, and social skills. This executive will lead teams and manage people, not just be immersed in numbers.
• Perspective on Risk: The CFO should show a willingness to try new things and take calculated risks to grow the business and improve the financial position of the company.
• Results- Driven: The CFO needs to set goals that are specific, measurable, achievable, relevant, and logical.

Now, if you find a candidate with all of the traits listed above, my suggestion is to hire him or her immediately! But most candidates will have some, several, many, but maybe not all of these traits. As the hiring manager for this position, you need to assign a weight to each of the traits, and decide which are imperative for your business now, and which can be coached over time. As a CEO and business owner, this is one of the most important hires you will make. So take your time, and do it right!  If you're unsure about anything, let's talk.