Business-Breaking Mistakes to Avoid When Hiring a CFO

Business-Breaking Mistakes to Avoid When Hiring a CFO

As your company grows, managing financial decisions becomes more complex. On top of basic bookkeeping and cash management, there’s forecasting and analysis, risk management, and financial reporting.

The CFO’s job is to manage finance teams and use financial data to make strategic decisions that promote business growth. They oversee financial reporting and risk management, perform data analysis and financial planning, and report results to key stakeholders like the CEO or board of directors.

Your CFO is a crucial hire that can make or break your business. The CFO you hire needs to be forward-thinking and strategic, have specific knowledge and experience in your industry, plus exemplary leadership and people skills.

Hiring the wrong person for this role can be highly detrimental to your company. A bad CFO can damage your company’s reputation, lower employee morale, and waste your resources. If you have to terminate them, you’ll likely pay high administrative costs to remove them from banking agreements, insurance, and other contracts. To help you avoid this, we’ve put together a list of some of the most common mistakes that companies make when hiring a CFO.

Doomed From the Start

If you’re advertising the role in the wrong places, your new CFO will be doomed from the start. Posting the opening on job boards and asking your contacts for referrals might be fine for less-influential roles like staff accountants or sales representatives. But if you’re looking for a CFO, this kind of recruiting won’t give you the caliber of candidates you need.

You might end up with candidates who have been unemployed for a while. Prolonged unemployment can lower inhibitions and expectations, causing them to care less about compensation, company culture, and the actual role itself. This creates a possible flight risk. The candidate may seem fine with lower pay and longer commute times at first. But once the reality of the role has set in, they might realize this position isn’t as desirable as they thought and decide to look elsewhere.

Instead of using the same strategies you would for other roles, consider hiring an executive recruiting agency to find the best candidates. Recruiters who specialize in executive hiring will know your industry and the experience required to be successful in the position.

Spotlighting the Wrong Credentials

A candidate’s credentials may seem more important than experience at first. But in reality, their experience should carry more weight than specific degrees or certifications.

Startups often fall into this trap. They emphasize searching for candidates with Certified Public Accountant (CPA) credentials because this is the most well-known financial certification. But they fail to consider other credentials like CMA or CFA, as well as actual experience.

Potential candidates need to have relevant experience in your industry. Each industry has its own principles and best practices that influence how finances operate. And simply working in the industry isn’t enough; they should have experience handling corporate finances in your specific area.

It’s also important for the candidate to have experience working at a company of a similar size. This will help to align expectations and ensure that your new CFO can implement practical and beneficial systems for your business.

Underestimating The Need for Great People Skills

A bad manager can make or break your business—and this holds true for executive roles. A candidate might seem perfectly capable, knowledgeable, and experienced on paper. But that doesn’t necessarily mean that they have the right communication and people skills, or that they’re a cultural fit for your company.

It’s important not to underestimate these kinds of qualities. How the CFO interacts with their coworkers and fits into your company culture can affect employee engagement, productivity, and growth. Senior roles like this one should be filled with candidates who can positively impact your company’s environment and your team’s morale.

Not Using the Hiring Process as a Strategic Opportunity

When replacing a CFO, many companies try to fill the exact position that the previous CFO held. But the company has most likely grown and evolved since that person was hired. In terms of actual functions and responsibilities, the role you’re hiring for now probably isn’t the same one you hired for years ago.

You can use the hiring process as a strategic opportunity to reevaluate the position. How can a new CFO support your current needs and expected future needs? Consider this question carefully, and then use your answer to revise the role. This will help you attract the right person—someone who can move your company forward, rather than just maintaining the status quo.

How to Hire a CFO That is Right for You

Proper planning and preparation will allow you to hire the right CFO for your company. If you don’t know what you’re looking for, you might stretch out the hiring process or hire the wrong person—both of which will cost you in the end.

Instead, devise a plan for how you’ll recruit and assess candidates. Identify the qualities, experience, and skills your business needs, and critically evaluate the role of your new CFO before you hire them. Taking a strategic approach to finding your next CFO is an integral step in laying a strong foundation for the success of your business in the future.

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