3 Common Mistakes CEOs Make When Hiring CFOs

Hiring for the top finance spot in any organization, whether it’s a controller or vice president of finance is a big investment of time, energy and money. If the recruitment process goes the way it’s supposed to, the company gets plenty of return on their investment and they shouldn’t have to go through that particular exercise again for years. However, if the recruitment process goes amiss and the company ends up hiring the wrong person for the job, not only is the up-front investment a write off,  a bad hire translates into an ongoing liability and headache for the CEO. Here are a few common recruiting mistakes CEOs of medium sized businesses make that often result in bad hire:

Assuming That All Financial Executives Are Created Equal

Even when there were three separate and distinct accounting designations in Canada (CA, CMA and CGA), it wasn’t all that easy to sort through the technical and professional differentiators between financial executives. Now that all professional accountants in Canada fly the CPA (Chartered Professional Accountants) flag, it’s harder than ever for people outside of the accounting profession to figure out what the best fit for the CFO chair looks like. And it’s not just a function of technical training. It’s a function of industry, company size, ownership, complexity, operational jurisdictions and any number of other factors. Someone who’s been successful as the vice president of finance of the Canadian division of a U.S. based multi-national logistics company may not be successful in your Mississauga based $70mm manufacturing concern.

It is essential that the CEO determine in detail before he or she starts the search, what kind of professional environment the prospective candidate will come from and what professional qualifications and experience they will bring to the table. If the prospective candidate hasn’t totally convinced you that he or she is going to nail the job during the interviews and you’re assuming that they’ll be successful based on their previous position, keep looking until you are convinced.

Taking the Path of Least Resistance

One of the first things a CEO does when they need to go to the market to hire their top financial executive s is to tap into their own network. They’ll reach out to other CEOs they know, they’ll ask their public accounting partner for referrals and they’ll canvas their friends. Inevitably, someone knows someone with experience as a controller, director of finance or CFO who’s currently unemployed and who would perfect for the job.

This candidate may be professional, technically very competent in their field, personable and best of all, ready to start right away. They may also be totally wrong for the job. If they happen to be the right candidate, that’s great – but make sure that you have a number of other candidates to compare them with before you come to that conclusion.

Hiring to Replace the Incumbent Instead of Advancing the Business

The knee jerk reaction of almost every CEO who’s faced with the prospect of replacing a CFO who’s either retiring or leaving for greener pastures is to find someone who’s the outgoing incumbent’s doppelganger. This is especially true in medium-sized owner-managed businesses where the turnover at the senior ranks is exceedingly low and executives can have tenures of ten or twenty years or more.

As much as the CEO may like the outgoing incumbent and appreciate his or her years of service, this is a real opportunity to rethink and in most cases re-engineer the CFO position and by extension, the finance department. What the business looks like today versus what it looked like when the incumbent was hired may be two different things. And as much as the incumbent may have been a great hire back then, the business may need an entirely different profile today.