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What You Need to Know About Being a CFO Headhunter

May 31, 2019
by: Lance Osborne
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I have a very specialized practice recruiting CFOs for small and mid-sized Canadian companies. The majority of my clients are owner-managed, and the revenue range of my client base tends to fall between $25 million and $250 million.

Recruiting a CFO for a $75 million owner-managed company is different than recruiting one for a $750 million company in that the search criteria can be quite a bit more nuanced for the owner-managed company than the large public company. Also, the impact the right CFO can have on a mid-sized, owner-managed company can be quite a bit larger than their counterpart in the large public company.

I’ll get a call to make a proposal for a CFO search for one of four reasons:

  1. The company needs to replace an outgoing CFO.
  2. The company wants to (confidentially) replace an under-performing incumbent CFO.
  3. The company wants to upgrade the person leading their finance function from controller to VP Finance.
  4. The company is hiring its first CFO.

Btw, in the small and mid-sized market, the title CFO is sometimes misunderstood. Some people think it’s synonymous with VP Finance. While a VP Finance is often the de facto CFO, a mid-sized company’s CFO could also be a Director of Finance; it’s a function of size, complexity and how hands-on the person heading up the finance function needs to be. I’d estimate that almost half of the CFO searches I conduct are actually for Directors of Finance.

In all the circumstances above – where an owner-managed company needs to hire someone to head up their finance function – there are five questions that need to be addressed:

  1. How much horsepower does the company actually need (VP Finance vs Director of Finance)?
  2. What does the owner-manager want accomplished by the CFO in the short term?
  3. How much operational and/or strategic input does the owner-manager expect from this position?
  4. Where will the company be in five years?
  5. What sort of person will fit in well with the owner-manager and the rest of the executive team?

How Much Horsepower?

As I mentioned previously, almost half the CFO searches I conduct carry the title Director of Finance. That’s a function of the market I specialize in. Executives in owner-managed companies are, for the most part, very hands-on. Their companies aren’t typically of a size or complexity that justifies two or three layers of management. Their executives certainly need to be “heads-up” but they also need to be “hands-on”.

In most of the Director of Finance searches I conduct, the company will already have an accounting manager or controller, but the finance and accounting function still needs to be closely overseen and there are inevitably special projects like ERP conversions that need to be quarter-backed by the CFO.

Clean up the Mess

In the circumstance where a company is hiring their first CFO, upgrading from a controller, or replacing an under-performing incumbent, the over-arching mandate is that the finance and accounting needs an overhaul. When I’m going through the needs analysis process with the owner-manager, he or she inevitably has a list of things that need to be fixed, systemic changes that need to be made, and initiatives that they’d like the CFO to get to once they’ve cleaned up the mess.

Operational and Strategic Input

Growing companies almost always get to the inflection point where the owner-manager realizes that if they’re going to continue to grow at their current pace they’re going to need more from the finance function than closing the books every month. Long term growth plans involve financing, capitalization, cash flow and myriad other considerations that a good CFO can help with.

And a seasoned CFO with years of experience in other companies will have seen other ways of successfully dealing with some of the operational challenges the growing company is currently facing. They can often make significant contributions outside of the finance lane.

Where Will We be in Five Years?

There’s an old saying that you don’t dress for the job you have, you dress for the job you want. Similarly, owner-managers should hire for the company they’re going to have in five years and not for the company they are today. If your company is $25 million in revenue today, and you expect to continue growing at 20 percent year over year, you’re going to be north of $60 million in five years – and that’s the company you should be hiring for. And if you plan to find a strategic buyer in the next five to ten years, it’s crucial that you hire someone who can maximize enterprise value every step of the way.

The Beer and Pizza Test

Owner-managers are a special breed – entrepreneurial, hands-on, demanding, passionate about their businesses, and usually pretty strong minded. And surprisingly, they often don’t apply the same rigour about fit to the person heading up their finance function as they do when they hire someone to head up sales or operations.

I’d counter that a good CFO is every bit as vital to the success of a growing enterprise as any other executive on the team, and the same fit criteria need to be applied. A good CFO isn’t huddled away in their office, someone you meet with once a week or so. A good CFO is out on the floor, interacting with the staff, other managers, customers, suppliers (and of course, you) on a daily basis. So whatever your particular style might be, you need to be comfortable with the idea of regular interaction with your new CFO. If you can’t see yourself going for a beer and pizza with a prospective CFO (assuming, of course, that you like beer and pizza), move on.

If you think you may be in the market for top financial talent in the next few months, call me direct or email me, for a no obligation consultation.

(416) 567-7782 lance@osbornefinancialsearch.com

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