The 1, 2, 3’s of Hiring a CFO

The key to success in any hiring process is finding the right fit between your organization’s needs, culture and leadership and an individual’s skills, interests, and personality. The search for the right senior-level financial manager is no exception. Nonprofit organizations need to be clear about what type of role they want the senior-level financial manager to play within the organization and what challenges this individual will need to address.

CFO or Controller?                                                 

Even though organizations may use the titles interchangeably, there are key differences between a controller and a CFO. A controller tends to be more focused on producing financial statements and managing the technical aspects of accounting and finance, such as accounts receivable and payable. The CFO is usually strategic in nature; not just creating the budget for the organization, but also focusing on risk and impact on financial operations and programmatic initiatives based on budgetary considerations. CFOs do more than analyze the financial statements; they interpret the implications for the organization for a particular fiscal year and beyond. CFOs serve as an active strategic partner to the Chief Executive Officer and work across the organization with the senior management.

According to an article published by The Bridgespan Group, four things determine at what point in your growth you will need a CFO:

• The organization’s size
• The number of different types of funding sources
• The activities that you engage in that require different types of financing, and
• The strategic growth you anticipate that requires long-term financial planning and analysis

CFO roles vary across organizations, depending on the size and complexity of the organization. Organizations with budgets below $1.5 million often cannot afford and/or don’t need the specialized skills of a CFO; therefore, a Controller may be a better fit for the organization’s needs.

Organizations with budgets between $1.5 million and $10 million (“small”) may need a role with responsibility for multiple areas, including accounting, real estate, technology, legal, and administration. Another option for small organizations may be to hire a part-time CFO or outsource the function.

For organizations in the $10 million to $40 million budget range (“medium”), CFO positions can be similar to those at either large or small organizations, depending on the complexity of the organization’s programs and revenue sources. If a mid-sized organization offers highly diverse programs, such as multiple income-generating businesses or programs at multiple sites, or if its funding comes from several sources e.g. government contracts and earned income, then the CFO function would probably have a narrow focus like that at a large organization. The job of a CFO at a mid-sized organization with less complex funding—say, mainly gifts from individuals, or relatively simple programming, would probably resemble the small-organization model.

In contrast, CFOs of organizations with budgets over $40 million (“large”) more often focus tightly on accounting and finance issues, including oversight of the organization’s investment strategy and endowment. CFOs working in large nonprofit organizations must have a broader view and be good communicators with knowledge beyond accounting and finance. CFOs in this category must be people oriented. They have to be comfortable working across the organization; to include working closely with boards of directors, committees, and external stakeholders.

In-house Recruiting or Outside Search Firm?

Once a decision has been made to hire a CFO, an organization needs to decide if the recruiting will be performed using in-house recruiters or an outside search firm. A large organization may have the requisite recruiting staff; however, the CFO position is a highly technical position requiring specific types of expertise. Consequently, a search firm specializing in finance may be the better choice for placing such an individual. Another option may be to request the organization’s audit firm to perform the technical portion of the interviews.

Small organizations are more likely to find the talent they seek and at the same time save money in the long run by using a specialized search firm that places professional level candidates in the accounting and finance field. These firms have large networks of quality contacts; therefore, they can provide access to highly skilled professionals that nonprofit organizations might not be able to find on its own. A search firm may also assist in the development or revision of the CFO position description, which is an essential tool in the recruitment process because it drives the job ad, the candidate selection process, and a new employee’s first appraisal.

If your organization outsources the CFO search, the search firm will most likely perform the preliminary screening. If recruiting is performed in-house, then the initial screening will be performed by the organization’s staff. Regardless of who performs the search, sufficient time should be devoted to the review of resumes to adequately compare skills and experience to the requirements in the job description. A screening phone interview may be the next step to ensure that candidates selected for in-person interviews are viable candidates.

In-person interviews are one of the most critical aspects of the hiring process. You will need to determine the number of rounds of interviews, in addition to carefully selecting who in your organization is on the search team. Of course, one of the interviews should be with the CFO’s immediate supervisor. In addition, you may want candidates to meet with directs reports, peers (heads of other departments), and the Treasurer or other Board member. If the CEO’s finance and accounting expertise is limited, a member of your audit team could meet with candidates to ensure they possess the requisite technical skills to perform the job.

Best practices for all rounds of interviews include:

• Devote sufficient time to the interview process, which includes allowing time to prepare, conduct, and evaluate results
• Follow the same process for each interview by preparing a standard list of questions that can be tailored based on the interviewee’s response. Preparing standard questions should provide an objective standard by which to compare all candidates
• Plan to allow an interactive interview to ascertain the candidate’s communicative style, which may help gauge whether the candidate is the right person for the team

Once the CFO is selected, the CEO should take the lead in positioning the CFO as a senior leader in the organization. This is a critical step to ensure the CFO role is received as an important part of the organization’s management team and future. Organizations that use these techniques may significantly improve its chances of hiring a CFO who fits well with the position, the organization, and the leadership team.

Maureen Downs serves as a Chief Financial Officer in the Firm’s Outsourced Services department and can be reached at mdowns@tatetryon.com.