Best Practices When Hiring a CFO

It doesn’t matter whether you’re a dance troupe, pharmaceutical company, marketing agency, or local food co-op: if your financial situation is not in order, your business has a problem. At a smaller scale, this can be managed by the founder/owner/CEO.

If they don’t have the requisite experience (and most realize pretty quickly that they don’t), they might hire a bookkeeper or accountant, or outsource the work to a contractor. While these folks tackle taxes and everyday cash flow issues, mentors and financial advisors can help make strategic financial decisions.

But when to hire a CFO, many will ask.

Eventually, businesses grow beyond this stage of bookkeeper plus financial advisor tag-team. When you require more vision and focus on the financial side of your business, this is when you hire a CFO.

How to Hire a CFO

Hiring a Chief Financial Officer is not at all like hiring an accountant. It means hiring a C-level team member who understands finances the same way the CEO understands your industry.

A good CFO plots your course through the many disruptions and variables that keep impacting businesses on a financial level, and helps bring the CEO’s vision to fruition through the judicious application of resources. When hiring a CFO, you’re hiring a leader, and the best practices for this process will naturally reflect that.

Here's how to approach a CFO hire:

1. Know your vision.

It seems like an obvious statement that you should know your own organization well before hiring someone to help move it forward, but it’s easy to skip this critical step. This kind of self-knowledge is typically driven by the CEO.

The CEO won’t necessarily know all the details of the financial side of things (especially if operational expenses typically fall in someone else’s purview), but they should be able to provide sufficient strategic guidance for the potential CFO to be able to determine the steps necessary for success.

Your CFO’s vision must align well with your company. If there is a fundamental disconnect in vision communicated to candidates when it comes to things like growth, risk management, or investments, then the new CFO will find themselves working blind, or even counter to the company’s wider goals.

2. Know your challenges.

Challenges are similarly important. Having a good grasp on your current financial and financial-adjacent challenges will not only enable candidates to self-select for the types of challenge they enjoy. It will also empower you to ask more pointed and helpful questions during the interview process.

Future challenges are also worthy of consideration. Are there new industry regulations in the pipeline? Is a key tax credit expiring in the next few years? Is an important vendor experiencing financial instability?

You might not be able to (or even want to) address all of these during the hiring process, but asking behavioral interview questions about similar situations can help you get a feel for how the candidate has dealt with similar situations in the past. Asking challenge-related questions will also show you a candidate's thought process in response to difficult situations.

3. Nail down necessary skills.

Not every CFO will need the same skills. But if you know that a certain skill is necessary, you’ll need to be extra vigilant to ensure that your new CFO truly brings it to the table.

Skills assessments such as simulations, as well as good interviewing will all be a part of this process.

At the CFO level, you should be beyond the basic skills tests you might administer for entry-level employees. Basic computing and programming skills, typing, following directions… you should (hopefully!) be able to assume this level of competence in a CFO candidate.

What’s more, if your new CFO is lacking in a particular area—let’s say they’re brilliant at the core parts of their job but they can’t spell to save their life—it may be easier to hire someone else who can handle those tasks, or delegate that work to a current employee. Finding someone who can proofread and edit correspondence before it goes out is considerably simpler than finding someone who can develop a sound financial strategy for the entire company.

The skills that do matter most to you will depend on that earlier understanding of your vision and challenges.

• Is it the ability to quickly analyze the financial health of a particular endeavor through a look at its financials over the course of several months?
• Is it the ability to coherently present a financial strategy to a group of non-finance managers?
• Do you expect your CFO to be able to work with your databases confidently and effectively?

Creating a simulation that covers one or more key skills can help you to determine whether there’s a gap in your candidate’s perception of their expertise and the reality.

4. Consider your culture.

You know the people with whom your CFO will need to work most closely: the CEO, naturally, along with any direct reports, assistants or admins. Next there are those who manage the data on which they’ll rely.

• What kind of partner is needed to lead these individuals?
• What kind of manager will be most successful with existing personalities?
• What kind of values, habits, and traits should this person exemplify?

Keep in mind that the CFO doesn’t operate in isolation, so these softer qualities can matter a great deal when it comes to achieving success in this role.

Related: How to Screen Candidates for a Company Culture Fit

The CFO role has become increasingly complex. Hiring CFOs has as well.

If you’re not sure you’re equipped to tackle this process on your own, SelectOne has you covered. We’re committed to helping businesses find the right people for the right roles. Get in touch to schedule a consultation.

Editor's Note: Originally published 11/5/18; updated 5/18/20.