Archive | CFO Executive Search Process

Arnold Partners CFO Placements Help Push Silicon Valley IPOs to 55 since Q1

According to the Silicon Valley Business Journal (10/30/15), Silicon Valley has had 55 companies IPO since Q1 2014. Arnold Partners placed 10% of the CFOs in those companies, creating over $7B in market capitalization. While only half of the 55 companies are trading above their IPO price, all but one of the Arnold Partner client companies are above their IPO price, with two being significantly above. We are helping to form lasting value creation with the top technology and life-science companies in the Valley and throughout the country.

If you are seeking a CFO in this market, Arnold Partners is ready to help you attract a world-class leader to help drive value no matter your capital strategy or location in the U.S.

The really remarkable thing is that only 55 Valley-based companies went public in the last 21 months. If you take out the biotech blast, that cuts the number to 31.

The Value of the Right CFO—for Every Financing Event

Our observations over the course of the last few years is that finding a CFO who can help chart the course of his or her company in a collaborative way with the CEO and Board is the most valuable addition a growing company and can make a huge impact—no matter the course the company takes. IPOs are rare and may be really important steps in growing a company. But as seen in this most recent data, a CFO who can help the CEO manage the Street post-IPO is even more important. The only way to do this is by having a highly predictable business model where expectations can be managed, met and exceeded. Most emerging tech companies are highly unpredictable! The best CFOs are able to put all the business metrics in place well before any IPO talk, so that the transition to life as a newborn public company is a smooth one.

Many of the CEOs we meet with are thinking that an IPO is the next big event in their company’s trajectory. Most of those companies do not go public. That said, having a stalwart CFO in place in a growing private company is a smart investment. The best CFOs are also instrumental in positioning their companies for every conceivable financing event: M&A, growth capital, strategic partnerships, debt financing, etc.

Trouble Ahead in the IPO Market? I Think Not.

The gist of the SVBJ article was that the slowing of the IPO market and the fact that only half of the companies that went public are above their opening day price is a signal for trouble ahead. I disagree. The majority of companies we have been meeting, all over the country, have growing top-line revenue and positive outlooks for the coming year. Focus on growth and getting predictable about that growth and good things will follow.

Arnold Partners CFO Placements: 100 % Success Rate

With 100% placement success rate, we are proud of all of our CFO placements, and happy to have a spot on the roster of recent technology IPOs. More important is our measure of lasting results. The CFOs we have placed over the last 10 years have an incredible tenure in the companies they have joined. So if you are looking for a great technology or life-science CFO, no matter your stage, industry, or location, we are ready to help. Shoot me an email at dave@arnoldpartners.com or call 408-205-7373.

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A Great CFO Hire on Paper vs. a Great CFO Hire: A Tale of Two Clients

I had a client last year that kept falling in love with candidates he could not attract to his company. There was nothing wrong with his company; in fact, I think it will prove to be very successful. However, it was earlier stage than some CFOs want to get involved with. The CEO is a compelling, passionate, smart guy and frankly I think he could sell anything to anyone. But CFOs are a different breed. They do not like to be sold. They think more like engineers—the numbers drive their decision making.

 

Meet Mr. Amazing: A Great CFO Hire?

This client was easy to work with—he was communicative, open, and we really got some great talent to the finish line. But it was just not closing. There were some internal delays. The candidate who was considered perfect wasn’t so perfect after a long health delay. So along comes a CFO that the CEO considered the “most amazing candidate of all time!” This candidate looked great on paper and was coming off of a big win in the industry. He was known to the Board and it was thought he would bring an air of success, credibility and celebrity to the company. Now you can guess, my client was ready to hire; there was some fatigue on his part. And hire he did against some objections from me, but mine was a lone voice in the crowd. He hired this most amazing candidate start to finish in about a week.

Four months have passed and the most amazing candidate of all time has quit. The IPO has been delayed. The commute was too far. When the going got tough, the one with all the credentials on paper got going—right out the door. The CEO and the Board’s judgment became clouded when they got caught up in a moment of euphoria, and they rushed the process at the end. The right hire is in the wings and there will be no replacement search necessary, but now the client has a different type of credibility gap to fill.

Mr. Carve-out Wasn’t Carved Out for the Job

A recent client was a very different tale. He was extremely decisive and thought he knew what he wanted before he engaged us. He had one CFO candidate identified that we carved out of the standard fee. My client met with a total of three candidates in our process and decided Mr. Carve-out was right. We made him a fair and market offer but he said no. Mr. Carve-out was also was coming off a big win and I believe he is really looking to be a CEO not a CFO. This was not the right hire and I was relieved that he turned us down. It could have been a repeat of the client story above. Had the “most amazing candidate of all time” resigned prior to our making the offer to Mr. Carve-out, I would have been even more strongly against that hire.

Enter Ms. Moneyball

Ms. Moneyball is what the Board member who introduced me to the search called her. She is hungry and has all the skills and stats, but is not a proven commodity. Like Matt Duffy vs. Pablo Sandoval. (Look how that is turning out!) The offer we made to her was the same as to Mr. Carve-out, so the Moneyball analogy does not completely fit. I would not have my client hire a woman for the job for less than what he was going to pay a man. The key point is that she is the right hire for their stage and will actually do the work that “the most amazing” and “Mr. Carve-out” would probably want to hire staff to do. She is an “A” player in terms of the skills and experience we were looking for; she just did not have the CFO title. If and when the times get tough, she will fight through them. She is smart and driven and will work very hard to ensure the company success. This search was completed in 40 days start to finish.

Lessons Learned

Don’t be fooled by a big reputation. Skills, smarts and potential are more important and a rigorous process should not be rushed. Clients take note: I will be more forceful in my advising in these situations in the future. If you would like to share your own stories or to discuss hiring strategies, please contact me, Dave Arnold, at: dave@arnoldpartners.com.

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CFO Recruiting in The Cloud? Works like a Dream.

techThe realization I had last fall about the typical executive search process being outmoded was a real thunderhead because it struck me like a bolt of lightning. Working in the vacuum of weekly Excel spreadsheet updates for clients felt so 90s! One client challenged me to find a better way to convey information about candidates and the search pipeline. As luck would have it, I received an email solicitation from a Cloud-based SaaS company offering a new recruiting technology specifically tailored for the executive search industry, and within a week I was signed up. Not just a handy tool to make the search process run more smoothly, this tool has completely transformed how we at Arnold Partners deliver our services to our clients.

Given that all of our clients are in the technology industry, it made sense for Arnold Partners to adopt an advanced, technology-centric approach to our recruiting process. By using the services from Clockwork Recruiting, our entire process is managed in the Cloud ─ from pre-search to closing. The system enables complete transparency for our clients so they can see the efforts going into the pipeline and next steps with candidates in process. In addition, the reporting capabilities are swift and to the point.

By leveraging the Clockwork research services we are also able to jumpstart our searches by populating the project with potential candidates, right from the get go.  We then combine this research with our existing database of established relationships in the CFO community. (Note, we do not have anyone contacting potential candidates other than myself, which is a central tenant of our pledge to clients.) This one-two punch has led to even faster delivery of qualified candidates for our clients.

Shared CFO search online workplace gives 24/7 access to all information

The Clockwork system allows for all information about the search and specific candidates to be housed in a location which is both secure and accessible from any computing device 24/7.  This makes for a great user-interface. Also, if a candidate is coming in for an interview, clients do not have to scramble to find an email with our assessment notes and resume ─ it is all in one secure spot. As we populate the records with more and more data, a very clear picture emerges, enabling us to presenting information to a search committee or Board of Directors in a clean, professional, customized manner.

This post may sound like an ad for Clockwork, but that is not my intention. Using this platform levels the playing field and makes Arnold Partners an even stronger competitor to larger executive search firms.  As my advisor Howard Bain pointed out to me at our last meeting, he was very frustrated with a large search firm he was working with on a CEO search. He said the biggest frustration was lack of visibility to the search progress. That will never be a concern with Arnold Partners ─ we are all about delivering our services in a transparent and easy-to-use manner.  As we kick off another busy year, we are moving forward confidently with this improved process to help our clients succeed in finding outstanding CFOs and Audit Chairs.

Take a look at the future of executive recruiting

Link to see what the new shared online workspace looks like. Or contact me at dave@arnoldpartners or 408-205-7373.

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Interviewing Advice for CFOs and CEOs

ventureI had the pleasure of sitting down with one of the all-time great venture capitalists last week. By working with him on four separate successful CFO searches and now a Board search, I have come to respect this individual more than words can describe. He has not needed to work for financial gain for many years, yet he remains committed to his partners, his CEOs and the community at large.

My guess is that he is in the top ten most successful venture investors of all time.

As we were wrapping up talking about the new Board search, I asked him some questions about how he evaluates talent. We always read that a company’s success is more dependent on the people than the technology, and I believe that to be true. I wondered whether his ability to spot exceptional talent was the key to his success. I am sharing his answers to my questions below; I hope you find the knowledge he graciously shared of value.

How do you evaluate a potential C-level candidate?

“The first thing I look for is their track record. Have they picked winners? What are their specific accomplishments within that track record─how did they specifically contribute to the successful outcome? It is OK if someone takes a risk on a company that does not work out, but I do not like to see a series of loser companies on one resume. In the case of a CFO, he/she may not be to blame for a technology failure, but they should be held accountable for being astute enough to pick more winners than losers.”

What are the most important questions you ask a C-level candidate when they get to you?

“I always ask: ’What is your biggest success and what is your biggest failure?’ If I get a lot of hemming and hawing on the failure question, that is a big red flag. We have all had failures. If you have not, then you have not lived and you have not worked in technology! I am looking for transparency mostly. If this person is going to be on a team with me, in a Board meeting with me, I need to know they can be transparent to what is happening in the company. If they cannot be totally honest with me in a first interview, then I have no time for them.”

What else do you look for?

“Preparation. They need to come to my office prepared. It shocks me that someone who has been through several meetings before getting to me is not prepared with really intelligent, well thought-out questions. Are you kidding me? They should know the company through and through and be asking really deep questions about the strategy and the execution of that strategy. If they are unprepared there is no excuse.”

Final comments by the Legend

Bottom line for this investor is that the interview is only good for so much, and he never relies on his personal impression: “Anyone can put on a good act for an hour interview and I have been fooled before.” He says there is no substitute for reference checking. 10 plus references on a CEO are typically checked, and perhaps a few less on a CFO. After doing venture work in the Valley for so long, he has access to just about anyone he wants for a reference, and critical hires are never made without talking to people that he trusts. This tidbit does not surprise me in itself. Checking references is obvious. But what is refreshing is that here is a guy who has hired 100s of C-suite executives and he still is humble enough to not trust his own excellent judgment! Who are we to disagree? Do not make a hire without checking on-list and off-list references.

Some key takeaways: if you are a C-suite candidate, your track record should include successful companies, significant accomplishments and people to back you up. If you are CEO or VC looking for talent, Arnold Partners strategic executive search will find you candidates with these winning qualities.

Contact Dave Arnold at 408-205-7373 or Dave@arnoldpartners.com.

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Market Outlook for CFO Talent in the Bay Area

red-hotThe market outlook for CFO talent in the Bay Area is red hot in 2014. We expect this trend to continue for a variety of factors: the IPO market continues to be open in most industries, the aging nature of our population headed to retirement, and the lack of a deep talent pool of experienced public company CFOs. As the broader economy in the U.S. continues its crawl out of the great recession, the tech-heavy local market has been expanding for the last two years. Certain sectors do seem overly frothy, but time will tell. Clearly this is not another dot-com bubble, but what goes up, does come down. With the global and national markets on the mend, there is more growth opportunity for technology companies and more pressure on the talent pool both locally and nationally.

Ruling out some sort of global calamity, we expect the market to remain very tight in the Bay Area, and expect other markets to tighten with the improving economy.

Increased Competition for Talent

So if you are a company seeking a CFO with public company experience or specifically IPO experience, what can you expect? The fight for talent is intense. Be prepared to pay more than you planned, be ready to move quickly when top talent is in front of you, and keep an open mind to creative solutions. Recently we a recruited a sitting public company CFO out of his current role for a client ready to IPO; fortunately our client was attuned to all of the advice above and made a compelling offer in a timely manner. Of course it is always much more than a financial decision─the courting process made sure of a good fit between CEO and CFO and the team as well.

Advice for Companies Looking to Hire a CFO

It is always the case that the number of “A-Players” in a given market is finite, and the number who want to make a change is also finite and shrinking. This is where creativity can come to play. Thinking outside the specific industry confines, or bringing in the “A-Player” step-up candidate are two possible alternatives to calling the same five industry-leading CFOs in your space. Sometimes the “Best Athlete” model is the right one in a tight talent market.

Advice for CFOs

If you are a sitting public company CFO you are getting calls from people like me. In the Biotech sector, a public company CFO told me a couple of weeks ago that he is getting an average of three calls a week. He said the only reason he called me back was because of our relationship spanning over the years. If you are a CFO without public market CFO experience, how do you get it? The key is to work under a CEO who has been in the public limelight. Investors, both private and public, don’t like it when both the CEO and CFO are without public company experience.

Clearly, whether you are a hiring company or CFO candidate, having a dedicated resource that is focused on the role of the CFO is in your best interest. A CFO recently told me, “You know Dave, the reason I like working with you is because you think and talk like a CFO. It’s really great the way you size up your client opportunities and are able to present them to me in a way that highlights all the things I’m concerned with.” It was a kind comment, but instructive too; if you are a company seeking a CFO you want an expert on your side. And if you are a CFO with too few hours in each day, you want a search partner who understands what’s important.

It’s going to be a long hot summer that will continue into the fall. To be prepared and keep cool, call Dave Arnold at 408-205-7373 or email me at Dave@arnoldpartners.com.

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CFO Search: Quality vs. Quantity

qualWhat are the most important factors when embarking on a CFO search? More importantly, what are the most important qualities you should look for when hiring a search firm to help you hire a CFO? Three quantitative measures are frequently cited as the most important: time to completion, longevity of the placement, and re-placement rate.  I’ll give you my perspective on these measures based on many years as a CFO search consultant.

CFO search begins with a clear target

The process for a CFO search, or any search for that matter, must begin with a very clear understanding of what you are searching for. Fortunately when it comes to CFOs and Audit Chair Directors, the definitions are usually pretty crisp. Nonetheless, there are critical subtleties in the definitions for CFOs, the culture of each company is different from that of another, and the blind spots of CEOs will differ. These considerations must be weighed and sorted, so at kick-off we have a strong, common understanding of the specific must-haves and nice-to-haves.

Because of our long-time focus on the financial function, helping clients define what is needed in the role is second nature to Arnold Partners. We act as a management consultant specializing in executive search, adding value from day one, even in the pre-search process. The average time it has taken us to complete searches in the last year is just under three months, proof positive that this value creation also has the benefit of saving time as well.

Watch out for too much speed

bestSpeed in search is important to most clients at the onset because some event is pending, or the client realizes that the decision to hire a CFO should have been made months before. Perhaps a budget was blown, or a market shift could have been anticipated if there had been a CFO in the seat.  But moving too fast may result in a hire that doesn’t stick. Then you are back to the drawing board. After digging back into all of the CFO searches I have completed, I am proud to report that the average tenure of the CFOs I have placed is 38 months. This includes a number of placements where the companies ended up getting acquired in fairly short order. Of those companies that have not been acquired and are still in operation, the average tenure is 48 months. These CFOs are sticking in place because time was correctly invested.

So the averages are good, what about the mistakes?

Nothing is more demoralizing and costly than a bad hire. A bad executive hire is even worse. Can you expect success on every search? You can if you choose the right firm. To date, Arnold Partners has a 100% success rate, meaning the CFO was in place for a minimum of a year.  We have been rehired to conduct replacement searches twice – once after the CFO was on the job for three years but developed a health issue, and once because the client moved from Seattle to the Bay Area.  As we guarantee our work for a year, we are proud to say we have not had to employ that guarantee.

In Sum

Every CFO search firm should have a score card on these three measures.  If you like our top marks for quality, speed, and longevity, call me, Dave Arnold at 408-205-7373 or email dave@arnoldpartners.com.

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