CFO Recruiting vs. Data Digging

CFO Recruiting vs. Data Digging

by | Jul 19, 2018 | CFO Search, News from Arnold Partners

I recently added a new question for my CEOs when we kick off a CFO search. It is simple, but is proving to be very helpful: What is it you do not like about executive recruiters you have worked with, or about the process? Mike Farley, the Founder of Tile, Inc. sat back and laughed a bit when I asked him. Then he thought for a second and told me he feels that most recruiters rely on their candidate databases too much and do not make enough of an effort to recruit fresh talent. This was surprising to me to hear and I took it to heart.

Mike’s frustration is not misplaced. What do recruiters do when we have a new mandate? Certainly, we quickly start going through our mental list of people we will call once we have agreed upon the specification. When I ran a large recruiting firm one of the things we prided ourselves on was a huge candidate database with a very sophisticated search algorithm to sort out different candidates’ technical attributes. Having a large database can create a false sense of security that everyone who is qualified for this role is already in the database (or one’s personal LinkedIn network). But because each search is unique, I believe each search deserves a fresh approach to identifying the right set of candidates for a specific client. The bottom line is that recruiters should actively recruit, not re-hash a database.

Of course, I preach that my network of CFOs is big and strong and nationwide. And it is. But certainly, I do not know every CFO in technology. It is a constantly changing universe and would be impossible for anyone to track accurately. I think understanding how a CFO likes to be approached about a new opportunity may be a more valuable asset than having tons of contacts in a database. After all, what good are names and contact info if you cannot deliver a winning presentation and deliver high quality candidates to the opportunity?

Strong database, a good starting point

Having a strong database is important no doubt, giving the recruiter a jumping-off point. It is a collective of industry sub-components, and specific individuals will lead to others of a similar ilk. But like Mike, I think it is critical to think about the present as well as where things are going in the future, especially in technology industry searches. It is critical to reach out to the up-and- coming generation and to re-invigorate the database with every new search by asking respected and trusted contacts for great referrals, and by reaching out to those folks that are 3 times removed as well.

When we presented the short list of candidates to Mike, I was proud to say that prior to initiating the search, I had never met any of the five people on the list. This is what recruiting is all about. It is what keeps it interesting for me personally and professionally. Reaching out and beyond the comfort of who I know today to the folks I want to know tomorrow.

 Unearthing CEO concerns re CFO search

I will continue asking each CEO I meet with what bugs him/her about executive search consultants. I am sure it will be a different pet peeve with each one, who knows. Maybe a theme will emerge. The great thing about being an entrepreneur within the search industry is that with each new search, each new CEO, and each new specific mandate will be the challenge to find that rare, exceptional, standout person for my client. And the way I go about doing that is not formula driven. It is as unique as the role and each CEO. It is not data-base mining, it is truly recruiting!

What bugs you about executive search and the way it is conducted? I’d love to hear. Email me at moc.rentrapdlonra@evad.

 

“Unconscious Bias” in the Hiring Process

“Unconscious Bias” in the Hiring Process

by | Jun 26, 2018 | CFO Search, How To Hire a CFO

Until I read the “Smarter Living” column in a recent  New York Times, I did not know there was such a thing as “unconscious bias.” But after reading about it, I knew I had some learning to do. Not only for my own take-aways for “smarter living” in my personal life, but also to explore this issue relative to how I serve my clients and candidates alike when doing searches for top CFO talent.

Article author Tim Herrera explains, “Unconscious biases are shortcuts our brains take to reach certain conclusions.” They are both necessary for everyday living (because we cannot analyze every stimulus and sight we take in), and they are potentially dangerous (because if we get too cozy with our preconceptions they may come to haunt us).

Bias starts with the resume

This is a fascinating topic when it comes to the hiring process. Starting with reading a resume, what do we immediately deduce about someone we have never met? Many things! We start forming conclusions based on where someone went to school, the level of education they achieved, what companies they worked at, and what accomplishments they chose to convey. These are all reasonable things to consider when deciding whether we want to meet someone. But how many of our conclusions come from an unconscious bias? How many times do we pass on a meeting because someone’s resume does not seem to fit what we may consciously or unconsciously hold as important?

Beware the big talker

The article also points to a study published on the American Psychological Association website that showed that people who talked more in working environments were perceived to be “more influential” than those who talked less. In his article, Herrera concurs: “Your brain can instinctively trust people simply because they sound as if they know what they are talking about.” And of course, “influential” goes hand-in-hand with executive presence. People with executive presence are more influential than those who lack it. The study also points out that when people are using a lot of words, those listening may not scrutinize what is said, and the listeners can be lulled into a false sense of thinking that the speaker must know what they are talking about! This issue brought to mind how many times we are sold something we really did not need. That could be a case of “unconscious bias” as well.

Power of first impression

When we meet someone for the first time, particularly in an interview situation, the potential for bias of all kinds is very high. In fact, the whole purpose of an interview from both parties’ standpoint is to determine fit. We determine fit by making judgments about one another—some of those judgments will be conscious and others unconscious. It is critical in my opinion to be keenly aware of the conclusions we make about a person, and how some of those conclusions will be influenced by unconscious bias. We can put an extreme amount of confidence in our ability to trust based on things like confidence and extroversion rather than digging into the real, factual details of a candidate’s abilities and accomplishments.

 Trust but verify

Herrera further points out that in order not to fall prey to the downside of unconscious bias, he says we should always verify the truth. In the case of hiring, we rely heavily on references. Recently, I was working on a search with a candidate and asked her for references as we were getting close to the offer stage. I was a bit worried because she already had a couple of offers and I thought her references might be a little burnt out. Truth is, she told me no one involved in the other searches has asked her for references. That is crazy. References serve a lot of purposes and we need to verify our impressions. “Trust but verify” is not a bad motto. Equally important: We should verify or un-verify any biases we have developed about the candidate.

Some people do really well in an interview. They may be a trained salesperson or full of gravitas. But do not let unconscious bias lead to hiring a stuffed shirt. Verify your opinions through thorough reference checking—both on list and off list.

I have been meeting CFOs for a long time and feel I have an ability to identify the winners, but I will always check references whether my clients ask it of me or not. Getting lulled into overconfidence from experience is just not part of the Arnold Partners way of doing business.

Would love to get your thoughts about bias and how you deal with it. Contact me at moc.srentrapdlonra@evaD.

 

The Shortage of Seasoned CFOs, Silicon Valley and Beyond

The Shortage of Seasoned CFOs, Silicon Valley and Beyond

by | May 9, 2018 | CFO Search, News from Arnold Partners

The Shortage of Seasoned CFOs, Silicon Valley and Beyond

I had the pleasure of meeting with Rob Krolik, the former CFO of Yelp! a couple of weeks ago. As one of the few CFOs to take a company from less than $100MM in revenue to nearly $1B, with a successful IPO along the way, his phone rings “just about every other day with a new company seeking a CFO hire.” He is not in the CFO market. The truth is, there are more and more former CFOs who are not in the market for another CFO gig. It is putting pressure on the entire ecosystem. Here are some facts, then I will get to some ideas on what to do about it, including the novel things Rob is doing about it himself and the “CFO Academy” run by FEISV (Financial Executives International Silicon Valley).

Unprecedented Demographic Shift

The truth of the matter is we are undergoing a major demographic shift as the Baby Boomers are now reaching retirement age in droves. Every day 10,000 people turn 65 in the US and this will continue for the next 19 years (Source: Pew Research). One of the unique things in the Valley is that some of the most successful C-suite executives tend to opt out of regular, full- time employment much earlier than age 65 if they have had a big hit. So many companies want to hire the “been-there-done-that-with-success executive” like Rob, but the executives may not be inclined to want to work in the trenches like they had before. It is a perfect storm for a CFO shortage.

As cited in the 2018 Silicon Valley Index published by Joint Venture Silicon Valley: “Silicon Valley’s population is aging rapidly. There has been a 31% increase in residents ages 65+ over a ten-year period, and a declining share of children partially due to declining birth rates, which were lower in 2017 than in any year since the mid 1980’s. Overall population growth has slowed over the past two years.”

On the larger, national demographic picture, you can see on the chart below that the second smallest group of the labor force is the age group 45 to 54 — prime CFO age range for sure (Source: US Bureau of Labor Statistics).

Rob says there are at least 60 CFO openings in the greater Bay Area right now in the Technology sector, and I am personally aware of at least another 15 in the Life Science sector. These are the openings that are mostly out to search. Rob said within a few years that number could easily double, as new companies are constantly being funded, and the number of seasoned CFOs will have further declined when these companies are ready for one.

So, What Is To Be Done? Two Innovative Programs

FEI Silicon Valley is keenly aware of this problem and in 2015 started the CFO Academy. It offers a four-session course to help up-and-coming CFOs (Controllers, Treasurers, FP&A execs, and the like) understand where they have gaps in their hard and soft skills and to provide a real-world training opportunity to help close those gaps.

Candice Graves, who heads the program points out, “Our attendees are a step or two away from becoming a CFO and many have gaps in Investor Relations and or fund raising. We specifically address these gaps with presentations from investment bankers, venture investors, and sitting public and private company CFOs. We talk about preparing for a fundraising and what is done inside the company and what happens after that information is turned over to the investment community.” She said that they have “about 20 students each year” and the biggest challenge to recruiting people into the program is the time commitment. “These are all working professionals and we seek a mix of small companies to large, and a mix of gender and ethnicity, so pulling each group together is a big effort.”

Mark Muenchow, the current President of FEISV adds: “The program is an ongoing effort with the current students as well as the graduates. We have an annual event to bring all the previous speakers, students, and organizers together once a year. In addition, each class holds quarterly follow-up meetings, so it is not “here is your certificate, good bye,” but rather an on-going effort to continue the group knowledge.”

The program expanded to the SF Bay Area chapter last year and is getting national attention from other chapters of FEI.

Rob Krolik is doing his own sort of CFO academy called, “How to be a great CFO.” Thus far he has put on two one-day seminars for both Andreessen and Menlo Ventures. He is now gearing up to partner with the Wharton School Executive MBA program to expand the reach. His course is based on his experience and is focused on practical items managing the various disciplines under the CFO umbrella, such as Board Meetings, Facilities, Taxes, Treasury, etc. The primary goal he says is “to give the up and coming CFOs confidence.” He says by giving the attendees the skills they need to do the whole job, it builds confidence to accomplish the second goal: “Helping the CFO guide the Board and CEO in decision making.”  He also provides an ongoing forum for those that take the course to interact and ask questions of each other in a “safe” environment that build their knowledge base and network. “This isn’t rocket science. 99% of what you have questions about can be answered by someone in the forum,” Rob says.

The Bottom Line

At the end of the day, CEOs and Boards will have to face the music that there are not enough seasoned CFOs to go around. They will be forced to take the up-and-coming CFO candidate. However, though the efforts of FEI and Rob, perhaps making that hire will have been significantly de-risked. Both programs truly provide the forum to build skills that will lead to good decision making. And at the end of the day that is the job of the CFO. Personally, I applaud their efforts and highly recommend anyone aspiring to be a CFO to take advantage of these programs. As Mark Muenchow points out: “The finance world is mostly a group of self- selected, left-brained, analytical people. But the role of the CFO is equally right-brained and CFOs need to solve a variety of problems that are not always quantifiable. We try to equip our members with these types of skills through real-world examples from sitting CFOs.” I say Bravo!

What’s your experience with recruiting and hiring CFOs? If you would like to learn more about Arnold Partners’ successful CFO search process and our strategy for dealing with the challenges of CFO search, email me at moc.srentrapdlonra@evad.

Economic and Employment Outlook

Economic and Employment Outlook

by | Mar 20, 2018 | CFO Executive Search Process, How To Hire a CFO, News from Arnold Partners

Economic and Employment Outlook for 2018 (i.e. How Long is the Commute?)—and Impact on CFO Demand

It’s not just the CFO market that is RED HOT in Silicon Valley, it’s the entire economy. According to the California State Employment Development Department, as of March 7, 2018 the overall unemployment rate in Santa Clara and San Benito counties is currently at 2.9%. That’s the overall rate. For degreed professionals it is under 1%. That means more jobs, including CFO jobs, are out there.

For those of you commuting anywhere in the Bay Area, you instinctively know this. A look at the unemployment rate from 2010 to 2018 is telling — it’s a straight down and to the right line:

 What’s Driving All This?

The economy in Silicon Valley is firing on all cylinders. It’s a very different expansion from what we saw with the dot-com bubble in the late 90s. For starters, the push is extremely wide in terms of the industries within tech: AI, Autonomous Vehicles (can you guys hurry up with this, we need them now!), SaaS, Consumer, even Semiconductor is seeing some revival due to the AI boom. On the Life Science side of things, CFO jobs are opening as both Biopharma AND Medical Device companies are getting funded and doing very well. This expansion is about revenue generation —- real dollars (not just ICOs, which is a whole other topic).

From everything I’m reading there’s still a lot more fuel to throw on these flames. Where we’ll house and transport additional workers is a real problem, but the epicenter of tech is still here and not disappearing anytime soon.

IPOs Drive CFO Demand

There are a number of high profile IPOs that really will happen in 2018 and 2019. DropBox, Zscaler, AirBnB, and Uber have all announced. IPOs directly affect the CFO market in that when high flyers go out into the public markets with success, others will follow. We saw this happen in 2012 in the Biotech market with dozens of IPOs, some of which probably should not have gone out. Most companies will not go public without a CFO, and those that do soon realize they need one.

What does this mean specifically for the CFO market in 2018? It means competition for employers. It means candidates for CFO jobs can be picky. It means there are very few people on the sidelines. It means if you are seeking to hire a CFO it will be hard work and you will need to dig deep into your contacts and or work with an executive recruiter who can really help.

Changing Demographics Impact CFO Availability

There’s an additional factor facing the CFO market this year and the coming years as well — the Baby Boomers are retiring. This is noticeable at the CFO level and will force companies to look at planned succession and look at candidates who haven’t previously been in the CFO seat. Our clients have been more receptive to looking at “step-up” candidates than ever before, and I think this is at least part of the reason.

So enjoy the ride as slow as the traffic may be, it’s going to last a while. And take stock that full employment is a lot better than the alternative. Remember 2003?

When the CFO market is this tight, you need a search partner with proven success in this type of environment. Contact me at moc.srentrapdlonra@evad to discuss your objectives and we’ll work together to land your ideal candidate.– Dave

Dave’s got a lot to say on variety of topics relating to CFO jobs and the industry. Be sure to read his previous post: Have You Ever Been Presented with a Counter Offer?

Have You Ever Been Presented with a Counter Offer?

Have You Ever Been Presented with a Counter Offer?

by | Feb 20, 2018 | CFO Compensation, CFO Search, News from Arnold Partners

The Dreaded Counter Offer

Have you ever been presented with a counter offer after resigning a position? Or, have you presented a counter offer to an employee who resigned?

Let me clearly state that one should (almost) never accept a counter offer, and why companies as a policy should (almost) never make them. None of the CFOs I’ve placed have accepted a counter offer. This dreaded possibility is always discussed prior to my making an offer on behalf of my client.

I was recently interviewed by FierceCEO for an article about counter offers, and as is frequently the case, the reporter only used a few of my words, so I’m jumping on this soapbox as a public service and as a refresher on this important issue!

Explore Your Motivation

It’s easy for a company to make a counter offer. Much easier than trying to get the work done without you and experiencing the pain that would be felt in your absence. But the truth is, as soon as you walk into your boss’ office and resign, a critical line of trust has been broken and will most likely never be repaired. Typically, counter offers include an increase in pay and perhaps a title boost. In my many years of recruiting CFOs and C-level executives, it’s clear to me that people don’t change jobs merely for money. There are a whole host of other reasons. Usually it’s because they don’t like their direct boss, they don’t agree with the strategic direction of the company, they don’t see a route up the ladder, they are bored with the work, they hate their commute, or their benefits are lousy and getting worse. Or a combination of some of these factors.

If you accept a counter offer for more money, the root cause of your unhappiness will still be in place. And, your increase in pay could be an annual increase just given early. Calculate the after-tax value of that increase. Is it really worth it? My cynical side also says that if you accept the counter offer, you’ve just provided cover time for your employer to start looking for your replacement!

Band-aid Solution

Most counter offers only put a band-aid on the wound. They usually start with praise about your important contributions or they present some big project that is coming up they plan on giving you. They almost always include some increase in pay. I don’t have research to back this up, but conventional wisdom says 80-90% of people who accept counter offers end up leaving within a year. I made that mistake myself once and missed out on joining my next company when the stock was much cheaper. I was fairly low level and the counter offer included a call from the CEO. Talk about being swayed to stay! I stayed ten months after accepting a counter offer. Lucky for me, the offer I accepted and turned down was still available!

People make a change because they’re moving away from things, or moving towards something — a better company, a better role, a shorter commute, etc. Usually people have some items on each ledger, a combination of moving away and towards. If you’ve lost trust in your current company and considering an offer elsewhere, think through what accepting a counter offer really means. If you take the counter offer, you have to tell your new company that spent weeks/months getting to know you that you will not be joining them. Good luck going back to them when your root problem returns in your new role! Making decisions is largely what executives get paid to do. If you second guess your decision to leave, what does that say about you?

The Exception!

I can think of one instance where a head of engineering resigned to the CEO having accepted a large role as division general manager in a new company. The new role was bigger than his current one and paid significantly more, but the company was not as exciting or successful as the company he was working for. This savvy CEO got to the root cause of this executive’s motivation for change — he wanted a more strategic rather than an execution role. The CEO didn’t make a counter offer to keep this exec in his role, he actually created a new position as head of strategy that fully enabled the potential deserter to remain with the company, reputation intact! So this was not a mere title change, it was truly a new job. (The reason I can tell this story is that the executive is my brother. He stayed in the new role for several years and later retired.)

If and when you do resign, do so with dignity and thanks to your current employer. Make a good hand-off and leave as quickly as you can without burning any bridges. Back up your verbal resignation in writing. You will need your references down the road. We are in an incredibly tight labor market, so be sure-footed and clear about your reasons for moving on. To steal from the Kona Brewing ad, “One career bro, don’t blow it.”

I invite you to share your experience with being offered or offering counter offers. Or if you’d like to learn more about our process and how it supports successful career decisions, email me at moc.srentrapdlonra@evad.