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 great 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 great 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 to get you a truly great CFO. If you would like to share your own stories or to discuss hiring strategies, please contact me, Dave Arnold, at: moc.srentrapdlonra@evad.
The 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 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.
I 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 interviewing advice he graciously shared of value.
What interviewing advice do you have for evaluating 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 Interviewing Advice 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 interviewing advice 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.
The 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 and how you can take advantage of the market outlook for CFO talent in the Bay Area. 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 knows how to read the market outlook for CFO talent in the Bay Area.
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 moc.srentrapdlonra@evaD.
What are the most important factors when embarking on a CFO search? More importantly, what are the most important qualities you should look for when selecting from CFO search firms 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
Speed 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, unlike some other CFO search firms who rush through the process.
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
All CFO search firms 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 moc.srentrapdlonra@evad.
I was in a client meeting this week and was taken aback by my client’s view of retained search professionals. Maybe he was burned a few times by executive search firms? Not sure, but out of our conversation, what differentiates my firm Arnold Partners from most other retained search firms became clear: some firms just don’t know how to correctly hire a CFO.
While at an investors’ conference the week prior, my client ran into a partner from a large executive search firm and they got into a debate about the relative value of the search process vs. the outcome of the process. The search exec. stressed the value of the process and the insight gained, but could not sway my client; the only value he saw in the search process was the end result – a great hire.
Gems Gleaned from the Process
I agree that the search process itself can provide a great deal of valuable information to a company, specifically discoveries about how the company is perceived by the professional community and how the specific role is received by the potential candidate pool. These are truly important things; the candidates you are seeing and the prospective candidates your search partner is approaching are not yet “drinking the kool-aide” as we like to say here in the Valley. If the response to the company story is not positive and needs to be re-tooled, this is valuable insight especially when the story is being presented to CFOs, who are by their nature conservative and a tad skeptical, in my experience.
Beware the Purple Squirrel
Another possible discovery that can be a real show stopper: the person you are looking for does not exist! I have heard this called the unicorn or the purple squirrel. This is a frustrating discovery, but it can also provide insight for the executive team and board. If the specification for the role is too far outside the lines or tries to combine too many “must-haves” there needs to be a reconfirmation with the search partner and the client to reassess the needs of the business and the goal of the search. I like to say, “In search, you cannot find what you are looking for unless you know what you are looking for, but, if you are looking for a purple squirrel, you may be looking forever!”
Where the Rubber Meets the Road: Completion and Stick Rates
My view is that process is important and discoveries can provide insight, but the real drive and goal is the successful hire ─ to find a CFO that who will create a lasting, positive impact for all stakeholders in the organization. A process without consummation is a failure. This is where I pride myself in our 100% completion rate. Yes, searches can be tough; in fact most of them are. But for the best outcome what should a CEO or VC look for in a search partner? Two metrics: completion rate and stick rate (how long the placed candidates stay in the roles). One national firm boasts on their website of a 77% completion rate, which means they do not complete 23% of their searches ─ almost a quarter! And yet their clients are out 100% of their fee for service.
If you are contemplating how to hire a CFO and seeking a search partner for your search, you will find Arnold Partners to be 100% committed to both a useful process AND a successful outcome with long-lasting results. If you would like to share your experience on how to hire a CFO, or want to learn more about how Arnold Partners hits its numbers, call me, Dave Arnold at 408-205-7373 or email moc.srentrapdlonra@evad.
