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.
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 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
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.
In celebrating the end of another successful year here at Arnold Partners, I gave thought to what happens once we shake off the satisfaction of completing a search, and the real work begins for our clients and placed candidates. As a general rule, I’m not personally involved in the details of on-boarding the new hire. I have an important regimen of follow-up with the executives involved, but certainly I’m not on-site to see how the new CFO is brought into the fold to maximize success. So, I reached out to some of my clients to educate me (and maybe you too?) about successful methods of on-boarding for success.
My client Shari Simpson, Head of Global Human Resources at Shockwave Medical, points out that while on-boarding a c-suite executive is different than an entry-level employee, “It’s very important that everyone deserves attention and respect from day one.” She says much more information is shared at the executive level about the business plan, company goals and objectives, and the timelines to achieve them, but the contribution of every employee is critical. Shari also states, “If the employer’s expectations of the new hire aren’t met in the first 60 days, the new hire is likely to leave. You don’t want any surprises in the new hire’s experience. You want their expectations of what it’s like to work there to be right in line with reality.” She goes on to say, “On-boarding is more than a check-list, it needs to be real and based on empathy for all employees and focused on mutual success — no surprises!”
John Owens, Chief People Officer at Sentient (and long-time client of Arnold Partners), chimed in as well on some important factors at the CXO level. He emphasizes the culture of the company during the interview process, specifically how the executive staff interacts with one another. How are meetings conducted? What are the key behaviors? Is communication tight and crisp, or is it long-winded and heavy on details? John says, “What you really don’t want is a new executive to fall on their face in their first executive meeting!” He also takes a lot of time in the interview process to explain the culture of the company, because, he says,“If you don’t get the cultural fit right from the start, it’s highly unlikely it will ever be right.”
Ms. Andy Danforth, former client of Arnold Partners, has some even stronger thoughts on the importance of on-boarding: “All new employees really want to have a formal orientation process, especially executives. The complexities of the executive role require that they learn the lay of the land before they dive into any form of execution. They need to know the who, the what, the where, and understand the expectations from all parties.” She added, “The on-boarding process builds momentum and is absolutely critical for retention. It’s really not an option — it’s mission critical to have a formal and well-systemized process for all employees.”
Finally, I had the pleasure to speak with Jennifer McKay, VPHR at Hercules Capital, placed there by yours truly. She had a couple of unique ideas to add: “The big thing is to communicate with new hires before they even start, and to set their schedule for them so they know what meetings they will be in, and with whom. Then, the critical part is getting feedback on their initial impressions. They bring a fresh set of eyes and ears to the company at a high level — they can offer some truly novel and unique ideas about what seems to be working well and what’s not. It’s like having a free consultant!” Jennifer also likes to meet with the new exec during the first week to talk about the star employees from their previous job. She keeps a list for future hires.
So, while I may hand the baton off to my clients after we have sign-off on an offer, I do believe our process is in lock step with the advice from above. It’s about respecting all the parties involved in the search process, it’s about getting the cultural fit right, it’s about being as clear as we can about the current situation in our client company and sharing the vision of where the company wants to go. Most importantly is long-term success. My speculation is that the long-term success of any hire may begin with the first recruiting call, and how the opportunity is presented to a potential candidate. For a refresher on this point see my video, https://youtu.be/eLdprDG_3Uw. There are many steps from there.
I’d like to hear your perspectives on on-boarding. Or if you would like to learn more about our process and how it supports on-boarding, email me at moc.srentrapdlonra@evad.
If you’re a CFO candidate, how many times have you seen a job specification and only casually glanced at it? I had a CFO candidate tell me just the other day that he had no reason to read the spec, because, as he said: “I already know very well what a CFO does.” I’ll admit as a writer of detailed position specifications, it’s easy to give less attention to the finer details, but that’s a mistake when you’re getting started with executive recruiting.
Being focused on one discipline as I am in the CFO role, it would be possible to become complacent and not dig into the nuances of the specifics in each client situation. But it’s critical to not fall into that trap! The round peg-round hole does not apply to executive recruiting, and the spec should carefully represent the uniqueness of each client we represent. Yes, there may be some similarities in CFO roles at different organizations, but experience has taught me that focusing on the subtle differences in each client situation is what enables us to find an exceptional match—vs. finding an also-ran.
Making the Deep Dive
The specification is a product of the deep dive into the company we are representing that reflects hours of diligence to understand the specifics of our client’s situation. Here’s an example that illustrates the benefit of this approach. My firm Arnold Partners was recently hired by a CEO to perform executive recruiting for a CFO following a meeting that was 99% about Arnold Partners—our approach, successes and past clients. As he was leaving for vacation he asked us to meet with his entire executive team. After an in-depth conversation with just the first person we realized that they didn’t need a CFO given their stage of development. We cancelled the rest of the meetings, no spec was needed, at least not for now.
We incorporate into the spec the unique qualities of the company and the strengths and weaknesses of the CEO so we can target the CFO who will bring complimentary skills and style. The spec is created in a way that can’t be duplicated robotically, and sets the tone for the partnership between company and search consultant, and the value that will be created with the right hire. Gaining an understanding of an IT’s company’s core technology and what makes the company tick is not a trivial undertaking, and we expect a few back and forths until we nail it.
Enticing the Candidate into Action
A spec should entice the candidate by sparking an interest in the specific opportunity or an idea for action. The goal is to have a prospective candidate think, “Wow, this was written for me!” or “This is not exactly right for me, but I know Joe would love to hear about this opportunity.”
I have said to clients in the past: “the spec goes out the window after the first meeting.” There’s some truth to that, but only because so much thought was put into the spec in the first place. The spec serves as a guidepost and may need fine-tuning after some interviews meetings take place, as “nice to haves” become “must haves” or vis versa. The spec can be a dynamic tool over the course of the search. The spec is worth obsessing over, and at Arnold Partners, we do. Clients should take a serious view of the creation process and CFO candidates should mind the details.
What’s your experience with specs in executive recruiting? I’d like to hear your thoughts or have the opportunity to help create one that creates extraordinary value for your company. Email me at moc.srentrapdlonra@evad or head over to our About page to learn more about how Arnold Partners can help with the process.
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.
