CFO Studio Magazine, 3rd Quarter 2012
by Howard Reba, CFO of Fidelus Technologies

To even a casual reader of today’s business news, it is clear that CFO turnover remains high at many small and middle market organizations. Whether attributed to new CEOs bringing in their choice, private equity investors electing to put their own people in place, acquisition activity, increased regulatory scrutiny, or the more initiative-oriented and short-term focus of the role, it is remarkable how companies go about selecting a new financial leader for their organization.

We are all familiar with the three questions companies ask when evaluating new employees: Can they do the job? Will they do the job? And will they fi t in?

A good interviewer and solid human resources team should have little difficulty answering the first question.

The second one is a little tougher, but still quite manageable. It is how companies handle the third question when selecting a new CFO that I find most fascinating.

In general, a CFO fulfills a leadership and stewardship role for the entire company by delivering a strong financial function and collaborating across other departments. Accordingly, job requirements include certain experiences, technical capabilities, and achievements. Why then do so many companies automatically screen out candidates based on industry experience?

The most common must-have requirement in CFO job descriptions is industry experience, and in many cases that makes sense: a manufacturing CFO is unlikely to be a top candidate for a hedge fund CFO role.

However, this approach is applied way too broadly. A CFO joining a new organization is simply a new piece of the puzzle that provides leadership. How well that piece fits depends on what gaps need to be filled. Often the missing piece is not industry experience, but more likely it is financial leadership.

Let’s look again at what a CFO does. First, he contributes individually. A unique set of talents and experiences allows him to bring fresh perspectives and ideas to the table. In this case, newness to an industry can be an advantage, as the new CFO can bring to light new ways to do things. It is incumbent upon the CFO to challenge approaches and decisions; one with a similar background would be more likely to promulgate the status quo.

Second, a CFO leads the finance team and maybe other groups as well. Here, he is basically minding the store, and the skills required do not vary tremendously from store to store. They involve strong management abilities, solid communications, and team-building skills. None of this is industry dependent.

Lastly, I believe the most important role a CFO fills is serving on the organization’s leadership team. Here he is a member and needs to provide what the other members do not. And that is most likely financial insight. A questioning demeanor will be more important than supplementing the industry knowledge most likely already present around the table.

So why do companies continue to focus on industry? Maybe it is because it is an easy way to whittle down the large pool of applicants. Maybe it is because there are many experienced candidates. But I must ask, are they the best fit?

Sometimes yes, sometimes no. so why limit introducing potentially better CFOs based on this one criteria that is not the most important one?

The most important factors are how well the candidate complements the competencies already in place and personifies the ethos of the organization. The broad ability to do the job, the personal drive to add value, and the cultural match clearly trump the singular and narrow focus on industry experience, especially in the most senior positions. It is rarely industry tenure that determines success or failure as CFO, so why is it the gatekeeper to the candidate pool?

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