Sounds like a no-brainer question, right? You’re the CEO, you run the company, you should choose your financial right arm. And mostly that’s what happens. But there is a trend afoot because of the increasing importance of the CFO’s input to strategic initiatives, a trend that has been growing for a decade and continues to gain momentum. The premise: One person’s opinion, even if that’s the CEO, isn’t always good enough to get the most capable candidates front and center for such a critical and technical job.
How can that be?
Think about the CEO who rose to the top through sales and marketing successes, or engineering/development successes, or operations successes. These CEOs have earned the right to run their companies, but does that make them qualified to choose their next CFO? Increasingly the answer is “maybe not.” Also, more finance chiefs are rising to the top job these days than in the past, a vivid recognition that in-depth financial expertise is a critical ingredient in the tool kit of today’s top CEOs.
Consider the trend of publicly held companies in which the Board of Directors has taken a direct hand in helping to find the next finance chief. In a recent Wall Street Journal article (March 31, 2015, p.B7) the journalist noted CFO changes at Google, J. Crew Group, Avon Products, McDermott International, Avnet Inc. and others, in which the board actively participated in the search for a new CFO, sometimes overriding the choice of the CEO because of perceived levels of experience in key strategic areas like M&A, creativity, growth management, etc.
Well, that’s all well and good for a big company with a strong, well connected corporate board, but what about the privately owned company facing that transition. Like yours? And further, those below $100 million in annual sales – thought of by many as small companies, but very often without strong boards if they have boards at all. Are their CEOs and owner/operators better at it than public company CEOs? Not very likely. They just have more of a tendency to wing it – get some input from their CPA firm and their lawyer, perhaps – and then the decision is made and everyone hopes for the best. Does that sound like good risk management? Yeah, I don’t think so either.
So what’s the bottom line message of this post? If you have a board, use them – for identifying candidates, for interviewing and screening, and for assisting in the selection process. If you don’t have a board, collaborate with someone whose expertise can help you match your strategy with their qualifications. That doesn’t include your mother, your best friend, your family lawyer, or another business owner with the same issues. It might include me. I’m just sayin’.
As always, I welcome your comments and feedback.