Heid: In the private-equity sector, we’ve seen some people with treasury experience who were brought in to do an IPO that is now delayed. The portfolio companies are switching their focus to operations, finance, restructuring, cost-cutting, and profit improvement. Raising funds is not as prevalent, except for companies that are highly levered and need to recapitalize.
We’ve heard in the past that companies want Superman or Superwoman to be CFO. Are they reordering priorities now, or is the laundry list still really long?
Langhoff: In years past, if clients had 10 things on their checklist, they might settle for 8. But now they want all 10, and are willing to take their time and see as many people as they need to in order to get all 10.
Heid: The amount of due diligence by both companies and candidates is pretty extensive in today’s environment. A company cannot take the risk that the CFO they hired is going to show up with a Wells Notice from a former company. And rarely do we have a CFO candidate who does not insist on meeting with the chair of the audit committee and the external auditors.
Langhoff: There’s no substitute for spending time with the CEO, your potential future partner. Go to dinner with him and see him in different environments. It should be the closest relationship you have outside of your immediate family. Letting someone hire you after a 45-minute interview is a real mistake.
Heid: We call it the airport test. If you got stranded in the airport for 12 hours, would you want to be with this person?
What are boards of directors asking for? CFOs who can be CEOs?
Heid: They absolutely want CFOs who have upward potential. They want somebody who has not only the technical capabilities but also leadership ability and who can move up to be COO, president, divisional president, or even CEO. They don’t want to bring someone who doesn’t have upward potential into this critical slot.
Langhoff: Clients are asking for someone who can step up, but the reality is, I’m not aware of any Fortune 500 CEO who was recruited in from the outside as CFO and went directly to the CEO chair. The average tenure at a company for a CFO who becomes CEO is 19 years. So if any recruiter calls you and says they’re looking for a CFO who can be CEO, you ought to push back pretty hard. If you don’t go out and get operational experience, you are probably not going to get the shot.
Are companies doing a good job when it comes to succession planning?
Heid: The ones we encounter usually don’t have much succession planning in place. When a vacancy unexpectedly occurs, shame on them. There should be not one but two or three potential backups, and plans to get them to that level. A lot of companies have other priorities and it falls by the wayside. A case in point is General Motors. How large is their finance organization? They’re doing a search right now for a successor to the CFO.