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Interviewing the Chief Financial Officer, CFO Assessment
Organizational fit LEADERSHIP Vision & Value Financial Strategyis generally assessed 1 in 5 ceos of $2 billion The raison d’être of the an approach that deliversduring the small talk at plus companies come CFO is to use his financial a sustained competitivethe beginning and end of from 1 of 20... PAGE 9 prowess to create value... advantage for a companyan interview... PAGE 6 PAGE 12 or an individual... PAGE 14 ASSESSING THE An Interview Guide | a whItepaper by shane phillips
contents ASSESSING THE CONTROLS CHIEF FINANCIAL OFFICER TO REDUCE THE COMPANY’S 3 who could become the chief architect of your company’s 16 EXPOSURE TO IDENTIFIED RISKS growth trends Organizational fit MITIGATING RISKS A Risk can be defined as 6 is generally assessed during the small talk at the beginning 17 any event that threatens the achievement of the and end of an interview business objectives… LEADERSHIP REDUCING COSTS 9 1 in 5 ceos of $2 billion plus companies come from 1 of 20 18 BY EMBRACING TECHNOLOGY AND BECOMING INNOVATIVE AGENTS OF CHANGE. Vision & Value resource allocation12 The raison d’être of the CFO is to use his financial prowess to 19 to strike a balance create value. between current and future investiments Financial Strategy an approach that delivers14 a sustained competitive advantage for a company or an individual. shane phillips consultants +971 50 940 7537 | firstname.lastname@example.org | www.shanephillips.net
Assessing the Chief Financial Officer An Interview Guide A fter interviewing 250 totaling more than $1.5 billion between 1972 to Chief Financial Officers, 1987. Their share price skyrocketed from $25 a share I thought it was interesting that in 1980 to $500 a share in 1987, increasing the only 8% passed their initial company’s value by 20 times in less than seven years. assessment for the position. One Take a moment and imagine your own personal net CFO even balked at me when I worth, and then imagine growing that value by 20 asked him to describe his vision for the financial times to get a feeling for what Saatchi & Saatchi agenda of his company. He continued to explain accomplished. The company simply experienced that creating a vision was not the job of the CFO, white knuckle explosive growth during this time that his job was to play a supporting role. He told period. me the vision should come from the Chief Executive Officer. Needless to say he was The architect of this growth was not one of the disqualified. creative visionaries the firm was so renowned for employing but rather their Financial Director, who I would contest that the CFO is a visionary and often was none other than Sir Martin Sorrell. From 1975 a critical value creator in a company. Take for to 1984, Sorrell was busy perfecting his CFO skills example a small advertising boutique formed in 1967 and became a master of the “Earn Out” acquisition called CramerSaatchi. CramerSaatchi grew to strategy. Not too long after he left Saatchi &3 become one of the largest advertising agencies in the world and is most notably recognized as Saatchi & Saatchi their share price dropped by 98%, while Sorrell went on to build the world’s largest Saatchi. Saatchi & Saatchi executed 35 acquisitions advertising firm, WPP Group. 500 US DOLLARS 450 400 350 300 250 200 150 100 50 1980 1982 1982 1983 1984 1985 1986 1987 0 PRICE CHANGE ON SAATCHI & SAATCHI STOCK
Mark Loughbridge, CFO of IBM, takes the podium and becomes the world’s number one CFO for 2012 - The Wall Street Journal For a more recent example of a leading Chief not have and if they cannot give direction to their Financial Officer one can look at Mr. Mark own careers, they will not be able to give direction Loughridge, Chief Financial Officer of IBM. Mark to a large and complex team of executives. took over as CFO in 2004 and has played a heavy hand in defining the company as it divested its PC Top performers begin with a vision; they exude a4 business. Loughridge has developed the company’s plans as it relates to how to grow profit and earnings sense of direction, and are meticulous in their execution. While the skill sets of a CFO may vary per share as well as how to invest its cash. He has depending on the needs of an organization there championed more than 80 acquisitions and is one of are a few universal threads which all top the key architects of IBMs vision for 2015. His total performing CFOs must share; vision is one compensation for 2011 was $8 million while his of them. company, IBM, surpassed $100 billion in revenue last year. Mark Loughridge possesses a potent mix of This assessment of a CFO looks at 8 critical financial and strategic skill sets and to many he is areas and is designed only as the beginning of the living definition of the modern day Chief an exhaustive selection process. There are Financial Officer. several areas I left out such as organizationa impact and the ability of the CFO to create An executive cannot transmit something they do not have and if they cannot give direction to their own careers, they will not be able to give direction to a large and complex team of executives. As we can see with the examples above that top consensus with the Board or their ability to performing CFOs are visionaries, they are strategic influence power players of which they have no leaders who take initiative and are critical impact authority over. players who help define the face of an organization. In any executive assessment, This assessment is generic and a proper especially in a CXO assessment, the individual in selection process should always be bespoke question must have vision and a sense of direction. An executive cannot transmit something they do
The 8 critical areas this assessment looks at are: the Six Point Selection process or an equivalent process as described in the following pages.While there are many more relevant areas to look at Organizational Fit when assessing a CFO, such as Tax Strategy, Financial Analysis, Funding, Capital Structuring and others, I have chosen 8 to start with. These 8 were chosen as a beginning not an ending. ip Re loc I start with organizational fit as one begins to sh Al so ati er ur on ad assess fit during the small talk at the beginning of ce Le 8 1 2 s a meeting. I chose to assess Leadership next as I have argued at the beginning of this paper the CFO Vision & Creating is a critical leadership role. As the title suggests, it st / 7 3 Shareholder Value starts with Chief, it is not Financial Chief Officer it Co uc ing iency c 6 4 is Chief Financial Officer, and thus the emphasis is Red g Effi asi n 5 on leadership ability first and financial acumen Fi trat second. I then move onto Vision & Creating Ri ing e na eg ncr S s I t nc y Shareholder Value, which can be seen as the sk ga Controls ia iti l paramount duty of the CFO. Then the rest of the M competencies are explored in detail. To be clear it is not important where one starts the assessment. It is important to be thorough and and tailor made by the hand of a master the initial interview should take approximately5 craftsman to meet the needs of the organization. two hours. That is 8 sections with 15 minutes spent on each. For example if a company is under duress and A full selection process should entail several requires to be restructured, it will require a stages as described in the Six Point Selection very different CFO than a company which is process below; delivering record profits and is preparing for 1. Behavioral Interview an Initial Public Offering. As well a company 2. Chronological Interview that is looking to grow organically will require 3. Technical Interview a much different CFO than a company that is looking to grow through acquisition. So 4. Case Study before any candidate assessment can be made, 5. Psychometric Testing first an assessment of the company must be 6. References As the title suggests it starts with Chief, it is not Financial Chief Officer it is Chief Financial Officer, and thus the emphasis is on leadership ability first and financial acumen second. completed. A deep understanding of the One cannot over estimate the impact a CFO has vision and direction of the company must be on an organization and thus organizations are developed as only then can a CFO who is a fit encouraged to invest in a regimented, thorough be found. and exhaustive assessment of their CFO candidates. I will not go into an explanation of This assessment guide is designed to be a generic the Six Point Selection process described above as suggested starting point and a blunt initial first I do not have space in this paper to do so, instead pass as part of a much larger and regimented I will focus on the initial interview. n selection process. It should allow you to identify your top ten candidates; however your top candidates, once selected should be exposed to
organizational fit O rganizational fit is STATISTICS OF A generally assessed during the small talk at the beginning TOP PERFORMER and end of an interview. CXO executives often use a gut check of whether or not they would like working with this individual and whether or not he would be a successful addition to the team. This accepted small talk phase of the interview is an excellent opportunity to retrieve key information about the candidate. As part of casual conversation one can ask where the candidate is from, where they grew up and where they did high school. I did not cover it in this assessment but it is important to also ascertain how senior the CFO is by asking who he reports to and who reports to him. You may find that the CFO is actually reporting into a Regional CFO who in turn is reporting to a Group CFO, high HIGH COLLEGE performance which may leave your candidate lacking any real SCHOOL STUDENT EMPLOYEE6 autonomy in his or her role. This is important to note. It is also interesting to note how many boards he Thus in High School it is interesting to note what was or she sits on, which management committees the candidate’s favourite class and sport. Did they he or she sits on etc, as your CFO should be take on early leadership roles such as Captain of the comfortable managing heated debates with senior Basketball team or Best Boy? stakeholders, board members and influential members of the economy. The next part of Organizational Fit & Impact questions provides insight into the individuals self During this part of the assessment it is critical to awareness and self image. It is recommended look for early expression of the candidate’s core to ask the candidate to describe themselves in personality. As children we often play to our a personal manner, not a professional one. For strengths, therefore kids with natural interpersonal example one could answer the question “describe skills will gravitate to team sports and introverted yourself...” by saying, “I am a professional deep thinkers will have a penchant for solo Executive Search Consultant with 10+ years of activities. So the interviewer will gain insight into experience who enjoys building championship You may find that the CFO is actually reporting to a Regional CFO who in turn is reporting to a Group CFO, which may leave your candidate lacking any real autonomy in his or her role. the candidate’s drivers, subconscious motivators leadership teams”, or from a personal perspective and competencies by looking at the incumbent in “I am creative, deep thinker, loving father of two early development. As a child did the candidate daughters, who enjoys rich personal relationships enjoy group activities or did they prefer to play with my peers”. The traits the candidates use to alone. The assessment should contrast professional competencies with early development interests.
organizational fit describe themselves verve and brio. They will demonstrate a should be written down systematic approach to goal achievement and then later in the interview and a penchant for success metrics, such the candidate should be able to as vividly remembering where they demonstrate this trait in their finished in school. professional careers. In contrast the underperformer will be void of As children we often any vision, will have only a vague idea of their performance in high school, and will have play to our strengths, serendipitously ended up at some university or therefore kids with natural into some job as they roll with the punches of interpersonal skills will life. gravitate to team sports and While it is true that some people are late introverted deep thinkers bloomers and we should be mindful of that, will have a penchant for it is interesting to note a candidate’s early solo activities. performance. The statistical probability of7 For example the interviewer could then ask “at someone being a top performer in high school, a top performer in university, and then a top the beginning of this meeting you mentioned you performer in their chosen profession is were creative, can you give me an example of a quite high. time you had an innovative idea which increased revenue or reduced a cost?”. Doubling back during Success breeds confidence and self esteem, the interview process creates checks and balances which is required by any leader of a sizeable to ensure the candidate is speaking from the gut denomination. So we cannot say with absolute and not just trying to give you the politically confidence that an individual will perform correct answer. well in his or her profession because in early development they were top performers, but Furthermore it is important to understand how we can say the statistical probability that this the candidate thinks about achieving goals. individual will continue to perform at above Often the top performer will have adopted a average is higher than if they did not perform personal vision early on in life. well in school. When the candidate answers the questions below take note of not what they In the least the top performer will describe goals are saying but how they are saying it. Do they such as making the football team, or getting present the answer with confidence, with a sense accepted to their favourite university with of direction and insight? Doubling back during the interview process creates checks and balances to ensure the candidate is speaking from the gut and not just trying to give you the politically correct answer.
organizational fit Assessing fit is a rather sophisticated technique n What is your strategy to achieve this vision? and one could write a book about it. For the (Top performers will demonstrate a regimented purposes of this assessment I believe this is and systematic approach to achieving their enough to get you started and moving in the vision. They will have thought about what key right direction. milestones must be realized in order for them to achieve their vision. Underperformers in Please see some suggested questions below. contrast will stammer to present a strategy as they have never given it any serious thought.) n Childhood – Where did you grow up? Was it fun growing up there? What was your favorite n What are your salary expectations in the short game as a child? run? (This is an uncomfortable question for all candidates and can sometimes be asked at the n High School – favorite classes, sports, interests, end of the interview.) grades? Leadership positions? n What are your salary expectations in the long n University – favorite classes, sports, interests, run? (Many top performers will have a clear grades? Leadership positions? Student body vision of how much they should be earning positions? in 10 years from now. They should be bench marking themselves off their mentors and8 n image – How would you describe yourself, Self industry gurus.) not professionally but who are you as a person? Okay and professionally, now how would you n Current Family status – married, kids, no kids? describe yourself? What do you see as your greatest value proposition? n Community involvement / Non-vocational leadership roles? (Is the candidate contributing n What is your personal vision? What is the to the community in which they live? A candidate raison d’être (purpose) of the next ten years who is making an effort to give back can be more of your life? (Top performers will often comfortable in the role of coach or mentor others describe their vision and describe a systematic on the team; much more due diligence is required approach to achieving it. They are so charged than this one question but you can start to build up and excited about the direction they are a body of evidence for the candidate who is a taking in life that they enjoy talking about it; natural mentor.) n underperformers in contrast find this question uncomfortable, they often stare off into space and try and muster a personal vision on the spot.)
leadership “I suppose leadership at one time meant muscles; but today it means getting along with people.” - MK Gandhi D riving a team to achieve In fact, a USA Today article published in 2008 goals in a competitive market revealed that one in every five CEOs running the is one of the most challenging 1,187 public companies with a market CAP of over tasks a senior executive can face. $2 billion or greater at the time, had previously come Individuals who score high on from one of 20 companies. That is 20% of all CEOs this section will have a clear idea of large cap publically traded firms come from one what leadership is and specifically what values of 20 companies. The top leadership factories in and traits the ideal leader should epitomize. As an the US at the time of the article were GE, IBM, and organization can never outperform the capabilities McKinsey. In fact GE had created 26 CEOs of $2 of its leadership, the purpose of leadership should billion orgreater companies in 2008.9 be to create more leaders. As an organization becomes more ambitious and develops, its hunger for leadership becomes insatiable. Many US companies have such an appetite for leadership talent that they have become experts in developing leadership in house. Virtual leadership factories have begun sprouting up all over the country.nx20 The purpose of leadership is to create more leaders and CFOs who live by this philosophy should be identified, attracted and retained by companies who want to beat their markets. The first step in assessing leadership capability is to understand their philosophy around leadership itself. The first question in this section, “What is the purpose of leadership?” will allow you to see the candidate’s leadership philosophy. Further+ in the questionnaire is another question whichBx20 asks “You cannot be promoted if you cannot be replaced, discuss?”. The majority of executives will fail to see how these two questions are linked 1 in every 5 CEOs, of publicly and thus a red flag mechanism can be created, traded US companies with should the incumbent be trying to give you the answers they think you want to hear. $2 billion plus market capitalization, come from 1 of The executive who truly believes the purpose 20 companies. of leadership is to produce more leaders will invariably see the question “You cannot be
leadership THE PRICE OF The very essence of GREATNESS IS leadership is that RESPONSIBILITY. you have to have - WINSTON CHURCHILL vision. You can’t blow an uncertain trumpet. - Theodore M. Hesburgh will invariably see the question “You cannot be leaders in the world are capable of achieving this promoted if you cannot be replaced, discuss?” benchmark. as relating to succession planning and how important it is to institutionalize succession Having a vision of what leadership is in an planning into the organization. The growth of organization is only part of the equation, the the organization depends on its ability to produce real question is can they actually lead a large and a steady stream of competent and capable leaders; complex team? A top performing leader must as is demonstrated by winning case studies such understand how to harness the power of a team. as GE, IBM and McKinsey. They must be capable of aligning a group and will be a key factor in mobilizing people to follow a As the leadership assessment continues the new direction. Candidates who score high on the successful candidate should demonstrate the teambuilding questions of the leadership section of ability to embed the values of the idealized the assessment will have a clear idea of what kind leader into the company. It should be grafted of infrastructure must be created to drive a team onto the recruitment process, the succession from good to great. I will provide a base line for this10 plan, the promotion plan, the compensation and benefits plan; it should resonate throughout the answer, however team building is fluid and no two CXO executives approach it in the same way. Some Where they will have issues is in creating ownership of the goal with front line staff, creating mutual accountability for the goal across business functions and acquiring and retaining a team with a complimentary mix of skill sets. organization. For example McKinsey has a very may stray from the formula I suggest, what is most clear picture of what leadership should look like important is the extent to which they have invested at their organization, they recruit against it, they in developing a framework for managing a large promote against it, they reward people who echo and complex team; complimented by their proven it. They live it. It is the job of the team leader ability to make a team deliver results. to create this type of a culture and only the top For starters when assessing an executive on teambuilding I look for the following; Their ability to acquire and Their ability to articulate retain a complimentary mix a clearly defined goal for the group. 1 4 of skill sets to allow people to leverage strengths & weaknesses. Their ability to create a 2 5 Their ability to get the clearly defined process to team to take ownership achieving the goal. of the goal. Their ability to create Their ability to create clearly defined success metrics, milestones and a point of 3 6 mutual accountability across functions and organizational arrival for the achievement boundaries. of the goal.
LEADERSHIP While I do not have time to go into an Please see suggested questions below; explanation of something as complex as team dynamics in this white paper, I have n What is the purpose of leadership? provided enough for you to get started. By following these guidelines you will at least be n What is your team building philosophy? able to benchmark your CFO candidate’s team building philosophy against the above list. n What are the key elements of team building? Describe 3 of the most important aspects Often Chartered Accountants will be very of teambuilding? (Leveraging Strengths/ strong at creating a clearly defined goal, Weaknesses, Common Goal, Common developing a common process or path Approach, Common Measure, being mutually towards the achievement of the goal and accountable, creating ownership). will have prudent success metrics in place.11 Where they will have issues is in creating ownership of the goal with front line staff, n How do you embed your team building philosophy into the organization? How do you creating mutual accountability for the goal embed this into your recruitment process, your across business functions and acquiring and training & development, you career planning, retaining a team with a complimentary mix of promotions, innovations, compensation & skill sets. benefits? Thus in summary candidates who score high n What do you think of the phrase “You cannot in this section will have a clear idea of what be promoted if you cannot be replaced?” the purpose of leadership is, what leadership How do you embed this philosophy into your should look like in the organization and have organization and even the role of the CEO? a keen vision of what infrastructure they will create to lead their team to success. n Describe a time you were able to turn around an underperforming team. How did you do it? Finally they will be able to embed all of this into every facet of the business in an effort n What are the key attributes of a successful to create an enduring organization whose culture? What are the attributes of a successful culture will become a virtual leadership leader? How do you embed these values into factory. It is a tall order and few candidates your organization? will pass this section. n What actions and support, in your experience, make a team function successfully? n
VISION & CREATING SHAREHOLDER VALUE we are limited, not by our abilities, but by our vision - khalil gibran T he raison d’être of the division of his or her company. Often one of the CFO is to use his financial prowess primary reasons the top performing CFO has for to create and capture value for the changing employers is that their current company’s shareholders. This will require the operating platform is incapable of achieving the savvy CFO to be a strategic visionary, CFO’s vision. If the top performing CFO feels a team leader, and a creative another organization’s platform will be a catalyst to business partner. their vision, that particular company becomes very attractive. Understanding the executives personal Thus the assessment starts by looking for examples of and professional vision become key elements of both significant value creation. Divesting shared services the selection process and the attraction process.12 such as a call center and outsourcing it at a discount can provide a large upside for an organization. Right As part of their vision the CFO should develop and sizing an organization, or acquiring a competing communicate a compelling finance agenda. They business can deliver an impactful lift to a company’s should be able to clearly articulate the financial goals value. Sophisticated decisions which require intense of the company in both a short and long term context. financial strategy are at the heart of the CFOs job description. These decisions cannot be relegated The three most important goals of the finance to anyone else. Candidate’s who are not thinking department should be easily recalled by a leading about value creation may be more focused on the day CFO. Creating a vision is only 10% of the job, 90% to day running of the business and may not have a is getting the team to commit to the vision. A CFO strategic role at all. who is creating a vision and driving change within the finance function will be able to articulate his or Vision was discussed in depth at the beginning of this her finance agenda with ease. As he or she struggles paper and its importance cannot be underestimated. to get their team to take ownership of the vision they The CFO should have a clear vision for the finance would have had to communicate it on a daily basis in a litany of forms. Candidates who cannot recite their vision for the finance department may not be heavily involved in the 3 to 5 year business planning process and most likely are not internal change agents. Failure to recite a vision can be a red flag that this individual is not a CFO and may be a Controller with a CFOs title. good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it into completion. - JACK WElCH
VISION & CREATING SHAREHOLDER VALUE Below are a few questions suggested to test a n you give me an example of a time when Can candidate’s ability in Vision & Creating Shareholder you were able to successfully create and Value; communicate a compelling financial agenda? Why was it successful? n you give me an example of your biggest Can impact as it relates to building shareholder n What is your vision of the finance department value? of the future? n Many people feel that current public n Describe a time you had an innovative idea company reporting practices actually destroy that increased efficiency or increased revenue? shareholder value, discuss? n Describe a time you felt the vision of your n What is your vision for your current company was slightly off focus? Were you able department? to influence your leadership team to change directions? n How will the role of the CFO change over the13 next 5 years? (wait for candidate to answer and then ask) How are you adapting to these n your mind who are the top 3 CFOs of this In region? (Candidates who are aware of other changes and what critical course corrections will top performers in the market are developing a your department have to make in order to stay vision for their own personal and professional competitive in the near future? development) n Who is the visionary on your current CXO n What makes a top CFO? n team? Do you share their vision?
financial strategy if you know the enemy and you know yourself, you need not fear the result of a hundred battles. if you know yourself but not the enemy, for every victory gained you will also suffer a defeat. if you know neither the enemy nor yourself, you will succumb in every battle. - sun tzu F or the purpose of this white paper, strategy is defined as an approach that delivers a sustained competitive advantage either for a company or an individual. Therefore if the company’s vision is to be the14 leading IT company by gross revenue or to be the law firm with the highest billings per partner; the manager his or her vision could be to be the strategy would then be how the IT company will number one Account Manager in the country, and achieve the highest gross revenue in its industry his or her strategy may be to create distribution or how the law firm will achieve the highest channels his competitors do not have access to. billings per partner. In this instance an executive does not have to wait until they are leading a large team to exercise The strategy will describe an approach to their strategic skills. Continuous improvement the fulfillment of the vision which delivers a and competitive strategies can be developed at all sustained competitive edge. levels in the organization. In essence life is about strategy and anyone who is interested in being competitive should have numerous examples of creating and executing strategy. Candidates who complain that they are not in a strategic role should be eliminated immediately. Strategy is omnipotent for the CFO as finance threads every department and every area of the business. Finance affects every employee in the form of compensation and benefits which can often be the largest piece of the P&L of a business. A winning strategy can be developed by a CFO of In its more implicit form it is embedded in every a billion dollar company or it can be created by an business activity as controls or can be as complex entry level Account Manager. as sophisticated derivative hedging strategies used to minimize the company’s risk exposure. Strategy takes place in all areas of an executive’s career and those executives who advance to Financial Strategy is the bedrock of any top the top are the ones who are using winning performing CFO and a critical pillar of any strategies. In the case of the entry level account competitive business.
financial strategy As CFOs become more sophisticated they are able n Have you ever successfully implemented the to direct human behavior within the organization outsourcing of your organizations non-core and seamlessly graft controls onto the over- business functions? What was the situation? arching strategy of the business. How did you recognize the opportunity for outsourcing was significant? They are masters of generating consensus and commitment to new ideas. A strategy which is not successfully executed is a useless strategy as n you give me an example of a long term, Can the test of any good idea is in its execution. A 3 to 5 year, business planning effort you leading CFO will know how to get their teams to championed? accept and implement the master plan. n What is your philosophy of strategic Below are some suggested questions to test a CFOs development & business planning? strategic acumen; • How often do you review your strategic plan? • Do you include outsiders in your strategic n Have you ever had an idea which has allowed process? your company to enjoy a sustained competitive • What are the key steps in a successful15 advantage? strategic planning process? • How do you get alignment across the Board, n you give me an example of a project you Can C-Suite, Business Units, Line Managers and worked on in which you had to switch strategies Employees? mid-project? What was the situation, how did you recognize a change in strategy was needed, n Why is it 90% of strategies fail to be how did you implement the change? (Reducing implemented? Why do only 10% of companies foreign exchange exposure, changing a banking successfully execute their strategies? relationship, divesting or outsourcing an element (Sophisticated candidates will state that this is of the business, etc.) due to a lack of ownership and internalization n What is the toughest thing about of the company strategy by its staff. Leading implementing a new strategy? executives will institutionalize processes to allow front line employees to influence n you give me an example of time you were able Can and help create strategy. They will create to reduce working capital in your organization? infrastructure which allows the strategy to What are three strategies for reducing accounts be fluid and ever changing as the market and receivable? What are three strategies for reducing company evolve.) inventory? What are three strategies for increasing accounts payable? n Describe the most exciting acquisition of your career? Was it your idea? What was your n Your company has requested you to increase strategy of evaluating the acquisition target? the Return on Assets. What are two strategies to achieve this goal? Have you n your current/previous company’s strategy Is ever spearheaded such an initiative in your competitive? What changes would you make professional career? to it to make it more competitive? n Describe a time you developed a strategy from n your industry who has the most competitive In scratch? What was the situation, how did strategy of all? How can you compete against you implement the strategy and what was the them? n result?
CONTROLS has the foresight to see where the gaps in the system are as markets change direction. What is critical to assess is the candidate’s creative problem solving skills and their understanding of human psychology. Below are some suggested questions regarding controls: n you give me an example of a project you Can worked on that was suffering from control problems, how did you pinpoint where the problem was? How did you find the problem, how did you fix it and what was the result? O n CFO often inherits a companywide The ne of the paramount measurement system that is based on historical functions of the CFO is to needs, rather than the requirements of its develop and nurture an effective current strategic direction. How do you prune set of controls for the business. He out those measurements that are not resulting or she will examine each process in behavior aligned with the strategic direction? in the business that involves Can you give me an example of a time you were financial transactions to see where there is a risk of able to step into a role and link performance16 losing assets and then install controls to reduce the company’s exposure to the identified risk. measures to the strategy of the organization? (Candidates with a commanding knowledge of controls will gravitate to re-engineering Controls also increase the quality of financial data legacy control systems when they take on a new that is being relayed back to the CXO team, from CFO position, while CFOs with an elementary which critical business decisions will be made. understanding of the subject matter will be gun While every company will want to operate in a zero shy to change traditional control set ups. If a risk environment, the catch is controls can be very company takes a drastic change in strategy, a costly. A risk free operating platform is often too change should be echoed in its control systems) expensive to be competitive, thus a certain level of n What was your most challenging assignment risk is always present in the company and the savvy as it relates to implementing reliable control CFO knows exactly how much risk is acceptable. systems? Often clients will chose a CFO from the same n What is the toughest part about constructing industry as after working for twenty years in reliable control systems? a specific sector an executive develops a deep understanding of the inherent risks in the business. n you give me an example of a project where Can The mature, seasoned CFO is able to leverage you were able to design new controls for new controls to direct human behavior as required by systems from scratch? What was the situation, the over-arching strategy. what did you do and what were the results? This type of re-engineering requires the experienced n you give me an example of a time when Can hand of a master craftsman who is able to identify you were able to create a measurement and legacy controls which are no longer needed and reward systems to channel behaviors into correct areas? thus a certain level of n you give me an example of a time you re- Can risk is always present engineered control systems to create value for your company? in the company and the savvy CFO knows n Describe a time you effectively removed a exactly how much risk is control from the business with positive acceptable. results? n
MITIGATING RISKS only those who will risk going too far can possibly find out how far one can go. - T.s. eliot A risk can be defined as In today’s environment most companies will have any event that threatens the a Chief Risk Officer but even so the CFO should be achievement of the businesses heavily involved in risk assessment in the business and objectives as defined by its vision have a deep understanding of risk management. and strategy. The Chief Financial17 Officer must not only be aware of Suggested questions to assess a CFOs risk competency are listed below: all past risks to the business but should be proactively seeking the probability that new unknown risk events may occur. n What is your risk philosophy? Traditionally companies buttress their risk policies n you give me an example of a time you were Can with layers and layers of preventive actions aimed able to successfully identify and mitigate a at dealing with risk events which have already significant risk for your company? (E.g. Loss of occurred. The greatest risks are the ones which key business partner, Forex risk, system failures, have not occurred yet and are completely unknown loss of brand image, investment losses, interest at this moment. rate increases) n What are the three biggest risks to your department? n Looking at our current business model what do you think the most likely risks for the business would be? n Describe a time when you successfully institutionalized a risk monitoring process? n How do you define your organization’s risk appetite? n Describe a time when you aligned your board and stakeholders on the appropriate risk appetite for the business? n Describe a time when you process re-engineered your risk reporting function? n How do you define a company’s risk threshold? n
REDUCING COST there is one rule for industrialist and that is: make the best quality of goods possible at the lowest cost possible, paying the highest wages possible. - henry ford I ncreasing efficiency is the CFOs today must embrace technology and become focus of any company which aims to be innovative agents of change. Questions focused competitive. Technology has delivered the on a CFOs ability to deliver cost reductions and biggest efficiency gains in recorded history increase efficiency are below:18 and the CFO of tomorrow will have to be tech savvy. Being up to date with the latest IT n What is your philosophy of cost reduction and approaches that can deliver value for a company is a increasing efficiency? must. n you give me a specific example of how Can Today organizations are doing more with less on you benchmarked your firm’s performance to an epic level. Automating a process can reduce risk assess how efficiently it was performing? How exposure, increase efficiency and reduce costs all did you identify where opportunity gaps were at the same time. Today companies are delivering and how did you propose to bridge these gaps? multi-billion dollar revenues with a fraction of the staff and the cost than that of even 10 years ago. n you give me an example of how your Can knowledge of bottlenecks in the production process affected your decision regarding capital expenditures? n What is the industry average cost to earnings ratio? How does your organization measure up to industry norms? n Have you ever created a system or policy which encourages efficiency improvements throughout the organization? Across all departments and divisions? n you give me an example of a re-organization Can you have spearheaded? How did you recognize that a re-organization was necessary? How did you re-align staff? How did you align people processes and strategy? n Describe a time you were able to significantly reduce your company’s fixed costs? n
resource allocation rule no. 1: never lose money. rulE no. 2: never forget rule no.1. - warren buffet I nvesting retained earnings Below are suggested questions for this section: effectively requires decision making19 rigor of an expert CFO. Current growth opportunities, future expansion n What is the most difficult decision you have had to make as it relates to Capital prospects, research & development, Expenditures? upgrading current facilities, pension fund investments, paying dividends to shareholders, n Have you ever been in a situation where there special projects, etc, the list of investment needs is was a disagreement with your Board about never ending and the winning CFO knows how to which projects should get funding and which strike a balance between current and future needs. shouldn’t? As the gate keeper to the company’s annual budget n What is your philosophy of investing excess and guardian of its liquidity, the ability to expertly cash? allocate financial resources is the touchstone of financial acumen. n Have you ever created a separate WACC for each department? (Creating an internal capital market.) n What are the three biggest mistakes a CFO makes as it relates to Capital Expenditures? n Describe a time your investment allocation has outstripped your growth rate? What was the result? What did you do to course correct the situation? n What is your investment philosophy? n
SUMMARYIn the many ways the Chief Financial Officer position is the least forgiving CXO position as a failureto perform one’s duties effectively can result in imprisonment. The pressures of the position aretremendous and only seasoned candidates who can handle the intense heat of the boardroom shouldbe entertained for the position. The role requires mature individuals with the gravitas to create impactwith senior stakeholders and the political acumen to manage the sophisticated undercurrents of aglobal arena. All of this must be underpinned by the rock solid character of an executive who has thecourage of their convictions. I hope this white paper enables you to make a better selection of yournext CFO, as it is but a small glimpse into my craft and profession. I have created this for free as it ismy honor to contribute to your success moving forward. The bedrock of a prosperous society is strongethical business and ensuring you chose your CFO correctly is critical not just to your company but tothe community. Should you have any questions about my assessment please do not hesitate to contactme as I will be delighted to hear from you.Shane Phillips Consultants is a boutique executive Helping companies build championship leadershipsearch firm specializing in senior placements. The teams has been a tradition in the Phillips family forfirm finds its roots planted in the 1970s in Canada generations. From assisting Fortune 500 companieswhere The Phillips Group was first founded. After acquire and retain top performing senior executivesthe retirement of Carl A. Phillips the business was or advising leading Chief Executive Officers onclosed for a period of years only to developing their human capital,be re-opened in Dubai. With two Shane has executed CXO assignmentsgenerations of Executive Search all over the world. His passion forexperience, Shane Phillips Consultants helping people and companies developoffers high touch bespoke service for leadership capability has driven himclients looking to hire the best people. to engage the media, where he isServices offered include Executive now the host of Dubai Eye’s careerSearch, Executive Assessment, show “Eye On Careers” as well as aRecruitment Process Out-sourcing, contributing writer to CEO Magazineand Training & Development. and Global Citizen Magazine. Shane holds an MBA from LondonSHANE PHILLIPS BIOGRAPHY Business School and a B.A. in Psychology from the UniversityShane is currently the Managing of British Columbia. He is a NonDirector of a boutique Management Executive Board Member of FortisConsultancy in Dubai, United Arab Group Holdings and Chairman andEmirates. The lion’s share of his Founder of Big Brothers Big Sistersprofessional experience is in Executive UAE. A former Executive BoardSearch with previous experience at leading firms Member of the Canadian Business Council, Presidentsuch as Korn Ferry International, Odgers Berndtson of the Club for Canadians and a volunteer with theand most recently at Stanton Chase International Families with Special Needs, the United Way andwhere he was MENA Regional Practice Leader for Young Achievers.Financial Services. shane phillips consultants +971 50 940 7537 | email@example.com | www.shanephillips.net