This article first appeared in the December issue of Financial Executive magazine.
As companies and hiring managers know all too well, making the wrong hire is costly. And not just from a financial perspective, though no one can discount the potentially extensive monetary damage from a disastrous hiring decision, especially for a senior-level position. Not only do bad hiring decisions drain an organization’s budget, they also take a toll on morale, productivity and time. Misfit recruits require significant attention, distracting both managers and team members from focusing on business-critical initiatives.
Research by Robert Half International underscores the time drain attached to ill-advised hiring decisions. Chief financial officers (CFOs) surveyed said that, on average, supervisors spend nearly one day per week overseeing poorly performing employees. But the effects of a bad hire rarely end there. A majority (95 percent) of financial executives surveyed said a poor hiring decision at least somewhat impacts the morale of the team, with more than one-third (35 percent) saying morale is greatly affected.
It’s not surprising that colleagues would find it more difficult — and highly frustrating — to continue carrying out their responsibilities when they have to pick up the slack for or learn to “work around” a problem hire. Moreover, team members may become resentful if they feel top managers are not addressing the situation.
The Ripple Effect
Besides the substantial hit to morale, a bad hiring decision at the senior level can have even more far-reaching implications. Financial professionals in higher-level positions have considerable influence over day-to-day strategy and operations. If they’re ineffectual in their role, the business will likely feel the pain to its bottom line sooner and more profoundly.
In addition, a company’s external reputation could suffer if there is a sense the firm’s leaders can’t make good hiring decisions, particularly for top positions. A failed hire at the CFO level, for instance, can shake a company’s reputation in the marketplace of public opinion. It may even put a firm at risk of adverse reactions from customers and clients, shareholders, auditors and regulators.
[pullquote forward=“2”]It’s not always a mismatched skillset that’s to blame for a failed hire. A culture clash can be just as problematic, maybe even more so.[/pullquote] Hiring a financial executive whose values, beliefs or operating style conflict with other senior managers can translate into a corporate crisis. If a company has to eventually terminate a higher-rung employee, there’s likely to be significant severance-related costs, in addition to the expenses and time involved in hiring a replacement. And that’s if a suitable candidate can be identified within a reasonable amount of time. The higher up the professional chain you go, the more difficult the process can be.
Replacing a departed employee is harder in today’s environment. Though the general unemployment rate remains relatively high, unemployment rates in accounting and finance hover well below the national average. For example, the most recent data from the U.S. Bureau of Labor Statistics put the unemployment rate for chief executives, which includes CFOs, at 1.8 percent. The rate for financial managers is 2.6 percent.
Avoiding Mistakes
With so much riding on making a good hiring decision, clearly the best course of action is to try to avoid hiring mistakes in the first place. And most ill-advised decisions can be traced back to a misstep in the recruitment process. A careful review of the company’s hiring practices and decision points may help identify where a breakdown occurred. These suggestions can help.
Understand the Type of Employee Needed
Before you can hire the financial executive of your dreams, reach internal consensus on the type of professional needed for the role. Recognize that the desired competencies may have changed since you last hired for the position, and identify the skills that are mandatory and those that can be developed.
The goal is to hire the person who is the best match for the job and specific work environment. For instance, maybe the company is becoming more global in scope and needs someone with international finance experience. Or, perhaps the business is restructuring and needs a turnaround expert, or a candidate with deep industry expertise is required.
Recent research by McKinsey & Co. identified four dominant CFO profiles: the finance expert, the generalist, the performance leader and the growth champion. As the consulting firm notes, there is no one executive type that will meet the needs of every organization. It is up to each business to determine the professional profile it requires. This is true whether a company is looking to fill the CFO post or another top position in accounting and finance.
Be Open to Internal Hires
Although external searches are essential when roles call for skills and experience that don’t currently exist in a company, sometimes the best candidate for a role is an internal one. Moreover, the potential for making the wrong hire can be minimized by elevating an existing team member, assuming the individual has the technical and interpersonal skills needed for a next-level role.
When promoting internally, you can usually be assured the person has a solid understanding of the business, its culture and its office protocols.
Nonetheless, companies don’t always look within their own ranks when filling financial management positions, according to Robert Half. CFOs interviewed for a survey said that, on average, fewer than four in 10 management roles in their accounting and finance department are filled by internal candidates.
This finding suggests many companies may be able to do a better job of developing their employees for future leadership roles. By implementing mentoring programs and enhancing training and development opportunities, firms can promote knowledge transfer and help existing staff expand their skillsets and make the hiring process more efficient. The alternative is not very desirable. Consistently bypassing internal staff for management positions erodes morale and hurts retention efforts. Organizations that fail to develop future leaders risk losing promising talent to other companies, along with the resources they invested in locating, hiring and training these individuals.
Involve Others in the Hiring Process
Hiring should never be a solo effort. Broad input from key internal stakeholders is critical, not only to identify qualities needed in the new hire but also in garnering broad-based buy-in before a candidate is tapped for a senior-level position.
In addition to involving influential employees in the hiring process, consider getting feedback from the board of directors or the finance or audit committee if the company has one.
Also tap network contacts to see who they know and for their insights on what has proven successful for them in the hiring process, and consider working with a recruiting firm specializing in placing finance and accounting professionals. These firms have deep networks within the business community and often know highly skilled professionals who aren’t actively seeking a new job but are open to making a move for the right opportunity.
Be Attuned to Nontechnical Skills
Besides having the functional abilities needed for the job, look for evidence a candidate also has the essential soft skills needed to succeed and fit into the organization’s culture. Failure of those in the positions to take leadership, communication and similar abilities into account may mean setting the team up for a bad match.
By conducting extensive interviews and carefully checking references, you should be able to gain a strong sense of a candidate’s interpersonal aptitude.
Audition a Candidate
If reluctant to make a full-time hire just yet or are still trying to determine the type of professional needed, consider an interim-to-hire arrangement. Firms of all sizes engage professionals at all levels on an interim basis today, including for senior-level roles such as treasurer and CFO.
Bringing in a consultant on a project basis can be one of the most reliable ways to assess a person’s qualifications and culture fit. Often, engaging someone on a consulting basis — including while you conduct a search for a full-time candidate — you can end up discovering the interim professional is the best person for the role.
Get Past the Professional Facade
When a new hire doesn’t work out, those involved in the hiring decision often find themselves reflecting on the process and thinking, “I should have realized it wasn’t a good fit when ...”
It’s not unusual for hiring managers to become enamored with some aspect of the candidate — e.g., “She has an MBA and CPA,” or “He has industry and IPO experience.” Before long, a hiring manager becomes mentally attached to a candidate and may ignore warning signs the individual isn’t right for the job.
Gain a deep sense of comfort and certainty about a candidate, especially when it comes to gauging culture fit. During the interview process, ask questions that can reveal a potential hire’s preferred corporate culture. And don’t get so influenced by the candidate’s public persona on LinkedIn, industry blogs or other social media sites that you overlook telling qualities about the person sitting before you.
Try to get past a candidate’s professional facade and assess whether the individual is the best person for your company and position.
Make Your Best Offer
Once the decision is made for the top candidate, move swiftly to extend an offer. It’s not unusual for highly skilled professionals to be weighing other opportunities. With this in mind, make a competitive offer from the start. Offer a compensation package that’s in line with — or, ideally, above — market rates. Stay current on salary ranges and compensation trends by consulting resources.
Skip the Shortcuts
Anyone who has ever lived through the experience of making a poor personnel choice or having to work with one knows the disheartening and wide-ranging effects of an ill-advised decision, especially when the wrong hire is in a senior-level role.
Considering the potential ramifications of a misstep, avoid taking shortcuts that might ease immediate staffing pains but create regrets in the long run. The time, money and frustration saved by avoiding hiring pitfalls will be well worth it.
Paul McDonald is senior executive director with Robert Half, the world’s first and largest specialized staffing firm, having been with the company for nearly 30 years.