As we draw to the end of 2024, one trend that has been increasingly noticeable in the world of finance recruitment is the high turnover of CFOs and Finance Directors (FDs). Many of these senior leaders are being recruited only to leave within months, often without a new role lined up. This raises an important question:
Why is this happening?
- Role Mismatch: Often, the role described in the interview doesn’t align with the actual job. This can occur when founders or owners aren’t entirely sure what they need, or when the role is exaggerated beyond what the business requires.
- Unexpected Financial Challenges: In many cases, businesses are less liquid than advertised, meaning what was sold as a “growth” opportunity quickly turns into a crisis management or turnaround role.
- Resistance to Change: Founders or owners can sometimes be unwilling to adapt or hear what needs to be done to achieve the goals they’ve set. For finance leaders, this becomes untenable.
- Volatility in private equity: Throughout 2023 and the first half of 2024, we saw substantial volatility in the private equity CFO talent market, with unprecedented numbers of CFOs leaving their positions midway through the investment cycle – 75% of our appointments in 2023 were mid-cycle. According to Bronzegate
- Unclear Business Objectives: If a business isn’t clear on its goals or direction, hiring a CFO or FD may occur prematurely, further complicating things.
How can businesses avoid these pitfalls when hiring finance leaders?
Here are a few key strategies:
#1 Be Transparent About Your Business’s Financial Health
Ensure that all stakeholders, including founders, owners, and investors, are on the same page about the current state of the business—especially cash flow and growth trajectory. Misleading a candidate will only result in a quick departure once they see the true picture.
#2 Align on Expectations for the Role
Before hiring a CFO or FD, make sure all decision-makers agree on the scope and purpose of the role. Is it a full-time role, or could it be handled by someone part-time or fractionally? Is this person expected to lead growth initiatives or fix existing problems? Defining these expectations upfront can prevent future disappointment.
#3 Leverage a Fractional CFO for Guidance
Hiring a fractional CFO can be an excellent way to assess your true needs before committing to a full-time hire. Fractional CFOs can provide insight into whether you should outsource certain finance functions or bring someone in-house. Since you only pay for the time they work, it’s a cost-effective way to ensure you’re making the right long-term decision.
#4 Consult a Specialised Recruiter
Recruiters who specialise in finance roles, like Tenzing Search, that can help you better understand what level of expertise is truly needed for your business. We work with companies of all sizes and can provide tailored advice to ensure you’re hiring the right person, for the long-term not just filling a vacancy.
#5 Ensure a Rigorous Recruitment Process
A recruiter can offer a more in-depth hiring process, often meeting with candidates’ multiple times and conducting thorough interviews. At Tenzing Search, we map the market extensively to find the best talent—far beyond just posting an ad. We cover all bases to ensure you attract the right candidates and reduce the risk of a costly mis-hire.
The Cost of Mis-Hiring: Can You Afford It?
Hiring a finance director or CFO is a critical investment. Research suggests that hiring directly can cost between £7,000 and £17,000 in terms of advertising, time, and other associated expenses. More alarmingly, the cost of a mis-hire can range from £50,000 to £150,000. This includes lost productivity, missed business opportunities, and the potential cost of terminating the employment early.
If a hire underperforms, businesses stand to lose between 30%-50% of the individual’s salary due to decreased productivity. These figures highlight just how crucial it is to get your hiring decisions right.
How Tenzing Search Can Help
At Tenzing Search, we offer a range of solutions to help businesses avoid costly hiring mistakes:
- Fractional CFO Placements: We can place a fractional CFO in your business to help guide your finance strategy, ensuring the right long-term structure and hire.
- Free Advice and Recruitment Support: We also provide free advice on how to advertise and market your finance roles effectively, ensuring you attract the best talent. We can even provide benchmark candidates to guarantee you’re seeing the most qualified professionals for your needs.
- Time Saver: Replacing a CFO can typically take six to nine months. At Tenzing, we know who is immediately available and pride ourselves on supplying candidates that we have met and qualified properly.
Hiring a CFO or FD is one of the most important decisions a business can make. Given the high stakes, can you really afford to get it wrong?
If you need guidance or advice on finding the right finance leadership for your business, reach out to us at Tenzing Search. It costs nothing to have a conversation, and it could save you from the significant costs of a mis-hire.
