Warning Signs When Qualifying CFO Candidates: What Most CEOs Miss
Due diligence when hiring a CFO matters more than ever before. IBM’s research shows that CEOs consider CFOs to play the most vital role in their organizations in the next two to three years. But choosing the wrong person can get pricey — businesses lose 5% of their revenue each year to fraud. Cases with losses of $1 million or more make up 22% of all fraud incidents.
The CFO world has changed dramatically in the last decade. Back in 2012, 43% of S&P 2000 CFOs had CPA designations. That number dropped to 43% by 2022. These changes mean companies can’t rely on traditional credentials alone to evaluate candidates. Business credit reports often cause problems too – 25% contain errors or missing information. This makes it essential to verify every claim a candidate makes.
This piece reveals warning signs that CEOs often miss while evaluating CFO candidates. You’ll learn practical ways to conduct thorough background checks, understand the differences between financial roles, and discover what really matters when choosing your company’s next financial leader.
Understanding the CFO Role Before You Hire
You must have a clear understanding of what the role means for your business needs before evaluating CFO candidates. The modern CFO role has grown by a lot from basic number-crunching into a strategic leadership position.
What a CFO should bring to the table
A CFO now works as a strategic partner to the CEO and provides expert financial guidance to accelerate business growth. The role goes way beyond the reach and influence of traditional accounting. It focuses on future-oriented finance aspects to help set the company’s direction. A qualified CFO delivers financial leadership in strategic planning, manages risks, makes capital structure decisions and represents the company in external financial matters.
Modern CFOs need excellent communication skills to explain complex financial information to different departments. They should be skilled at building high-performing teams and tech-savvy enough to direct digital transformation. Their emotional intelligence helps them manage relationships within the organization effectively.
Controller vs CFO vs VP of Finance
The difference between these roles is vital to proper evaluation. A CFO works directly with the CEO and board to provide strategic guidance from a company-wide viewpoint. Controllers handle accounting tasks, create financial reports and maintain accuracy.
A VP of Finance usually has deep accounting knowledge – they’re basically a CPA with leadership skills who could become a CFO later. Controllers work to improve efficiency and avoid financial risks, while CFOs lead strategic growth initiatives. Companies usually need a CFO when revenue reaches $25-50 million, though business complexity can change this timing.
When a fractional CFO might be enough
Businesses with revenue under $50 million often get better value from a fractional CFO than a full-time hire. This setup saves money by turning a fixed cost into a variable expense.
Fractional CFOs are a great way to get benefits beyond cost savings. They work with multiple clients at once, which gives them broader ongoing experience. Companies can bring them on board quickly – sometimes within a day – to provide immediate strategic financial leadership. Their outside viewpoint, free from internal politics, leads to honest advice based on skill and experience rather than pushing particular strategies.
8 Warning Signs CEOs Often Miss When Hiring a CFO
Your company can avoid getting into pricey mistakes by spotting red flags early when evaluating CFO candidates. These eight warning signs often slip through the cracks during hiring:
1. Too focused on accounting, not strategy
Today’s CFO role needs more than just accounting expertise. Candidates who talk mostly about financial reporting rather than business strategy might not be the right fit. Modern CFOs act as trusted advisers to boards and CEOs about organizational priorities, not just budget managers. The best candidates can explain how finance shapes business decisions beyond just reporting numbers.
2. No experience with fundraising or investor relations
About 68% of new and aspiring CFOs admit they lack fundraising experience. This gap could hurt both their career and your company’s growth plans. CFOs without fundraising know-how often struggle to pick the right capital sources, build investor-ready financial models, and set accurate business valuations.
3. Poor communication with non-financial teams
Communication gaps are a major weakness in CFO candidates. 31% of executives say communication skills need the most improvement in finance departments. The old stereotype of an unapproachable, charisma-free finance chief still exists. Strong CFOs excel at explaining complex financial concepts to non-financial team members.
4. Lack of leadership or team-building skills
Leadership skills matter more than ever for CFOs. Red flags include candidates with limited team management experience or micromanagement tendencies. Great CFOs build bridges between departments and promote teamwork instead of creating silos.
5. No track record of driving growth
The best CFOs spot new revenue opportunities and help choose investments that stimulate long-term growth. Candidates who only talk about cutting costs without showing growth initiatives might not bring the strategic vision your company needs.
6. Avoids technology or automation tools
Technology resistance raises serious concerns. Nearly 60% of CFOs now invest in modernizing finance operations through cloud, AI, and machine learning solutions. Candidates who shy away from these technologies could hold back your company’s efficiency and market position.
7. Doesn’t understand your business model
CFOs need deep knowledge of operations, supply chain, and the key factors behind company success. Yes, it is concerning that 45% of CEOs worry about their CFOs’ limited commercial experience outside finance.
8. Overpromises without data to back it up
About 49% of CFOs say their biggest challenge is knowing how to execute with accurate, timely data for smart decisions. Watch out for candidates who make big promises without evidence or show weak data management capabilities.
How to Perform Due Diligence on CFO Candidates
Scanning resumes and doing standard interviews won’t give you the full picture of financial leadership candidates. Here are some smart ways to spot problems that regular hiring methods might miss.
Check references beyond the resume
Past employers can tell you things you won’t find on a resume. Many companies just do quick reference checks or skip them. You’ll get better information by talking to references on the phone rather than through email.
Here’s how to make these calls work:
- Set up the reference check ahead of time
- Have specific questions ready about job duties
- Write down everything—even when references dodge questions
- Dig deeper if answers seem unclear
Watch out for candidates who can’t give you local references if they’ve lived nearby. This should raise a major red flag. A study shows only 53% of employers check if degrees are real. This leaves companies open to risk.
Ask for ground examples of results
Get candidates to show you how they’ve shaped strategy and helped companies grow. Ask them to share:
- Specific examples with measurable outcomes
- The thinking behind their money decisions
- Proof of how their plans affected company results
- Their working relationship with CEOs and executives
Keep good notes of these answers. They show you exactly what a candidate can do in your company.
Use business due diligence services if needed
Regular background checks often miss key facts about executive candidates. One in five executive-level candidates has something concerning in their past that basic checks don’t catch. Good executive checks should look at:
- Other businesses they’re part of
- Court cases in different places
- Money-related misconduct
- Conflicts of interest
- Global watchlists and records from other countries
Here’s a ground example: A candidate gave fake references and lied about their job. Only deeper digging found these problems.
Review cultural and leadership fit
The CEO-CFO relationship can make or break company success. You need to see if candidates can fit their leadership style to your company’s culture. Take these steps:
- Meet them for lunch or dinner
- Ask tough questions about hard situations
- Be open about company challenges
- Watch how they work with different people
Harvard Business Review points out that checking company culture before taking a job matters—this works both ways when hiring a CFO.
What to Look for Instead: Traits of a Great CFO
The due diligence process for CFO candidates should look beyond potential red flags and focus on positive indicators. Top financial leaders possess distinct qualities that make them stand out from regular accountants.
Strategic mindset with financial depth
Modern CFOs act as strategic architects of resilience and growth instead of basic number crunchers. They combine financial expertise with strategic decision-making capabilities and work as lead partners to the CEO to shape future business strategies. The best CFOs learn about new business opportunities from financial data to accelerate growth initiatives. These leaders need to balance profit goals with long-term vision while offering steady analysis based on complete financial understanding.
Clear communicator across departments
Knowing how to share complex financial information with different audiences is crucial. The best CFOs translate financial insights into applicable strategies that make sense to non-financial stakeholders. Clear communication helps them boost transparency and ensures leadership teams support financial strategies. Their communication skills extend to external stakeholders as they express financial positions to investors, regulators, and business partners.
Proven ability to scale operations
Outstanding CFOs excel at optimizing efficiency throughout the organization. They lead the development of KPI dashboards that show immediate operational metrics to enable faster, smarter decisions. These leaders work together with various departments to manage supply chain and personnel risks effectively. Their operational expertise creates efficient workflows, reduces errors, and speeds up tasks that ended up saving time and money.
Comfortable with ambiguity and change
Top financial leaders excel in uncertain times. They use scenario planning to prepare for multiple potential outcomes so organizations stay ready for surprises. Forward-thinking CFOs accept new ideas in technology and often lead digital transformation projects involving automation, AI, and machine learning. Their adaptability helps companies adjust quickly to market changes, which positions organizations to grow even during uncertain periods.
Conclusion
A CEO’s most crucial decision might be choosing the right CFO. This piece shows how the CFO role has grown beyond just crunching numbers into strategic leadership. We’ve also spotted common warning signs that slip past seasoned executives during hiring.
The landscape has changed a lot. These days, fewer CFOs have CPA credentials, and strategic skills matter more than ever. You just need a smarter way to evaluate candidates. Of course, good research means looking past polished resumes and practiced interview answers to find real proof of strategic results.
Watch out for warning signs. A candidate focused too much on accounting instead of strategy should worry you. So should someone with little fundraising experience or trouble talking to non-financial teams. CFOs who lack leadership skills or resist new technology probably won’t cut it in today’s world.
Smart research goes beyond basic background checks. Talk directly to references and ask for specific examples of business results. You might even want to use specialized research services to avoid hiring mistakes that can get pricey. Remember, your company’s financial health depends on this key leadership role.
The qualities that matter in a CFO? Look for someone with both strategic thinking and financial know-how. They should explain complex ideas clearly to everyone and know how to grow operations smoothly. Great CFOs stay cool with uncertainty and accept new ideas rather than fight them.
Your CEO-CFO relationship shapes where your company goes. Find someone who fits your leadership style but brings fresh views to financial strategy. This sets up your organization to grow steadily. Put in the time and effort to research properly, and you’ll boost your chances of finding that perfect financial partner who’ll help drive your success.
