Why Transparency in the Recruiting Process is the Key for Retaining and Attracting Top CFO Talent

Recruiting and retaining CFO talent is a top priority for many of today’s leading investors, CEOs, and Boards. However, recruiting a top CFO that meets the business’s exacting needs remains a challenge for even the most dedicated hiring teams. Thus, teams must sharpen their tactics in order to successfully attract the strongest financial executives.  

So, how do you attract and retain the best CFO candidates? Focus on creating both transparency and alignment in four key areas. 

1. Scrutinizing Valuation & Growth Assumptions 

In the recruitment process, CFOs often face vague or aggressive growth projections, sometimes unsupported by clear data. Once in the seat, after realizing that the value creation opportunity is less than expected (sometimes significantly so), CFOs may opt to leave before a transaction is finalized. This gap between the marketed valuation and the actual growth of the company also creates significant tension between CFOs and their CEOs and investors. Consequently, CFOs are reviewing company financials, historical performance, and growth assumptions with increased scrutiny. One way to enable CFO candidates to do this research is to provide the details and data that were used to develop the investment thesis. This enables CFOs to better understand potential exit pathways and value creation opportunities, thus equipping them with the tools to understand the strategic rationale behind the company’s growth projections. By providing CFOs with this information during the recruitment process, CEOs and investors can get ahead of potential challenges and foster a trusting relationship. 

2. Alignment with CEO 

Ensuring CEOs and CFOs are aligned on strategy and vision is paramount for achieving a company’s objectives. For example, during a recent CFO search process, the lead candidate and the CEO held joint working sessions surrounding the company’s growth goals and targets. Reflecting on this experience, the candidate shared that “the CEO’s proactive engagement and communication created a clear vision of the partnership potential moving forward; significantly enhancing the appeal of the role.” By building a relationship during the recruiting process, CFO candidates and CEOs can begin to form a partnership and envision the nature of what could be a long-term relationship. Similarly, when a CEO and CFO are being recruited simultaneously, lead candidates frequently express the desire to meet each other before finalizing any offers to establish both personal rapport and professional compatibility.  

3. Transparency Regarding Exit Timeline Scenarios 

It is often difficult to predict the specifics related to an exit. During the recruiting process, it is essential that there are transparent conversations regarding the exit timeline and the scenarios under which an exit could occur. This provides CFOs with the opportunity to evaluate whether they are aligned with the company’s strategic direction and assess the viability of the transaction schedule. Furthermore, CFOs increasingly request full equity plans to clarify their financial incentives, vesting schedules, performance milestones, growth assumptions, and payout timelines. Ultimately, sharing this information ensures alignment between the CFO candidate and the company, increasing the likelihood of success in both recruiting and retaining the candidate. 

Aligning around the exit timeline is important for all key stakeholders, specifically when looking to attract C-level talent later in the holding period. For example, we recently engaged with a client that needed to hire a new CFO four years into the deal. This was a challenge, given that for a CFO, joining a company this late into the transaction can result in diluted equity and limited value creations opportunity. Thus, to attract a new CFO, the CEO and investors crafted an offer that guaranteed the CFO a minimum payout regardless of how quickly the company sold and their equity vested. This example highlights the need for hiring teams to think creatively during the offer process in order to attract CFOs amid varying points in the holding period, shifting transaction timelines, and changing market dynamics. 

4. Transitioning into Private Equity 

Many CFOs are making the leap to private equity for the first time. In these instances, defining equity and the impact of valuation on equity is of utmost importance. For CFOs unfamiliar with equity vs. options, this can be a significant adjustment. If a candidate comes from a public company where they are accustomed to receiving annual stock grants, they will often request additional details on potential earnings upon the sale of the company. Working closely with first-time private equity CFOs during the offer process is critical for ensuring that they understand the deal horizon, valuation, and overall investment thesis. If the hiring team does a poor job of explaining the full compensation potential, the risk of losing the candidate and winding up with a declined offer is higher. CFOs who recognize the potential for significantly higher earnings through equity ownership — even if it means slightly lower income over the next few years — can be a tremendous asset to investor-backed businesses.  

Strategies to recruit top CFO talent are changing. As CFOs become increasingly strategic in evaluating new opportunities, attracting, and retaining the best CFOs requires CEOs and investors to lead with transparency, ensure CFOs understand the value creation opportunity, and validate the CFO’s partnership with the existing team. Taking the time to share essential details and ensure transparency is well worth the additional effort.  

For more information about our recently published Chief Financial Officer (CFO) Compensation Study, please visit our website to download the Executive Summary.