5 Common (and Costly) Mistakes Startups Make When Hiring Financial Services Pros
by Michael Burdick, on Apr 12, 2017
This blog was contributed to Paro by Tiffany Meyers at Built In Chicago. Built In is a network that allows people to get connected to local startup communities in Austin, Chicago, Colorado, and Los Angeles.
The path to every new hire is full of pitfalls. That’s especially true when hiring finance and accounting talent. Unless startup leaders have a background in finance, they often don’t know the right questions — let alone how to assess the answers they get.
Michael Burdick is CEO and co-founder of Paro, which matches highly vetted financial services professionals with businesses seeking part-time talent. Here, he shares the most common (and costly) hiring mistakes startups make — and ways to avoid them.
THE MISTAKE: Filling the wrong role
THE FIX: Get clear on duties (the title will follow)
Imagine: A startup thinks they need to bring on a CFO when, in fact, they need only a financial analyst. This is more common than you may think — likely because a layperson’s understanding of these roles tends to be general. The potential cost of making such a mistake is breathtaking.
To avoid such a gaff, forget about titles for the moment, said Burdick. Instead, create a list of the duties you need this person to perform, in detail. Present it to an internal or external functional expert, asking them to help define the role you need, whether it’s a VP of Finance, bookkeeper, controller, etc.
THE MISTAKE: Hiring blind
THE FIX: Test drive candidates
An interview gives you only so much information. To see your candidate in action, engage them in what Burdick calls a “practice project,” an approach he takes at Paro to vet candidates properly. For instance, ask a candidate to share ideas for improving your reporting structure.
THE MISTAKE: Being shortsighted
THE FIX: Hire in terms of growth potential
“Know what you want this new hire to do on day one — as well as what you need them to do down the road,” said Burdick. “Initially, you may want an accountant to implement QuickBooks. In a year or so, will you want them to transition to more powerful software?”
If you’re hiring a controller now, do you want that person to move into a CFO role eventually? Understand when a candidate will hit their skill ceiling — and ask if that ceiling is too low for how you want the role to grow.
THE MISTAKE: Hiring full time all the time
THE FIX: Allocate responsibilities wisely
Hiring full time does not always pay, literally. Consider a CFO’s salary expectations: $150,000 to $250,000 and more.
“When startups hire a CFO, the odds that they’ll do work beneath their pay grade is extremely high,” said Burdick. “They’ll operate as a Chief Financial Officer — but will probably do the books as well. That means you’re underutilizing your CFO and overpaying for your bookkeeping.”
In these cases, it makes more sense to hire a part-time CFO or fractional CFO for C-suite duties and a bookkeeper for your P&L.
THE MISTAKE: Going to general
THE FIX: Hire someone who knows your industry
It’s one thing to hire a great accountant. But the most optimal fit is a great accountant who also understands your trade. For a startup that manufactures a product, for instance, look for candidates who have held previous posts at manufacturing firms, or candidates who at least have experience managing inventory and other manufacturing responsibilities.