One of the hallmarks of a high-performing company is the ability to accurately forecast its business. Forecasting has many effects, from providing guidance to the financial markets to understanding cash needs to the creation of logical manpower plans – to name just a few.
Is this the CFO’s job? Well, yes, and partially yes.
The CFO creates the process and manages the build-up of the information. A CFO works at the front end to understand “expectations” but is careful not to over-emphasize target numbers. Many inputs are relatively easy to simply drop in, others are not. Sales forecasts, marketing spending, R&D costs are all examples of content best obtained by working with C-Suite counterparts. In the broadest of terms, a good CFO creates an environment where the rest of the team can be honest about their inputs, AND a good CFO develops enough business understanding to know when they are being given poor quality information. Interpersonal skills help with the former, and industry experience can be very helpful with the latter.
Can you hire for this skill set? Yes, but you may not have the skills or the time to do it.
There are a number of questions that can help you to identify a CFO candidate’s level of skill with forecasting. You might start by asking about the business they are currently in, what their market position is and what their key points of differentiation might be. You can ask them to explain their current forecasting process and identify where the major inputs came from. You can ask what their forecasts were used for, who reviewed them, and what type of changes they personally made or others such as the CEO or the Board made. That’s not all-inclusive, but it will give you a start.
We could discuss this in much greater detail, but that’s better done one-on-one and tailored to your circumstances. Frederick Fox can help you to screen for forecasting knowledge, along with overall technical competence and people management skills. If you spend the time with us to define your requirements, then we will find the right fit for you. This is what we do, we deliver results.
The author has been a partner with Frederick Fox for approximately one year, prior to that he had a long career in business (mostly in pharmaceuticals, consumer goods, and medical devices) as the CFO at 5 different public companies and the audit committee chairman at another. He leads our Finance recruiting activities. providing subject matter expertise across a wide range of financial