Although it falls outside their traditional job description, CFOs of growth companies must often play the role of human resources strategist. The responsibilities related to HR — managing performance, designing the leadership team for the next stage of growth and creating clear objectives for all employees — are just as important as having sufficient liquidity.
Often, small or early-stage companies don’t have a strategic HR leader. The controller or a low-level HR person handles day-to-day personnel and makes sure the firm stays compliant with the law. Many growth-company CEOs are either externally focused or haven’t worked in larger organizations with a strong HR director. As a result, their firms do not recognize and reward top performers, and they allow low performers to linger. As headcount grows, job duties and responsibilities become muddled, employees lack measurable objectives and firms lose momentum.
Many CFOs recognize this problem but don’t take ownership of it. They often make suggestions to the CEO or try to coach a lower-level HR person. Yet when things don’t improve, they sit back and wait. After all, few managers look forward to performance reviews (especially the hard ones). These unpopular processes are easy to ignore or neglect. However, failing to manage employee performance has an effect on the company and those who lead it — an effect even more unpleasant than having to tell an employee they are underperforming.
CFO Betty Kayton, who specializes in venture-backed growth firms, recalled one young firm in the software-as-a-service space that had a vice president of sales who could not close business. Despite Kayton’s counseling, the CEO would not replace the executive, who was his friend. The board of directors recognized the problem, brought in a search firm and chose a new sales head, stating they didn’t trust the CEO to pick a good candidate. Three months later, the board sent the CEO packing as well.
CFOs, in their HR capacity, must be make sure the right employees focus on the right things. For midsize companies, or even startups, the key is keeping the approach simple and consistent. Embrace these three activities:
While these three processes often won’t appear to be urgent, neglecting them can cause problems down the line. CFOs must prioritize them, creating a high-performance team that can drive continuous growth.
Robert Sher is the founding principal of CEO to CEO, a consulting firm of former chief executives who improve the skills of mid-market company CEOs and C-level executives who are navigating major shifts in their business or marketplace.