The impact of industry experience in hiring financial executives
While every expert has the right training and skill set, these do not make one expert. This title is only earned by merit once you do something to establish your authority within the industry. In other words, you need experience.
Now, while experience is sometimes transferable, industry-specific experience is not. Sometimes, the habits and practices adopted in one industry might be slightly hindered elsewhere.
With all of this in mind and without further ado, here’s why experience is so important in hiring financial executives.
1. The role of financial executives
Financial decisions can make or break any business. These financial decisions determine whether you have enough resources for all your plans, how resilient your business is to change, and much more. To understand why experience in this field is so important, here are a few core tasks of financial executives.
- Financial planning: Financial executives need to analyze financial data and make feasible plans for the future. Inexperienced financial planners omit many factors because they can’t account for unpredictable outcomes. The more experienced an executive is, the less likely something will slip under their radar.
- Financial reporting: Financial reports are important not just for the owners and stakeholders in the field; government institutions also require them. This means having someone who’ll botch this task might end up in trouble for you.
- Risk assessment: Every financial decision is a potential risk. After all, you need to commit resources (not just money, time, and work hours), and you hope that the payout will be sufficient. A veteran financial executive should be able to tell you when such a commitment is worth it.
- Cost management: In every investment, you must get the value for the money. Determining whether a purchase is worth it is not as easy as you think. There are many factors to consider, and not every payoff is as easy to quantify. For instance, how do you convert money to exposure?
- Stakeholder relations: Stakeholders need to know how the value of their stock is holding up. You need someone who can break this down and appease them even when they’re down (which is bound to happen even in the best of enterprises).
Even with the modern analytical financial tools, experience is an invaluable resource.
2. How do these decisions differ between industries?
The job of a financial executive (the tasks they’re in charge of) greatly varies from industry to industry. This is why the specific experience is so invaluable. While most processes are similar, the precedence of these tasks is quite different. For instance:
- Financial services and banking: Risk management and regulatory compliance are the most important. It’s all about risk assessments, whether you’re handling credit, interest rate, or market risk. Also, remember that financial executives have almost as big of a role as lawyers when it comes to compliance.
- Manufacturing: In manufacturing, the most important task is cost control. You need to ensure that the enterprise makes more money than it’s using. You also need to figure out the financial aspect of your supply chain. Is it worth having your fleet, outsourcing, or cross-shipping as your model of choice?
- Technology: In the tech field, financial executives are there to assess the viability of various tech projects financially. Here, you need executives who understand the technology and are familiar with other similar projects.
- Agriculture: Commodity price management can be incredibly difficult. There’s far more market speculation here than you would guess. In other words, financial executives in massive agricultural businesses are more expert traders than anything else.
- Retail: The biggest priority in the field of retail is probably inventory management and inventory turnover. As we’ve mentioned in the previous segment, you need someone who can understand market fluctuations over the course of the year.
While a veteran executive can adjust to a different branch, adopting some of these habits and becoming really proficient at them can take more time than you think. It’s always better to take someone from within a field.
3. How do you attract and hire experienced financial executives?
The simplest way to hire financial executives is to go through intermediaries. Finding reliable financial executive recruiters and hiring their services is not hard. This way, you get someone with experience to handle the vetting process and give you the exact person you were looking for.
However, if you decide to do it independently, you have an extensive preparation stage to handle. Here’s what you need to do:
- Start with a clear job description: While you probably aren’t an expert in the field, you must understand what you’re discussing. Experienced financial executives are a precious commodity, especially those with experience in the specific field that you’re looking for. This is why you must ensure you send the right signal from the start.
- Competitive compensation: As mentioned in the previous part, experienced financial executives have other options, so you need to make it worthwhile. One of the things that they’ll worry the most about is the compensation. In fact, we wouldn’t exaggerate if we say this is the most important part of the process.
- Networking: You already know many people in the industry, so why not ask them for referrals? Remember that while you may not be familiar with the finances themselves, you understand the industry and know people who conduct business there on virtually every level.
- Use the right platforms: Recruitment and social media platforms like LinkedIn are spots where you can find everyone from entry-level employees to CEOs. Even better, they’re organized in a catalog-like manner and have a filter system that will make your job easy.
The hiring process itself may determine more than you know, so take your time and be very careful.
The most important thing to take away from this is that experience is important, even if you’re not hiring financial executives. You want experts, and the only way to get expertise is to spend some time in the respective industry. This way, you have something to show for your effort. On the other hand, experts are expensive and hard to find/attract. However, they’re still worth it.