At a first due diligence meeting in Spain a while ago, preparing the acquisition of a Spanish manufacturer by a U.S.-based company, I witnessed a small gesture that made magic happen.
The two Spanish accountants were outnumbered 1:3 by the visitors from the U.S., but the head of the American group surprised his hosts (and perhaps even one or two of his own people) by asking his team members to introduce themselves - in Spanish.
Team Spain couldn’t have been more appreciative. The American gesture defied stereotypes, created cross-cultural goodwill, and got the whole process off to a great start.
This episode reminded me once again how important it is to have the right person at the right time at the right place when companies establish or expand an international foothold.
What companies should consider when appointing an international CFO
Their choice of a finance and accounting leader to oversee this engagement can determine success or failure in a foreign market. Global expansion projects bring into focus just how strategic the role of the CFO has become.
This role now requires a strong communicator, rather than a professional who’s merely in tune with the numbers. It demands a financial leader who’s able to bridge the culture and language gap between the CEO and executive leadership at headquarters on one side, and the in-country team on the other.
Three Rules to Select a CFO for Your International Expansion
How does a CEO or group CFO pick the “right” head of finance and accounting for a new subsidiary or acquisition abroad? While different industries and markets have their own distinct requirements, certain selection criteria apply across the board.
Allow me to share three that rank at the top of my list. Having built and led accounting, finance and cross-border M&A teams on three continents for more than two decades, I’ve found the following factors to be particularly important:
The CFO should be familiar with the business environment, accounting rules and regulatory framework on both ends, at the foreign destination as well as in his or her organization’s home country.
The head of finance overseeing the merger between a German manufacturing company and an American manufacturer, for example, should be familiar with both US GAAP and Germany’s HGB (Handelsgesetzbuch) and/or IFRS (if applicable) accounting principles.
Why it is important: Unrealistic expectations at HQ often hobble the process. For both sides to see eye-to-eye and the international initiative to be successful, the CFO should be comfortable in taking on the role of a “translator” between headquarters and the people on the ground, and vice versa.
Successful financial leadership in cross-border initiatives requires flexibility, respect, and understanding of the other country’s business culture. That includes its language.
In the example of the merger between a German and an American company, ideally, the head of finance would be conversational both in English and German, and be able to pick up on nuances.
Why it is important: Americans get things done differently than Germans, and China has its own approach. They all get results, albeit arriving at them from different angles.
Leaders who insist on converting the “local” approach based on their own cultural value scale risk being perceived as disconnected, rigid or arrogant.
As the company’s face in dealing with banks, auditors, authorities and suppliers abroad, your pick for Head of Finance can make or break your organization’s international reputation.
Cultural fit and personal chemistry are as important as a strong resume when appointing an international finance and accounting leader.
Why it is important: In the initial stage, most cross-border ventures typically require a high degree of direct interaction between the CEO (or group CFO) at headquarters and the finance and accounting leader guiding the financial implementation.
Often, this includes joint travel and negotiations with foreign counterparts. The head of finance of such a project may spend one week on a roadshow with the CEO, updating analysts and investors on the company’s foreign expansion strategy, and the next week “hand-holding” the in-country finance team of a newly acquired company abroad.
In my experience, how the CFO chosen to oversee the foreign entity’s finances is getting along on a personal level with key executives and management on both ends will be as essential for a successful outcome as that person’s firm grasp of the numbers.
These selection criteria for choosing a financial leader when expanding in a foreign market have served me well over the years.
As a personal shortlist, it may be subjective and far from complete. I hope you find it useful as a starting point when creating your own, and welcome your questions or feedback via email or on LinkedIn.
Inc: Things to Remember When Choosing Your CFO (2015)
Patricia Fletcher’s tips are mostly geared towards startups. Still, they cover a lot of ground and should come in handy when selecting a CFO for your foreign subsidiary.
Wall Street Journal / Deloitte: CFO Journal
Check out this resource for reliable up-to-date snapshots of topics that dominate the discussion among senior financial executives in target markets abroad.