Once a CEO realises that the next person to be offered a seat on the board is a finance director the first question is always “How much will it cost me?”
The answer to this question is rarely as straightforward as revealing the going salary for such a role!
- Firstly, it is essential to determine the real cost of an employee. The actual cost of recruiting a finance director is MUCH more than just the salary. When you factor in recruitment costs, tools for the job, office space, healthcare, bonuses and share options the cost is nearly double their salary.
- Secondly, does the CEO really need a full-time finance director at this particular point in time or just access to their knowledge, experience and counsel? When a company is growing, there’s often not enough going on to keep a full-time finance director fully occupied; those who do bring in such a heavyweight can find their finance director spending much of their time on low-value activities which could be completed by a less expensive resource.
- Finally, few companies really know what they need or should expect from their first finance director in terms of experience, credentials, and character so recruiting one often takes longer than expected. Using the services of a part-time finance director is a sensible first step towards hiring a full-time one.
There are very REAL benefits of utilising a part-time finance director before recruiting a full-time resource
- They provide all the skills of a full-time finance director without the cost or commitment.
- It’s a flexible resource, use as little or as much as you like, a few days a week, a few days a month or on a project by project basis.
- A part-time finance director will be experienced in coming in at short notice and will deliver value quickly.
- Since part-time finance directors hit the ground running, the duration of the onboarding process is significantly reduced.
- They will have hands-on experience dealing with the financial challenges your business now faces – and is yet to face!
- You don’t need to worry about any of the HR issues.
When it comes to the point when a full-time finance director becomes a viable option, then they can help with that transition.
Establishing “what is the cost of an employee?” is one of the central questions that a business manager needs answering.
Once the real cost of an employee is known, they can then answer the even bigger question, “what is the value of my employee?”.
Discovering the answers to these two questions is not as difficult as one might think, but what may surprise the reader is just how cost-effective a part-time finance director can be.
It’s important to consider the cycle of employment as well as the cost
To calculate the cost of an employee, we need to look at the true cost of employment and the cycle of employment
- First, the individual must be recruited and inducted.
- They must be trained through formal and on-the-job training.
- Then there is a period of getting up to speed.
- Once up to speed, there is the cost of managing that individual, setting objectives, appraising performance against predefined objectives while bearing the burden of personnel and administrative expenses of holidays and sickness, etc.
An employee also requires specific tools to do the job. They need a desk, phone, mobile phone, computer, software, a network to store documents, a printer and paper and general stationery.
A part-time finance director will be able to work effectively either remotely or on-site, requiring only internet access and a clean, safe environment in which to work when visiting a client’s premises.
What therefore is the TRUE cost of a finance director?
In answer to this question and according to our calculations, the true cost of an £85,000 finance director is closer to £140,000 (see full calculations at the bottom of this blog).
iFD clients have an effective part-time finance director that will cost half that and deliver more.
BUT what is the cost if you incur all the recruitment and training costs of a full-time finance director and then you find out after six months that you have recruited the wrong person?
(Image source: iStocker)