When Your CFO Quits, Trouble Is Looming. So, Fire Them?First.

Running away is the worst.

My CFO called me and told me he was quitting. He had taken a CFO role at a company in Georgia.

I was disappointed and surprised. I said, “He knows something I don’t.”

Our business unit had been sold, and we were carving it out of our mother company.?

His timing was purposeful because darkness loomed in the operating agreement covenants.

When a resignation is running away, not running?to.

Other internal candidates had interviewed for the open CEO role before I was offered the job. Jeff had a chip on his shoulder about not getting the job.

From day one, I felt it in how he looked and talked to me. And when he waited for me to leave town to avoid a face-to-face meeting to resign, it was confirmed.

Several team members noticed that Jeff was spending much more time with the young private equity executives assigned to our business.

He even proudly mentioned that he had hosted the young execs at his house for dinner one evening.?

This is highly unusual behavior, and something that should have hit my radar screen but, our business was in an uproar and all of us were working tireless hours to get the business performing at a level that would satisfy our customers and our ownership.

Apparently, not all of us. Emotionally he had disengaged.

Covenants are real and unforgiving

In private equity, there is something called an operating agreement that outlines all the covenants that must be maintained and the consequences if any are breached. I had read the operating agreement completely when the sale was finalized, yet now 18 months later, I was focused on what I could do to move the business forward not worrying about the agreement.

It is stated that should the business, for example, miss one loan payment, the CEO and CFO will be terminated, and the Board will assign new individuals to take these roles.

Pretty simple. We were close to breaching several of the covenants.

But Jeff decided to resign before we breached to avoid being fired.

Selfish actions are a part of business yet are not respected.

You see CFOs have access to all of the financials and his “new friends” had been working closely with him to find a source of cash to infuse into the business to avoid a breach.?

Jeff was naive. He felt that buddying up with the PE execs would somehow better position himself to save his job or to take my role if I was terminated. Likely they reinforced the consequences of a covenant breach which pushed him down a different path.

Jeff had flipped loyalty, from our team to theirs.

I was focused on finding a solution for the distribution center miscues and ways to course-correct that problem. Along with calls from upset customers, suppliers, and our sales team.

Our CFO had quit and stayed, interviewing for a new job. Running away.

My advice??

Avoid these mistakes if you find yourself in a similar situation.

• I’m an optimist. Early in my tenure, I had conversations with each of my direct reports about the commitment needed to persevere in this transformation. I trusted Jeff that he was in it for the company’s and the people’s success. I put too much faith in what I thought was integrity from his military background.?

While others were fully engaged, I should have seen from his actions that he was disengaging.

• As an ex-United States Navy pilot, I could not believe he would abandon his team, colleagues, or me. Upon reflection, I had been concerned about thrusting too much change, too early, on the organization.?

The sooner you make the leadership changes, the better. It is expected by the entire organization.

• Did Jeff resign because he knew we would breach covenants? Maybe, but I have to own it:

People don’t leave companies, people leave people.

I had always had great relationships with my CFOs in previous roles. We trusted each other and could discuss any topic. I relied heavily on them as functional and company leaders.

The difference is that I picked my previous CFOs and none of them wanted the CEO role.?

I believe in leadership being visible to all levels of the organization. This means I must invest time on the manufacturing floor, in distribution centers, customer service, credit and collections, and with the field sales force.?

This philosophy did not align with Jeff’s.?

Under these difficult circumstances, you must be visible.

Although it is business, make it individual. Get your employee’s perspectives on how the company can get better.

If you engage at every level and demonstrate loyalty to your teams, it will be returned in?mass.