This post is about the importance of a CFO building a close relationship with their in-house Head of Tax. When a corporate Head of Tax is reporting directly to the CFO, the company has valuable profit advantages. A strong working relationship between the two executives creates the greatest profit for the company through tax savings strategies and implementation of them. I have been educated about the proof many times over the years as these two executives work together to build an in-house profit center for the corporation. CFOs who have great respect for their Head of Tax, and include them in all business transactions, yield extraordinary tax savings resulting in increased company profitability. This close relationship is always a win for investors because the extra profit ensures there is more money brought back to the company to grow the business. CFOs who have the Head of Tax reporting directly to them have an advantage over the CFOs who do not have the Head of Tax reporting directly to them.
As an internationally recognized expert in tax executive search, and a track record with more than one thousand successful tax executive searches completed over thirty-three years, we are fortunate to learn these success stories from the multinational organizations we serve. We learn what happens behind the scenes when the CFO and the Head of Tax work closely together. The result of a strong partnership increases profits that would otherwise be millions (billions) of tax dollars lost to international, federal, state and local tax revenue authorities. The reporting relationship is important because it demonstrates the level of interest and respect a CFO has for their tax leader in working together to increase profitability.
During hundreds of conversations with CFOs who have retained us to conduct a search for a Head of Tax(HOT) for their organization, one of the many thoughts privately communicated is “Find a tax executive who can explain tax in a language I can understand!” CFOs may not always understand how tax business strategy can be a profit centered activity, but they appreciate someone who teaches them how to increase profits through corporate tax planning strategies. Tax planning strategies greatly affect bottom-line profit to the corporation when addressed properly with sound tax savings strategies. A thorough upfront analysis and review of a corporate transaction by the Head of Tax prior to the transaction is impactful. I have had more than my share of private conversations with less experienced CFOs who did not include tax on the transaction at a huge cost to the company because of how the deal was structured upfront. If they had consulted the Head of Tax first on the best way to structure the transaction, instead of keeping the deal secret from everyone, it would have been the smartest financial move they would have made on the transaction. A business transaction that does not include a tax analysis up front in most cases often ends with a financial loss that could have turned into a profitable gain.
I know CFOs who would not make a business move without seeking the advice of the Head of Tax first. They highly value and respect their tax leader because they have saved the company millions(billions) over many years using sophisticated legal tax strategies. I have met former Head of Taxes who are so highly valued they have risen to the corporate CEO role. It all depends on how the organization views and treats their in-house tax leader.
The tax executive rock stars we communicate with would never ever consider a role in an organization unless it reports directly to the CFO. So, my very best advice is to always have your Head of Tax reporting to the CFO. You will then be able to attract top tax executives to your company who thrive on building the tax function into a profit center.
Another important issue to learn about is how to compensate your tax executive appropriately. There has been a quiet trend brewing behind the scenes that needs to be brought to your attention. Many tax executives are talking about it privately, but they are not telling you what and your awareness of this problem will help retain your current tax executive but also attract the top performers to your company. What is happening is A.I is gathering compensation data from the job boards which is suppressing the real data. You see the compensation being paid to the top of the tax executive community is much more than being posted on the job boards. As a result, these top performers are tax executive candidates you never see during your interviewing process. They are turned off by the low compensation being posted by your organization, so you never meet them.
Your best strategy for attracting the best tax executive available is to retain an expert tax recruiter to thoroughly research the market in your geographical location first, then search regionally and then search nationally. The retained search firm should provide you with a list of what all tax executive candidates considered are currently being paid. You then have hard facts, and you use this information for your management team and Human Resources with up-to-date competitive data on tax executive compensation. Posting low salary on tax executive compensation online is costing you time, access to great talent, the very best of the tax profession, and ultimately millions/billions in tax savings.
I share with CFOs that the secret to company growth is to follow the strategy of great CFOs who work closely with their Head of Tax to grow the company through strategic tax planning strategies. I recently spoke with a tax executive who explained to me privately that the company’s massive growth was possible because the Head of Tax worked to build a tax team that created 2 Billion in income tax savings over ten years. That 2 Billion in tax savings enabled the company to acquire multiple new companies all over the world. This is exactly how these big companies grow! Now you know the secret resides with the Head of Tax reporting and CFO partnering to implement these tax savings strategies!
Start with a commitment to attract the best of the tax executive profession; start by contacting ki***@******ch.com and ask to be introduced to tax executives with a proven track record introducing technically sophisticated tax professionals to your company. News Flash: These tax executives are not actively looking at new tax jobs; you must hire someone to go out and actively pursue them and explain why they should talk to you and your company. If you are offering them an opportunity to report to someone in your organization other than the CFO…you lose access to the top tier talent. This is fact!
The tax executives we track and follow closely are sophisticated tax technicians who do a lot of what is characterized as technically sophisticated tax work. There are tax executives out there who will fight like Israel Special Forces Commandos identifying every opportunity to add money to the company bottom line. You just need to know how to find them, talk to them, and convince them why they should talk to your organization. They do not just walk through your door; however, by retaining an expert in tax executive search you meet the kind of tax talent that turns your tax function into an extraordinary profit center.
The point to make here is when we encounter CFOs who decided to reorganize their tax leader to report to someone other than the CFO, this results in higher dissatisfaction for the Head of Tax and higher attrition in an organization. The cost to a company is greater when this kind of reorganization occurs, so we recommend you always have the Head of Tax reporting to the CFO in your organization. I share this information to minimize attrition and increase retention and profit to the organization through proactive tax reduction strategies. Hire the very best tax executive, benefit from their advice and ideas upfront on transactions, and support them in the tax savings strategies they bring forward. This is why the CFO – Head of Tax Relationship – is a force for greater company success when working closely together.
There are a few more secrets to hiring a Head of Tax. Contact me by email to arrange a time to share additional information with you on a private call. ki***@******ch.com
858.232.4415
