Interim CFOs Have Power to Permanently Impact Total Business Value

Welcome to part one of Focus Search Partners’ thought leadership series, CFO Insights. This series will share critical information about identifying and hiring top talent for the CFO position, starting with today’s post explaining when to engage an interim CFO and why it makes good business sense.

Currently, the broader business community shares the consensus that the CEO’s most critical direct report is none other than the CFO, who now plays a far more strategic role and covers a broader purview in guiding business strategy and operations than in years past. According to several studies, including one from KPMG, the average tenure of a CFO is around five years. During that time, today’s increasingly indispensable CFO has adequate time to make a lasting mark on an organization.

But in many cases, especially in private-equity-funded companies, time is scarce due to competing priorities regarding a pressing transition, transaction, or transformation. More often than not, such necessary change events generate an immediate need for more CFO firepower to fight critical daily finance battles, such as reporting optimization and automation, cash flow forecasting, and system upgrades and implementations.  

A highly effective yet widely underutilized answer to this all-too-typical challenge is a full-time interim or project-based CFO to assist with these important initiatives. With the right level of experience, executive gravitas, and emotional intelligence, this type of resource can rapidly generate enduring company value, either as a seated interim CFO filling a temporary vacancy or as a project-based CFO who brings needed expertise and capacity to tackle critical initiatives for the company’s permanent CFO.   

When Is Hiring an Interim or Project CFO the Right Call?

The business case for an interim or project-based CFO comes in many varieties. Still, they all share a common thread—without bringing in that full-time resource, the company can’t move forward, restricting its ability to grow and possibly causing it to contract. For example, consider these scenarios:

  • CFO resignation: The average search for a permanent CFO replacement takes over 100 days, meaning a company must navigate an entire fiscal quarter — an eternity in the PE world — without financial leadership or the CEO’s right-hand partner in addressing the board of directors and investors. 
  • New acquisition: The experience and/or capacity of CFOs inherited from legacy companies don’t always align with the strategic intention of the transaction or have the ability to develop an effective first 100-day project plan, making it extremely difficult to achieve stated operational goals or desired ROI.
  • Ownership change: New ideas, market strategies, and financial goals come with new PE owners, which often calls for new finance leadership with experience in a PE-backed environment.
  •  Planned IPO: Perfectly competent private-company CFOs are typically out of their depth when it’s time to take a company public under the watchful eye of the market and regulators.
  • Transformational initiative: When undertaking a major company reorganization, system implementation, operational optimization, or other large-scale change event, the CEO may need a stronger CFO to execute the plan. Likewise, a highly skilled CFO may need a partner at the CFO level to drive the critical workstreams while they continue to manage other pressing priorities of the CFO office.
  • Company or finance organization turnaround: Whether the financials are in steep decline or the finance function relies on outdated processes and systems or insufficient talent, an immediate change in finance leadership is often the only remedy.

In each of these cases, a full-time interim or project-based CFO, who possesses the experience and skills to match the particular needs of the situation, can be identified and placed by Focus Search Partners within 10 days. In other words, forward progress is not sacrificed to the status quo or during an intentional executive search for a permanent CFO replacement.

How Much Value Does a Strategically Placed Interim CFO Generate?

An interim CFO working 40+ hours a week can make an undeniable difference in a short span of time. How do we know this? We’ve seen it time and time again.

Consider the company that enjoyed such success with its original owner/operator model that it decided to transform itself into a finance broker, only to realize that it lacked the specialty finance leadership and operational knowledge needed to achieve its goal effectively. Once it brought in a CFO with significant operations experience and a 20-year background in that exact field to act as its interim CFO/COO, the company’s future went from limited potential to otherwise primed for exponential growth within a few short months.

Or take the private manufacturer that sought to embrace market enthusiasm for its product by going public through a reverse takeover (RTO) transaction. With an extremely short deadline, limited finance staff, and leadership largely inexperienced in IPOs or public-company operations, they hired an interim CFO who had previously managed 17 public transactions. He successfully completed the RTO in just 105 days at a company valuation of $130 million and a 4X multiple for existing shareholders.

What Does the Right Interim CFO Look Like?

As these examples show, the right interim CFO varies by situation. Still, in every case, the person who fits the client’s particular challenge invariably possesses a slate of specific traits and experiences:

  • Ready-to-lead capability
  • Particular industry or initiative knowledge
  • Change management background
  • Track record serving multiple organizations in a related industry or business model
  • Prior success making significant improvements within short timeframes
  • Emotional intelligence that builds immediate trust and rapport
  • Ideal blend of hands-on practitioner and strategic thinker

KPMG notes that, “Today’s CFO must be deliberate and forward-thinking, a change leader and a project manager who is able to adapt to meet the challenges of disruptive competitors and changing customer demands.” If your current CFO is struggling in any of these areas or your CFO office is currently vacant, there is no reason to settle. You can bring in immediate reinforcement with an interim CFO, whether to elevate your finance organization’s capabilities or to tackle your next big project.

At Focus Search Partners, we build teams that grow companies. In the case of our interim and project-based CFOs, they routinely generate long-term business value for clients in the midst of transition, transaction, or transformation. Want to see more examples of the permanent impact they’ve made in very little time? Visit Focus Search Partners’ case studies.

By Monica Foster, Managing Director, Focus Search Partners

Stay tuned for part two of CFO Insights by Focus Search Partners, which will show you how to optimize your firm’s CFO hiring process so that you hire the right CFO on the first try.