Far from acting as often flawed stopgaps, interim CFOs at PE-backed companies can act as critical transformation figures.
You may be used to thinking the word “interim” means “temporary” or “stopgap”. But in the case of the private equity-backed interim CFO, the word takes on a different meaning. Interim CFOs at PE-backed companies can act as critical transformational figures who can help ensure that the stage is adequately set for the next finance leader to meet, and in fact exceed, measuring, managing, and scaling expectations. In a market where CFO talent is in high demand, the interim CFO can be critical to a business’ success.
The transformation of the position
Long gone are the days when the PE-backed portfolio company CFO’s chief role was the controller. From pandemic-induced volatility, to an inflationary and pre-recessionary economy, to a disrupted global supply chain and novel geo-political issues, to access to an avalanche of it-should-be-helpful-but-it’s-often-inaccurate-and-overwhelming data, the modern-day CFO’s role may be among the hardest within enterprise management and it’s only gotten more difficult. No longer simply a number cruncher, the new CFO must simultaneously measure the business, manage the business, and critical to PE ownership, scale the business.
The failings of the role
But by and large, many CFOs are not doing any of that particularly well – or at least not up to the expectations of their investors, according to Accordion’s State of the PE-Sponsored CFO Relationship survey, conducted in 2021 and published last year. That survey found that 81 percent of CFOs are not living up to their sponsors’ “measure the business” expectations, defined as their ability to collect clean data relevant to their operations. Similarly, 91 percent are not meeting their sponsors’ expectations regarding their ability to “manage this business”, or analyze and derive insights from their data. Eighty seven percent fall short of their backers’ “scale the business” expectations – their ability to act on the insights derived from their data.
The departure from the role
And that’s one of the reasons there is accelerated turnover in the position: post-deal, private equity investors retain the existing portfolio company CFO only 25 percent of the time, according to the survey. That means 75 percent of PE-backed CFOs will be fired, or more politely asked to move on from their role. What that figure does not include is the growing number of CFOs who are voluntarily leaving for greener (or perhaps less rigorous) pastures.
These three factors (the transformation, the failings, and the departures) combine to create one broader bottom line: Sponsors have CFO vacancies to fill.
How most sponsors fill CFO vacancies
Given the importance of the position to the success of the company, most sponsors rightfully seek to fill those vacancies as soon as possible and immediately initiate a hiring process to find the next permanent CFO. During that process, they fill the vacancy with an interim executive (either from the outside, or more commonly, by temporarily elevating someone from within the finance organization).
It’s not the wrong approach, but it’s also not the best answer for finding an optimal long-term CFO. There are three reasons why:
The CFO is not the only hole to plug: Yes, the buck stops with the CFO, hence the accelerated rates of departure. But, when a CFO does not meet expectations, there are often foundational issues within the department that are broken or have simply never been adequately built. The finance department should be a tech-enabled, lean organization with effective systems (and systems integration), streamlined processes for finance-owned functions, and imbued with internal expertise related to accounting, planning, forecasting, and reporting. These attributes are unlikely to exist in an optimal manner when a situation warrants removal of the in-seat CFO. Someone needs to fix and redesign the finance function paradigm. But there’s a reason that someone should not be the next CFO – at least, not immediately (more on that later).
Significant disruption to the organization: The CFO is not only integral to the success of the company, they will be a leading executive within the firm, a critical liaison to the sponsor, a collaborator with other functional/business unit heads, and a leader to the finance professionals within the organization. Hiring the wrong CFO to fill the vacancy quickly can have rather dire consequences related to attrition and stakeholder confidence. In fact, the wrong hire can substantively set the organization back, instead of propelling it forward.
Limited pool of candidates: Good CFOs are hard to find, particularly those with PE-backed experience, who understand the dynamics between portfolio companies and sponsors, can operate with both speed and agility in a volatile economy, are fluent in the full suite of finance function technologies (and their operating counterparts) and inspire confidence in both their team and key stakeholders. They’re not a dime a dozen, and as a result, they tend to have their pick of opportunities. Finding the right CFO is as much about feeling confident about the candidate, as it is about selling the portfolio company to the candidate. A finance department without the foundational tools in place can make for a hard sell and can (and likely will) limit the pool of potential candidates, often removing the most exceptional performers.
The interim solution
So, what’s a portfolio company with a CFO vacancy to do? The answer is to rethink the interim paradigm. The interim CFO should not be viewed as a stopgap figure, but rather as a fixer who can build the right finance function foundation. These fixers – experts who come from outside the organization – should be provided time to investigate the gaps in finance function processes, technologies, and talent. Importantly, they must also be afforded the discretion to address deficiencies to create a well-functioning department for CFO successor to seamlessly step into and lead.
This reimagined interim role not only quickly addresses functional deficiencies, but also informs the characteristics, traits, and expertise the next CFO will need to succeed in the role. That more detailed “job description” will help provide clarity for the hiring exercise and will limit the potential for making a wrong hire.
Finally, a finance function that is already operating in a way that aligns to sponsor expectations will naturally increase the caliber of talent interested in the role; the sell to the right candidate will be an easier one.
Craig is a Senior Managing Director with more than 20 years of financial restructuring, strategic advisory, and operational turnaround experience, including serving in C-level executive, interim management, and lead restructuring advisor roles for companies facing a variety of complex situations including rapid growth scenarios, underperformance, out-of-court restructurings, and Chapter 11 proceedings. He has significant experience in helping companies and equity sponsors drive value in restructuring and turnaround scenarios across the Consumer Products, Retail, Restaurant, Distribution/Transportation, Real Estate, Construction, Government, High Tech, Services, and Health Care industries. Read more
Keith Maib
Senior Managing Director
Keith is a Senior Managing Director in Accordion’s Turnaround & Restructuring practice with over 30 years of diversified business experience. He plays a key role in the delivery of the firm’s service offerings across financial restructuring, transaction advisory, private equity, M&A/transaction services, sell-side advisory, interim management, PE portfolio optimization, and PE subsidiary company performance improvement and restructuring. In this role, Keith has worked with key partners that include Marblegate Asset Management, American Capital, Fortress, Apollo, New Mountain Capital, Littlejohn & Co., and Prudential Capital Partners in portfolio company strategic, operational, and financial restructurings. Read more
This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
Cookie
Duration
Description
__hssc
30 minutes
HubSpot sets this cookie to keep track of sessions and to determine if HubSpot should increment the session number and timestamps in the __hstc cookie.
__hssrc
session
This cookie is set by Hubspot whenever it changes the session cookie. The __hssrc cookie set to 1 indicates that the user has restarted the browser, and if the cookie does not exist, it is assumed to be a new session.
cookielawinfo-checkbox-advertisement
1 year
Set by the GDPR Cookie Consent plugin, this cookie records the user consent for the cookies in the "Advertisement" category.
cookielawinfo-checkbox-analytics
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checkbox-functional
11 months
The cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checkbox-necessary
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-others
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-performance
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
CookieLawInfoConsent
1 year
CookieYes sets this cookie to record the default button state of the corresponding category and the status of CCPA. It works only in coordination with the primary cookie.
viewed_cookie_policy
11 months
The cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Cookie
Duration
Description
__cf_bm
30 minutes
Cloudflare set the cookie to support Cloudflare Bot Management.
li_gc
5 months 27 days
Linkedin set this cookie for storing visitor's consent regarding using cookies for non-essential purposes.
lidc
1 day
LinkedIn sets the lidc cookie to facilitate data center selection.
na_id
1 year 24 days
The na_id is set by AddThis to enable sharing of links on social media platforms like Facebook and Twitter.
ouid
1 year 24 days
Associated with the AddThis widget, this cookie helps users to share content across various networking and sharing forums.
UserMatchHistory
1 month
LinkedIn sets this cookie for LinkedIn Ads ID syncing.
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Cookie
Duration
Description
__hstc
5 months 27 days
Hubspot set this main cookie for tracking visitors. It contains the domain, initial timestamp (first visit), last timestamp (last visit), current timestamp (this visit), and session number (increments for each subsequent session).
_fbp
3 months
Facebook sets this cookie to display advertisements when either on Facebook or on a digital platform powered by Facebook advertising after visiting the website.
_ga
1 year 1 month 4 days
Google Analytics sets this cookie to calculate visitor, session and campaign data and track site usage for the site's analytics report. The cookie stores information anonymously and assigns a randomly generated number to recognise unique visitors.
_ga_*
1 year 1 month 4 days
Google Analytics sets this cookie to store and count page views.
_gat_gtag_UA_*
1 minute
Google Analytics sets this cookie to store a unique user ID.
_gcl_au
3 months
Google Tag Manager sets the cookie to experiment advertisement efficiency of websites using their services.
_gid
1 day
Google Analytics sets this cookie to store information on how visitors use a website while also creating an analytics report of the website's performance. Some of the collected data includes the number of visitors, their source, and the pages they visit anonymously.
AnalyticsSyncHistory
1 month
Linkedin set this cookie to store information about the time a sync took place with the lms_analytics cookie.
cebs
session
Crazyegg sets this cookie to trace the current user session internally.
hubspotutk
5 months 27 days
HubSpot sets this cookie to keep track of the visitors to the website. This cookie is passed to HubSpot on form submission and used when deduplicating contacts.
ln_or
1 day
Linkedin sets this cookie to registers statistical data on users' behaviour on the website for internal analytics.
uid
1 year 24 days
This is a Google UserID cookie that tracks users across various website segments.
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
Cookie
Duration
Description
__qca
1 year 26 days
The __qca cookie is associated with Quantcast. This anonymous data helps us to better understand users' needs and customize the website accordingly.
__ss
1 day
This cookie is set by SharpSpring, a marketing automation platform. This is used for tracking visitors and form submissions.
__ss_referrer
1 hour
This cookie is set by SharpSpring, a marketing automation platform. This is used for tracking visitors and form submissions.
__ss_tk
1 year 1 month 4 days
This cookie is set by SharpSpring, a marketing automation platform. This is used for tracking visitors and form submissions.
_dlt
1 day
Zendesk set this cookie to create a unique ID for the session. This enables the website to collect data on visitor behaviour for statistical purposes.
anj
3 months
AppNexus sets the anj cookie that contains data stating whether a cookie ID is synced with partners.
bcookie
1 year
LinkedIn sets this cookie from LinkedIn share buttons and ad tags to recognize browser IDs.
bscookie
1 year
LinkedIn sets this cookie to store performed actions on the website.
IDE
1 year 24 days
Google DoubleClick IDE cookies store information about how the user uses the website to present them with relevant ads according to the user profile.
koitk
1 year 1 month 4 days
This cookie is set by SharpSpring, a marketing automation platform. This is used for tracking visitors and form submissions.
li_sugr
3 months
LinkedIn sets this cookie to collect user behaviour data to optimise the website and make advertisements on the website more relevant.
mc
1 year 1 month
Quantserve sets the mc cookie to track user behaviour on the website anonymously.
muc_ads
1 year 1 month 4 days
Twitter sets this cookie to collect user behaviour and interaction data to optimize the website.
pa_crosswise_ts
1 year 1 month 4 days
Perfect Audience sets this cookie to collect information in a way that does not directly identify anyone, including the number of visitors to the website and blog.
pa_google_ts
1 year 1 month 4 days
Perfect Audience sets this cookie to collect information about how visitors use the website.
pa_openx_ts
1 year 1 month 4 days
Perfect Audience sets this cookie to collect information in a way that does not directly identify anyone, including the number of visitors to the website and blog.
pa_rubicon_ts
1 year 1 month 4 days
Perfect Audience sets this cookie to collect information about how visitors use the website.
pa_twitter_ts
1 year 1 month 4 days
Perfect Audience sets this cookie to collect information about how visitors use the website.
pa_uid
1 year 1 month 4 days
Perfect Audience sets this cookie for advertising purposes based on user behaviour data.
pa_yahoo_ts
1 year 1 month 4 days
Perfect Audience sets this cookie to collect information in a way that does not directly identify anyone, including the number of visitors to the website and blog.
personalization_id
1 year 1 month 4 days
Twitter sets this cookie to integrate and share features for social media and also store information about how the user uses the website, for tracking and targeting.
test_cookie
15 minutes
doubleclick.net sets this cookie to determine if the user's browser supports cookies.
uuid2
3 months
The uuid2 cookie is set by AppNexus and records information that helps differentiate between devices and browsers. This information is used to pick out ads delivered by the platform and assess the ad performance and its attribute payment.