During an unpredictable economic recovery period, businesses cannot afford to have an empty seat in one of their key leadership positions. Leadership voids are particularly perilous when it comes to the CFO position.
CFOs are the ultimate utility players in an organization — they’re captains of detail orientation. They need to seamlessly interact with all parts of the company to gather and disseminate information. At the same time, they need to be a strategic thought partner with the CEO. Having this seat empty can cause the best of companies to stall.
Interim CFOs keep a company in a safe pair of hands. They provide stability by offering critical financial reporting and business intelligence and moving key projects forward. Interim CFOs enable proactive companies to keep the momentum going. They also, maybe most importantly, allow them to take their time to find the right next full-time finance chief (vs. rushing to hire whoever is available at a moment’s notice).
Interim CFOs can add tremendous value, but they can also be hard to find and even harder to assess. After nearly 20 years in private equity and my experience working with more than 400 of the world’s top PE funds, I’ve learned a few things that can help optimize the process and maximize the value-add.
1. Similar situations. If you are a PE-owned company and need to bring in a short-term finance chief, find someone who has worked for a PE-backed company before. The same can be said for a publicly traded or venture-capital-backed company. These businesses have unique nuances, pace, and rigor.
2. Past success. The interim executive needs to have a track record of wins. That generally means a significant tenure at multiple companies. Beware of candidates with a history of jumping from job to job every year or two, unless their roles were seasonal or project-based. Ensure the candidate on each position, the accomplishments in each, and the reason for transitions.
No one is perfect, and expect candidates to have had some bumps in the road. For those situations, the suitable candidates offer their perspectives on what went wrong and what they did to resolve it. Be careful of candidates who consistently claim they were victims of circumstance and it was always someone else’s fault.
3. Industry experience. It’s much easier to stand at the finance helm of a food manufacturing company if you’ve done it before. The same can be said for software, health care services, or any industry. Each has its jargon and industry-specific practices. While many CFO skills are transferable, success is more probable with like-for-like industry-specific experience.
4. Company size. Similarly, the interim CFO should have experience working for a company of similar size and scale. The business processes and organizational structure of a 50-person company are fundamentally different from those of a 5,000-person corporation. When things need to move quickly or stabilize in a short period, size does matter.
5. The story behind numbers. It’s not enough to understand the numbers (sales, revenue, overhead) — you need someone who understands what the numbers mean. When CFOs dig into the story behind the numbers, it lets them naturally ask the right questions — how do they compare with industry averages? How and why are they changing over time? CFOs must have the work ethic and curiosity to grasp the numbers’ implications instead of merely reporting them.
6. Emotional intelligence. The CFO’s job is challenging, particularly if he or she parachutes in for an episodic need and has just a few months to accomplish the tasks at hand. For the best results, find a pro who has a high IQ and a high EQ (emotional intelligence). Why? The interim CFO needs to quickly gain favor from others in the organization to gather information and build a story around the numbers (as mentioned above). People are less willing to assist an impersonal, unlikeable leader.
7. Trust but verify. Research shows that job interviews alone are not predictive of success. Be sure to have conversations with key stakeholders in a candidate’s prior roles. Choose the references; do use the references the candidate gives. References aren’t fool-proof, though — they need to be candid, and some people may not be forthcoming.
8. First, do no harm. This is one of my mantras, and I think it’s a great way to think about what an interim CFO is hired to do. You don’t want to bring them on board to shake things up; you want them to keep things moving, perhaps do some cleanup, and set the stage for a full-time hire. While enthusiasm is a wonderful aspect of a new leader, a short-term executive should have a stabilizing effect, not a disruptive one.
Sean Mooney is the founder and CEO of BluWave, a provider of services to private equity funds.