Sourcing Interim CFOs: Look beyond the bytes

When GPs hunt for interim CFOs at their portfolio companies, the best approach is one that begins with technology, but never ends there.

Private equity GPs have long respected data-driven insights, well before the tech sector began churning out faster, more rigorous tools to manage all the information. As those tools continue to evolve, there seems to be little the “right” data tool can’t solve or at least improve. And recruiting is no exception.

But while machines can sift through thousands of resumes and offer the top twenty that fit a particular mandate, not every mandate search can be solved through a screen. The “Interim CFO” is one such role, requiring qualities that might be obscured by their work history. And in this case, it demands the knowledge of a potential CFO’s actual experience and long-term reputation, and that often involves a search consultant  with a rich, global  network to vet what’s behind the data.

Number cruncher as change agent

To be clear, interim CFOs are still CFOs, so they need that traditional skill set, but private equity’s real focus is creating value which is always a change management process. So the CFO needs to have an appetite not just for the classic duties of their title, but for performing them in a context of an enterprise undergoing a swift, often radical value creation program. And a lot of CFOs, even CFOs who have served at that portco for years, have “change fatigue” and may have little appetite to stay aboard that speeding train. The candidate needs to also be comfortable in a coach role, helping their team grow and improve, and frequently recruiting their very own replacement. Every interim CFO needs this “coach” ethos and the ability drive change, but the next question is what kind of change?

Two styles of change

Interim CFOs’ experience and skills also need to match the strategic direction of the portfolio company. If the portco needs to change internally, with an eye towards better processes, revised vendor relationships and new or more motivated staff, the right candidate is going to have more experience revitalizing the finance function. If the portfolio company is driving growth through M&A, as a way to consolidate a fragmented market, that CFO should have more deal experience, with a focus on swiftly onboarding new acquisitions. But all these qualities can be hard to gauge by their resumes alone.   

Drill down

Experience, especially sector or industry experience, remains a vital element to the right hire, and these roles are usually filled by CFOs later in their career. But GPs should look at such experience holistically. One candidate might have fifteen years in the exact same subsector but has little experience with the pace and expectations of a PE-owned business. Another candidate may come from the same industry as the portco, but not that particular subsector. However, they served as CFO for a company that underwent a massive restructuring to emerge a market titan. The latter candidate will be far better suited to help deliver on the investment case. Naturally, an even better candidate would have worked for a portco before, but even that warrants a closer look.

Are they a PE rock star or a PE casualty?

CFOs might have a few years’ experience working for a portfolio company in the same sector, but what was the nature of that tenure? Did a PE firm appoint them to the position, as part of its broader value creation campaign?  Or were they simply the CFO at the time the company was acquired by that GP, and after struggling for a year or two, was replaced? The market has plenty of such candidates that are searching for their next position precisely because they were ill-suited to the pace of private equity. There’s also the question of cultural fit.

Mind the culture gap

In many ways, today’s C-suite class are global citizens, comfortable working in multiple geographies, but that doesn’t mean that every company in the world is as comfortable being led by them. That Nordic candidate might not pick up on that cue from their Italian CEO, or that Spanish CFO might find their Swiss staff quite cold in their demeanor. There are always exceptions to such cliches, but they need to be examined, along with the culture specific to the business. It’s true that PE is looking for CFOs as change agents, but they need to have a rapport with the current culture to have any chance of building a better one. That accounting staff at that trucking company might not be very receptive to the CFO from Alfa Romero, or maybe they would be. Unfortunately, this is exactly the brand of intel that the “data” can obscure.

The relationship premium

All these questions have one thing in common. They can only be answered by a broad, global network of relationships, that can tell the story behind the data. The data can identify candidates, but they can’t capture the intangibles, from leadership capability to resiliency to reputation. That CFO at that bankrupt company might have been keeping it afloat with duct tape and a pocket calculator, while the CFO at that market leader coasted. The data can be completely accurate, and still lead to wrong hire. The right recruiter can serve as a vital reality check, and offer the truth behind the facts, because they’ve invested the time and resources in their own “data” drawn from a candidate’s peers. And there’s no machine that can replace that. For now.

Ross leads the Private Equity Solutions Practice for Odgers Interim across EMEA. Odgers Interim have a significant track record of placing Interim CFO’s and C-Suite roles across a wide array of sectors throughout EMEA. For further information please contact ross.gordon@odgers.com.